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Report on Business Cannabis Professional ‘It’s no longer about your square footage.’ Why outdoor grows may change the game

HIGHLIGHTS
  1. Good Buds, 48North and Agripharm obtain outdoor permits
  2. Agripharm to plant 9,000 clones on 5 acres by mid-June
  3. Outdoor licences lifts 48North’s capacity to 45,000 kg from 5,000 kg

At least three cannabis growers in Ontario and British Columbia are licensed to plant outdoor farms this spring, placing them on track to harvest the country’s lowest-costing marijuana crops while nearly 200 other companies await permits in an increasingly competitive industry.

Good Buds on Salt Spring Island in British Columbia, and 48North Cannabis Corp. and Agripharm Corp. in Ontario, said they were among the first three producers to receive outdoor cultivation licences from Health Canada, just in time to plant during the short spring planting season.

“We’re evolving to a lower cost business model that will survive amidst all the competition,” said Peter Miller, co-founder of Agripharm and chief executive of SLANG Worldwide.

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Agripharm, which has grown medical marijuana indoors since 2014 and is awaiting a cultivation licence for its greenhouse, is co-owned by Canopy Rivers, Green House Seed Co. and SLANG. By mid-June, Agripharm intends to plant roughly 9,000 clones on five of the farm’s 85 acres in Creemore, Ont., with the expectation to harvest roughly 10,000 kilograms in the fall. The cost of production is not yet known but is generally estimated around 20 cents per gram, compared with indoor costs that are typically well above $1 per gram.

While outdoor production in Canada means each field will see only one annual harvest, versus three indoors, the amount that can be planted outdoors is significantly larger while production costs are sharply lower. Most producers aiming to grow pot outdoors plan to sell the bulk of their crops as extractions, which are typically made from lower quality cannabis than what is grown in a controlled indoor environment.

48North received its outdoor licence late last week for its 100 acre farm in Brant County, Ont., after it signed supply agreements with wholesalers in Alberta and Quebec.

“Receiving the outdoor cultivation license from Health Canada for our Good Farm is an absolute game changer for 48North and the cannabis industry. Overnight, the company expands its annual expected capacity from 5,000 kg to over 45,000 kg,” said Jeannette VanderMarel, co-chief executive of 48North.

“As a result, I am confident that 48North will deliver on its promise to produce, high-quality, low-cost, organic cannabis for the next-generation of cannabis products, and the dried flower market.”

For Agripharm, an outdoor cultivation licence means its land will transition from a traditional rotational farm of corn, soybeans, wheat and hay to solely cannabis. The move also helps prepare SLANG for its expansion into the Canadian market from the United States. Aside from SLANG’s Firefly vape pen that uses dried flower, the company plans to introduce its other vapourizer products that use concentrates, which are expected to be legalized in October.

“We have the opportunity to expand significantly in the area. It’s no longer about what your square footage is. That will not be relevant at all in the next 24 months, possibly 12,” Mr. Miller said.

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“What will matter is, are your products selling, are they resonating with consumers.”

While it was prohibition that initially turned cannabis into an indoor crop, forcing illegal growers indoors to hide their plants prior Canada’s legalization of recreational pot in 2018, Mr. Miller said he expects the lower cost of outdoor production to lead to more pot farms.

“The sheer economics and reality will move this crop into a more traditional agricultural methodology from indoor production,” he said.

“Our focus is on extracting, processing and manufacturing finished goods and using the lowest cost materials we can find. When you’re growing outside, infrastructure costs are only harvesting and processing and turning it into finished goods.”

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