Cannabis Oversupply a Possibility in 2019: Analyst
Canada Could Switch from Shortages to Cannabis Oversupply Quickly – LPC
Analyst Tom Adams of BDS Analytics said that Canada could see cannabis oversupply as early as 2019. He based his predictions on patterns on other markets, and the ability of licensed producers to increase production.
“The point of balance will last about 10 seconds,” Adams said. “We’ll be on to the competitive battle that consumers can look forward to, of course, because that means lower prices.”
He predicted the overall market in Canada would jump from approximately $750 million to almost $7 billion by 2024. (Canadian dollars used here. Adams used US dollars in his estimations.)
According to the Global report (please see link below), cannabis supply chain problems and perceived cannabis shortages that led to legal retail cannabis challenges improved. Health Canada figures show that as of March 31, 2019, monthly sales of dried cannabis amounted to 7,627 kilograms. There were also 30,802 kilograms of finished inventory and 143,773 kilograms of unfinished inventory in the system. These numbers could point to cannabis oversupply. However, analysts from BMO Capital Markets warn that at least some of the unfinished inventory may be dated or otherwise not be suitable for sale.
“We believe this is due to the learning curve associated with growing cannabis at scale,” the company told clients.
Edibles, Topicals, and Extracts the Dark Horses in Oversupply Equation – LPC
The BDS Analytics report warns that there are many unknowns when edibles, topicals, and extracts are legalized in October. That makes it hard to accurately predict cannabis oversupply. Regulations announced with cannabis edibles legalization state that licensed producers must give 60 days’ notice of their intent to sell these products. That means edibles and other products will likely hit the shelves by mid-December. Adams said that there is a risk that edibles will put pressure on Canada’s cannabis supply. However, it represents a “minority” of the market, he said.
“It’s not likely to create a demand bump that would put flower supplies in jeopardy again,” Adams said.
If edibles does remain a minority of the market, improvements to the supply chain could lead to cannabis oversupply.
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