Industry watchers nervous as Canadian cannabis producers sit on a massive stash of inventory

Producers and extractors of Canadian cannabis are sitting on a massive stash of unfinished inventory of weed. This inventory is growingso rapidly that some analysts are worried it could cause a price crash in the fast-rising industry. According to Financial Post, since the start of the year 2019, the quantity of unfinished inventory of dried cannabis has virtually tripled, getting to a whopping 328,000 kilograms at the end of August. In January 2019, the amount was roughly 118,000 kilograms. According to Health Canada, unfinished inventory is defined as the amount of cannabis held in stock by a “cultivator or processor that is not packaged, labelled and ready for sale.” Health Canada also defines finished inventory, as product ready for sale that is held in the warehouses of provincial wholesalers and licensed producers.As of the end of August 2019, the finished inventory was at 60,872 kilograms. The industry sold just about 13, 000 kilograms of dried flowers in August 2019, which means that that the total inventory amount is nearly 30 times the industry’s monthly sales rate. It remains unclear what percentage of the unfinished inventory comprises of dried bud versus cannabis trim or other useless parts of the plant, the fast growth rate in the level of unfinished inventory has some industry analysts apprehensive. “If a large proportion of those 328,000 kilograms is dried bud, that’s going to be a big problem for the LPs,” said Matt Bottomley, a cannabis analyst at CanaccordGenuity Corp., quoted on Financial Times. “I suspect it’ll be a race to the bottom with price because everyone now has more than enough supply,” he said. The report notes that producers have already begun to lower theirprices;this move would most definitely affect the margins of recently. In recent times, Hexo Corp. has begun selling a new product line called Original Stash, for just $4.49 per gram, this is approximately 50 percent beneath the average per-gram price on the legal market. The company also said that they were shutting down their Niagara greenhouse and suspending 200,000 square foot of licensed space for cultivation, these new moves led to terminating the employment of about 200 employees. Reports say that much of the disappointment in cannabis sales can be narrowed down to two major issues. “First, there's Health Canada, the regulatory agency tasked with overseeing Canada's legal industry. No one can fault the agency for being so thorough in its licensing process. However, Health Canada began the year with more than 800 cultivation, processing, and sales license applications on its desk awaiting review,” says a report on the Motley Fool. Secondly, some have laid blames on certain Canadian provinces such as Ontario, which has 14.5 million people, but has one open dispensary for every approximately 604,200 people. A cannabis analyst from the Bank of Montreal Tamy Chen, who has previously expressed concern about the rising inventory situation, recently noted that provincial wholesalers are getting more choosy in their purchase orders to “ensure that in-store supply is better aligned with recreational consumer demand.”


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