Pot firms look to grow outdoors ahead of edibles
Farm fields across Canada could be growing a new kind of green crop this year after dozens of pot firms applied to produce cannabis in the great outdoors.
Health Canada spokesperson Tammy Jarbeau said in an email Tuesday the regulator has received 172 site applications as of Jan. 31 from licensed cannabis producers who intend to use an outdoor area for cultivation or other purposes, including destruction or compost. At this time, no companies have been authorized to grow cannabis in an outdoor area, Health Canada said.
Earlier this week, TSX Venture-listed 48North Cannabis Corp. (NRTH.V) announced it secured what is believed to be the first supply deal for outdoor cannabis for the recreational market when it struck an agreement to supply Société Québécoise du Cannabis, Quebec's cannabis retailer, with 1,200 kilograms of pot from its farm in Brant County, Ont. by the end of the year.
“We’ve always been focused on next-generation products, so the question was: How are we going to get the lowest-cost of product possible?” said Alison Gordon, co-chief executive of 48North, in a phone interview. “After working in Colorado and California and looking everywhere else in the world, outdoor is really the way this plant should grow.”
Although pot has been grown outdoors for decades, much of that has been earmarked for the illicit market, as all of the legal cannabis produced for the medical and recreational market is currently either grown in indoor facilities or greenhouses. Canadian regulators approved outdoor cannabis production in June 2018 after previously restricting it indoors to prevent theft and ensure quality control.
Since then, several major cannabis companies are priming their fields to grow tens of thousands of kilograms of marijuana outdoors ranging from three cents a gram to as high as 25 cents a gram, a fraction of the cost of producing the drug in an indoor facility. Outdoor cannabis proponents say the dried flower also maintains and even accentuates the fragrant terpenes that provides each cannabis strain with its unique and marketable flavour profile.
Producing outdoor cannabis is becoming a major plank for licensed producers such as Aleafia Health Inc. (ALEF.V) and CannTrust Holdings Inc. (TRST.O), which have both announced plans to grow the plant outside to meet the anticipated demand for the upcoming pot-infused edibles market. CannTrust plans to grow its outdoor pot using a hybrid indoor-outdoor method called perpetual harvesting, a technique in which cannabis growers utilize multiple grow areas to ensure that there are always plants in both the flowering and vegetative stage.
Meanwhile, Aleafia recently applied to Health Canada to amend their production license at its Port Perry, Ont. facility to include outdoor cultivation, and submitted a detailed document outlining its 24-7 security plans to regulators across the 26 acres it plans to use as its growing fields. The company aims to build dual perimeter chain-link fencing equipped with thermal and infrared sensors, motion detectors and drone aircraft to keep potential pot thieves at bay.
“It’s much less labour intensive than anything else,” said Aleafia Chief Executive Officer Geoff Benic, in a phone interview with BNN Bloomberg. “You plant it and let Mother Nature do its thing for the season.”
Most of the cannabis grown outdoors is also earmarked for extraction purposes due to quality issues, although 48North’s Gordon believes there will be a niche market of customers interested in purchasing outdoor pot.
“We’re taking a flower off the farm and it will be priced appropriately,” Gordon said. “But the margin that we're going to have on that is huge compared to what it would be for greenhouse-grown pot. And I think the quality of outdoor is almost identical to a greenhouse.”
Cam Battley, chief corporate officer at Aurora Cannabis Inc. (ACB.TO), also stated the Edmonton-based producer is interested in growing outdoor pot in Canada, but said there are no definitive plans. “It’s a possible piece of the puzzle to meet demand,” he said in a recent interview with BNN Bloomberg.
Still, growing cannabis outdoors in Canada has its challenges. For starters, producers expect to harvest just one outdoor cannabis crop a season thanks to Canada’s notoriously inclement weather. Outdoor-grown cannabis results in flower of much lower quality and questionable consistency, according to Jefferies Group LLC.
“We would suggest immediate grievances with outdoor growing by certain manufacturers is more driven by concerns around industry pricing. If the market suddenly gets flooded with cheap outdoor-grown cannabis it could make a route to profitability more difficult,” Jefferies said in a report released earlier this week.
Greg Engel, chief executive officer of Organigram Holdings Inc. (OGI.V), said the pot producer isn’t shifting its plans to grow its high-quality brand of cannabis in an outdoor setting after discussing the particular challenges with government officials.
“One of the challenges when you consider outdoor production is that you have to be at a minimum of five kilometres away from other crops because of pesticide drift,” he said. “Another issue is the soil you’re growing in and whether it has contaminants in it, and then there are bigger questions of security and odour. We have to filter our odours in our indoor facilities, but how will municipalities approve outdoor production if there’s concerns of odour?”
Aleafia’s Benic said his outdoor field already has municipal approval and is waiting for Health Canada to approve its cultivation application.
“We’re hopeful that it’s going to be successful, but when you weigh the investment and infrastructure that we’re going to be putting in place this year and the amount of cannabis you can produce, it’s a pretty easy business case,” Benic said.
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