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Volatility In Cannabis Land (Germany) – How will it affect prices for consumers? – by Marguerite Arnold

The debate about the price of cannabis as well as its imminent “collapse” or price hikes has been around since there has been a legal market.
In general, the conventional wisdom is a bit off the mark. For the most part, even when it is accurate, it is highly regional and at best temporal, subject to uncertain if short-lived winds. Why? Every cannabis market these days is a different animal thanks to regulations. Further, the American state focussed industry is very different from any other country right now. Canada, Germany, Israel and Australia are more alike to each other than any similarities they share with the U.S. state industry. In any state.

Then there are new wrinkles that so far have not been priced into any of these predictions. If anything, the price of cannabis is going to increase, dramatically, globally over the next 18 months.

U.S. State Markets Are Different
There is a body of evidence that shows that the price of cannabis, to the consumer, has dramatically fallen in places like Colorado. This is understandable for very easy to grasp economic concepts. Supply and demand. The market in Colorado has normalized. There is risk, but there is less of it and all of it is in-state. This all goes into cannabis pricing that is absolutely felt by the consumer. Not to mention all the way along the line until it gets to retail. There is also evidence that the California state cannabis market is going through a similar transition, along with Washington State.

In turn, this along with other pressures are pushing growers to cut costs. But those pressures include major issues, like water, land and energy conservation. None of the investment in such initiatives is tax deductible, either. In other words, this is a rich man’s game of high equity and razor thin margins that those who are well capitalized enough are now playing. Everyone else is being marginalized.

Further, the temporary ups and downs of state markets in the U.S. is by definition, limited to those state markets. It is illegal to transport anything cannabinoid over state lines. And while CBD may be the first to fall on this front, for now, what happens in Boulder, stays in Colorado.

Canadian Markets Will Be Stressed Next Year
There is ample evidence already, just based on the domestic situation in Canada, that there well might be a global medical marijuana shortage until 2020. This has a great to do with how the international as well as domestic Canadian markets are shaping up.

Right now, domestic licensed producers in Canada are expanding. They have great access to global equity markets. They are entering foreign territories. Plus they have large stockpiles of cannabis. The medical patient population is also growing at about 10% a month. In other words, it could double right at the time recreational takes off.

And there is already a rec market in Canada that is easily large enough to compete with even domestic patients.

On top of that, the entire German medical market could be sourced from Canada for the next 18 months to two years. Patient populations, even as estimated by the government (and they are conservative) will put a significant dent in Canadian supplies also.

Even though two new developments may in fact serve to help alleviate the supply of medical grade cannabis, that is already a huge demand that well may drive prices up even if over “just” the next two years.

And while Australia and Israel have just jumped into the cannabis export game, the former via its apparent intent to source most domestic cannabis from Tasmania, this is unlikely to have much of an effect. Yes, Tasmania supplies 40% of the world’s legal heroin. Medical cannabis, however, is a fish of an entirely different flavour.

There is zero chance that any national government at this point, will source the majority of their medical crops or even medication from down under. It is just too expensive. Importing cannabis into Australia (primarily from Canada) also just got very controversial.

For that very reason, all the pricing indicators and market pressures point to at minimum, ongoing upward price trends on the raw plant from growers all the way through to consumers.

German Patients Are In Trouble
If there is one place in the legalizing world right now where price has gone through the roof, it is Germany right now. In an effort to kill the home grow market, the German government passed a new law at the beginning of the year. It will be revolutionary, once they get the kinks out. For now, however, insurers are having to be widely sued to begin covering the drug. Doctors are reluctant to prescribe it. And patients are facing uncompensated costs at pharmacies that have risen dramatically even this year for reasons that have nothing to do with production or distribution, but a locally imposed “pharmacists processing fee.” A month’s supply to a German patient right now, is around $2,400.

It is the German situation, in fact, which dramatically underscores all of the discussions about price volatility and supply.The legal cannabis world is under licensed and way too small to even meet existing demand.

State markets in the U.S. are their own animal for right now. Outside of this very differently refracted local lens, however, the cannabis commodity market has a global footprint that is fairly easy to track, predict and understand when seen from this perspective.

[Featured image credit: commons.wikimedia.org]

Marguerite Arnold | September 11, 2017 at 5:29 am | Tags: Cannabis, cannabis prices, consumer cannabis proce, German cannabis, Israel cannabis, Medical Cannabis | Categories: Business, Opinion, Regulations | URL: http://wp.me/p8nEcz-Mg

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