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Oregon is an object lesson for Canada’s incipient cannabis market – economists

Marijuana produces in Oregon have stated that the sheer abundance of current supply is eating into their businesses less than 3 years after legalization, and economists have warned that it’s a tale that Canada should take to heart.

Stephen Easton, professor of economics at Simon Fraser University and senior fellow at the Fraser Institute, said that in hindsight, instabilities in both price and supply were inevitable in Oregon, and “there is no reason to think it won’t happen here as well. In a broader sense, we are adding legal production to an already robust illegal production.”

“Consumption may simply not increase in proportion to our ability to grow,” Easton told The Canadian Press.

At present, Oregon has almost 450,000 kilograms of usable flower in the system, and an additional 159,000 kilograms of marijuana extracts, edibles, and tinctures. The Oregon Liquor Control Commission said that some of the inventory of flower also goes into extracts, oils, and tinctures (which have increased in popularity).

Despite this, the retail price for a gram of pot has fallen about 50% since 2015 (from $14 to $7), according to a report by the Oregon Office of Economic Analysis.

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Currently, there are 104 licensed marijuana producers in Canada, including 57 in Ontario and 22 in British Columbia.

As of May 11, Health Canada has already received 1,974 applications from producers and had refused 268, while others were in progress, incomplete, or withdrawn. The entire application process takes more than a year to complete.

Under the federal government’s proposed approach to cannabis, regulations would not prescribe a limit on the amount of cannabis a producer cultivates under a standard licence.

“However, the Minister of Health could establish a production limit as a condition of the licence if there were reasonable grounds to believe that a licensee was producing more cannabis than this licensee was able to sell, and that the excess inventory was at risk of being diverted to an illegal market or activity,” a November 2017 consultation paper by Health Canada says.

 

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