Canada has seen a number of cannabis cultivators shifting to the use of greenhouses instead of growing the crop in indoor grow rooms. This new development could mark the final days for the cannabis black market in Canada and elsewhere.
Greenhouses can drive down the cost of legal marijuana in several ways.
As you may know, land accounts for one of the biggest costs that marijuana cultivators have to incur in order to bring the produce to the market. Indoor grows are located on prime industrial land which costs a fortune.
The shift to greenhouses means that cannabis producers can go to rural agricultural land which is cheaper to acquire. The reduced cost of land can translate into lower prices for each pound or kilo of cannabis.
Secondly, indoor grow facilities consume a lot of electricity in order to create the ideal conditions for growing cannabis. That high cost of providing electricity has always meant that legal cannabis will be more expensive than what is available on the black market.
Greenhouses can allow cultivators to use just 40 percent of the power that they needed when they were growing the plants indoors. This reduced energy demand would then make it cheaper to grow cannabis for the legal market.
Furthermore, greenhouses allow the economies of scale to come into play. As already mentioned, rural land is cheaper than the industrial land where cannabis has been grown indoors. Mega cannabis operations can therefore be undertaken on the expansive agricultural land which is available in Canada and elsewhere where cannabis is legal.
Pure Sunfarms is an example of cannabis producers in British Columbia who have decided to harness the power of the sun to grow marijuana. The facility has greenhouses covering a staggering 1.1 million square-feet. The complex used to cultivate other produce, such as tomatoes and peppers, before the greenhouses were retrofitted for the cultivation of cannabis.
This trend is likely to be replicated across Canada and the rest of the world if production costs are to be driven downwards. That means that big agricultural operators are going to drive the smaller players out of business since the “small guys” will not manage to compete with their bigger counterparts.
Ultimately, it is the cannabis consumers who will benefit since the competition among the big players will keep driving innovation in order to cut production costs further. It is those low production costs that will eventually kill the black market since the risks of illegal production are likely to increase with the passage of time. Legal cannabis industry players like Cannabis Strategic Ventures, Inc. (OTC: NUGS) and Canopy Rivers Inc. (TSX.V: RIV) long to see the day when the black market will dwindle to an insignificant level across the industry.
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