The cannabis market has been growing with a massive amount of propensity toward the future for some time now, but with any growing market, several issues can often arise. Many of these issues have been in play for a few years now, but they have become more apparent over the years. As the market is able to develop over the next few months, the hopes are that these issues can begin to show their upside potential in time.
One of the biggest issues that many have cited throughout the market has been that of an overproduction issue. At first, this may have seemed like a big problem to overcome because not many people knew how large the industry could get and what kind of demand they would be looking at. One of the companies that has been a part of this has been Aurora Cannabis (NASDAQOTH:ACBFF). The company stated that they have the ability to grow as much as 570,000 kg of cannabis per year, which is quite substantial when looking at some of the mid-sized companies in the industry. Currently, they have stated that they are only producing somewhere around 45,000 kilograms which means that they are nowhere near at full capacity.
One of the ways that many companies have overcome this domestic supply worry’s come from the advent of being able to circulate cannabis around various markets throughout the world. This has helped to potentially alleviate the issue as when companies produce too much cannabis, they can simply begin to export their product to various markets like Germany, South America and other industries that are developing alongside new legislation.
Economists have stated that when sales begin especially in Canada on October 17th, the initial sales throughout the industry will be focused on low-margin products. Since cannabis is traditionally a low-margin product in its raw form, much of the money in the industry with larger margins has been produced through the use of oils and edibles among other products. Because Canada has only legalized the use of dried cannabis flower for use on October 17th, it seems as though companies will begin to find ways to produce cannabis with higher margins. This has been happening a large amount in recent times as these large growing operations have been focused on making a large quantity of high-quality products at a low cost. The success of this will definitively need more research to happen, but it seems as though this could be an incentive to continue focusing on producing new ways to grow cannabis.
The cannabis space as whole has continued to develop over the course of the past few years which has been a large component of bringing in new investors into space. The hopes are high that as the market is able to reshape itself into being a mature industry of the future, new laws will continue to be made to help alleviate some of the stress that is inherent with new markets. Only time will tell how well these efforts play out into the future.
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