Will shipping price increases affect cannabis production costs?

A freight container shipped from China to Canada cost over $4,000 prior to 2019. By 2021, that price had increased by about 500 percent to $20,000. (1) Big-box companies with big enough pockets bought cargo ships. And to make matters worse, wealthy companies began harassing and penalizing small businesses over shipping costs. (2) Eventually, price increases for shipping down the production line to consumers will trickle down, but how will they affect cannabis costs?

Goods that remain dirt cheap

This author reminisces about the old days when BC Bud was so popular that growers in other countries imported soil from British Columbia. In other words, dirt may not be affected by North American shipping costs. However, the soil used to grow cannabis is far more complex and full of changes compared to soil. And cannabis production typically relies on diverse supplies from many sources that are often out of local reach.

Equipment costs of cannabis production

Totes, vermicompost, rockwool, coco, lights, bat guano, bugs, and the list goes on and on. Cannabis production requires a lot of behind-the-scenes stuff. LED grow lights can be sourced from the United States, but any increased local demand will still threaten to increase domestic costs. Not to mention a big shift in LED technology lately.

Most companies could feel pressured by a constellation of upside moves. As a result, manufacturers could be forced to pass on additional costs to consumers at the expense of sales. But has this happened in the cannabis market?

Raise store prices, then compared to now

PNW Garden Supply price increases over 2.5 years between 2017-2019 & 2.5 years between 2019 to current 2022, according to website prices in archived data.

• growth media
• Green Gaia Stone Dust – 36% & 0%
• Green Gaia All Purpose 2kg — 31% & 25%
• Canna Coco – 8.6% & 0%
• Botonicare Match – 47% & 0%
• Rockwool 6″ Block – 17% & 0%
• nutrient — The price of nutrients has been stable for five years, excluding a few products. Another exception is General Hydroponics, owned by Scott’s Miracle-Gro, whose price has increased incrementally and consistently by 4 to 30 percent since the fourth quarter of 2017.
• lighting have seen a small increase in the price of some products, approximately five to ten percent over the past five years. In addition, lighting technology has evolved significantly to LEDs.

The graph shows the average price of products in British Columbian Grow Shops over a five year period.

Judging by archived retail prices, the cost of select grow equipment appears to have increased after Canada passed cannabis legalization in 2018.

Grow tents and nutrient costs have remained almost flat over the past five years. While some hydroponic systems and growing media saw price increases of up to 47% in June 2018, recent shipping price inflation has yet to deal a double blow to British Columbia’s cannabis production costs.

Let us know in the comments if you’re affected by shipping price increases or increased cannabis production costs.

Authors Note: This market analysis is limited to available archived data.

swell

1. Xu, M. and Khasawneh, R. 2021. China-US Container Shipping Rates Pass $20,000 Mark. Reuters.
2. Personal communication with a rice importer. Vancouver, BC. 2021

footnote(s)