David George-Cosh

Reporter

Follow|Archive

Aleafia Health Inc. said the cannabis it grew during its initial outdoor harvest this year resulted in some of the cheapest legal pot grown in the country, a sign that thousands of kilograms of inexpensive marijuana could soon hit the market and create a potential oversupply scenario.

Toronto-based Aleafia said on Monday it grew 10,300 kilograms of outdoor-grown cannabis at its 26-acre Port Perry, Ont. facility this year, with cannabinoid levels near identical to similar strains grown indoors. The company said the total all-in cash cost to harvest the outdoor grow, which includes facility capital costs, came to $0.10 per gram, one of the lowest figures in the industry.

“Today, we can definitively say that Aleafia Health is among the lowest-cost producers while realizing close to the highest revenue per gram sold among our peers as demonstrated in our upcoming third-quarter financial results,” said Geoff Benic, Aleafia’s chief executive officer, in a statement Monday.

The emergence of cheap, outdoor-grown cannabis that will be earmarked for next-generation products such as oil and vapes will become significant for Canadian pot producers as they collectively ramp up operations, both indoors and outside.

Several cannabis-focused analysts have said Canada’s pot producers are harvesting enough marijuana to come close to hitting Canada’s annual demand of 924,000 kilograms​, while illicit suppliers continue to produce cannabis both below-average production and selling costs. Cannabis analysts have said outdoor pot production will cost between 10 cents to 25 cents per gram, but will be mainly used for extraction purposes due to quality concerns. Cannabis companies that grow their product indoors typically report cash costs of between $2 to $3 per gram. 

While Health Canada approved outdoor cultivation in the summer of 2018 to bring down production costs and discourage consumers buying from the black market, the move could also flood the industry with cheap product that may place margin pressure on companies.

Aside from Aleafia, several other cannabis producers are set to report their outdoor production figures that may further impact supply conditions in Canada. WeedMD Inc. said last week it completed its harvest for its 27-acre outdoor facility and will report its production results during its third-quarter release on Nov. 28, while 48North Cannabis Corp.  stated last month its outdoor grow will be able to meet its commitments to supply provincial wholesalers with 5,000 kilograms of cannabis, but declined to provide further details. Other companies such as Canopy Growth Corp. and Aurora Cannabis Inc. that grew outdoors this summer haven’t stated their harvest totals but will likely do so when they release their quarterly results later this week.

And more cheaply-grown cannabis is already on the horizon. Aleafia said it will be able to grow 102,000 kilograms in next year’s outdoor harvest after getting licensing approval to expand its farmland to 86 acres earlier this year.

Aleafia reports its third-quarter results on Tuesday.

Cannabis Canada is BNN Bloomberg’s in-depth series exploring the stunning formation of the entirely new – and controversial – Canadian recreational marijuana industry. Read more from the special series here and subscribe to our Cannabis Canada newsletter to have the latest marijuana news delivered directly to your inbox every day.