There is an overall supply shortage of cannabis in Canada at the moment, but a greater shortage of CBD-based products vs. THC-based products, writes Biome Grow CEO Khurram Malik.
This is partially a function of most licensed producers being focused on high-THC genetics, which is where the bulk of the demand resides in the recreational market. However, the smaller slice of the demand pie for CBD has largely been ignored to date. This CBD shortage was also further exasperated with the passing of the Farm Bill in the US, which now allows for the growing of hemp for the purposes of extracting CBD. Similar legislation in recent months has been approved in Canada. The overall media coverage of CBD as result of this has led to a significant uptick in demand that is now waiting for low-cost hemp-based sources to supply CBD from later this year—so part of the narrative here is a temporary timing issue to alleviate supply constraints.
In Canada, specifically, we expect the CBD shortage to be alleviated much sooner than the THC shortage as we move into late 2020. The ability to produce low-cost biomass at scale is a lot easier with the Hemp Act regulations vs. the Cannabis Act regulations in Canada. This will allow the Hemp-based producers to ramp up quicker than the years it has taken cannabis producers to introduce significant volumes into the medical and recreational markets. However, the ability to grow hemp at scale is one thing, but then to process all that biomass in an efficient and predictable manner is not easy. We expect only a few groups in the US and Canada to be able to manage a complete large-scale supply chain until we move into 2021. This is particularly the case in the US, where there is a limited amount of expertise in hemp farming.
At Biome Grow, we feel our partner company, CBD Acres, has these elements in place to do this. This will allow Biome to introduce CBD based medicines in Canada and international markets at affordable prices. Without insurance coverage, this is very difficult to do with THC medicines because the Cannabis Act regulations force Canadian licensed producers to produce a high-cost product for both the recreational and medical markets.
CBD Acres has a team of seasoned hemp farmers, proprietary intellectual property in terms of genetics, harvesting, drying and processing equipment, and a partner in Sunny Crunch Foods that can produce finished food, beverage, and topical products at large scale. In Canada, where Hemp has been produced at scale for other purposes for a long time, the greater challenge will be the downstream elements. This is currently a rare complete collection of supply chain elements in the hemp/CBD space. In the US, the downstream elements such as processing and finishing will not be an impediment, but efficiently producing and harvesting hemp at scale will be a challenge.
