Will US-grown marijuana be around 10 years from now?

The cost of labor, water, electricity, and tariffs can all signal an unfair market for U.S. marijuana growers.

The final chapter of the US cannabis industry was written before it even began! As the U.S. cannabis industry eagerly awaits federal legalization, presumably the dawn of a new age for marijuana, the final chapter is already written, from a book we’ve read many times.

Wait what I thought the US marijuana industry is just getting started, how can it be over? So early?

The US cannabis industry has a “US” problem. The high cost of labor, water, electricity, possibly tariffs and taxes on exports could make the cannabis industry look very similar to the auto industry and manufacturing. It’s just too expensive to grow marijuana in America compared to the rest of the world.

An interesting fact from the recent Benzinga cannabis conference was that the prices of growing cannabis keep falling as people try to improve margins and efficiency. The lights get better, the floors get better, the drying systems get better, but ultimately, the cost of doing business in America is a daunting task for the U.S. cannabis industry.

Colombia is a newcomer to the international cannabis scene. South American countries create a nice “sweet spot” for growing cannabis due to their humid climates, lack of winter and cheap labor. The impressive numbers I saw during Luis Merchan’s presentation at Benzinga showed that his company, Flora, can grow a gram of cannabis for $ 0.60. That’s before Colombia brings a few years of experience, better lights, seeds, soil, and techniques to market. The cost of growing a gram of marijuana in North America ranges from $ 1.50 to $ 2.35. Public reports show that Canadian company Aprhia is spending $ 1.85 to grow one gram of marijuana, while Tilray is spending $ 2.36 per gram of flower produced.

What if Colombia, let alone Brazil, Costa Rica, Uruguay etc. get good at this stuff in 2 years? Will they bring the cost down to $ 0.03 per gram?

The problem that could arise with full legalization in the US and then around the world is that cheap cannabis producing countries can flood North American markets with good, inexpensive marijuana. Also, keep in mind that Colombia is a developed and semi-affluent South American country. North America (think Colombia, the Caribbean, Brazil) and Europe (think North Africa’s labor costs).

Even if all cannabis growing is shifted from high-cost states like California and Colorado to low-cost and agricultural states like Alabama and Mississippi, the minimum wage is still $ 7.25 an hour. The minimum salary in Bogotá Columbia for one month is $ 500. With even cheaper workers in the US, the difference is huge, $ 72.50 per 10-hour day in Alabama and about $ 15 per day in Colombia.

The cost of water in the US is much more expensive in cannabis growing areas than in South America, and while electricity is more expensive on islands and smaller areas than in the US, much of South America can be grown outdoors year round and has never done so around a single grow light to turn on. Colombia also recently approved the export of home-grown cannabis.

I don’t see a day when a senator stands up and wants to impose a heavy duty on imported cannabis and marijuana to “protect our US cannabis farmers!” That would mean that US exported cannabis would be subject to tariffs, which would further increase the price, and its counterparties’ imports would most likely pay little or no tariffs.

So where is the US cannabis industry? The US cannot compete on labor, electricity (with a few exceptions, which grow outdoors all year round anyway), water costs, and a lack of government support. At some point, economy and maximizing margins will dictate that all of our oils and edibles are made from non-US or Canadian weed. Will it get to a point where places like the Emerald Triangle have to compete for price? What if their pre-roll is $ 12 and a similar pre-roll from El Salvador is $ 2. Are you ready to “buy” “American” for 6 to 10 times the cost?

Time will tell, but when cannabis is like the hundreds of industries around the world before it, US weed could be outsourced.

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