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Six months after legalization, high prices and supply issues boost illicit pot market

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TORONTO — When cannabis supply at Small Town Buds begins to dwindle, co-owner Chris Felgate shuts the doors of his Devon, Alta., shop and turns customers away.

Even though the legal retailer often still has oils and capsules in stock, most shoppers are looking for the store’s namesake product, he said.

“Having our doors open with no flower available was making customers more angry… It’s like going into a grocery store and not having groceries,” he said.

Since he first opened his doors on Oct. 17, the closures became a near-weekly ritual as demand outstripped the supply he was able to procure from the provincial government distributor, he said.

The situation began improving in March, however, after the Alberta Gaming, Liquor and Cannabis agency added additional suppliers, and he has kept his doors open consistently since. But the weekly supply he receives still lacks in selection and quantity, Felgate said.

“We’re lucky if we’re getting one or two cases of strains… We purchase everything that is available to us, whether we like the product or not.”

It has been six months since Canada became the first industrialized country to legalize recreational cannabis, in a bid to stamp out the illicit market. On that landmark day, high demand resulted in lineups at the few bricks-and-mortar stores that were ready, delivery delays and stock outs.

Licensed producers ramped up production in anticipation of Oct. 17, but product was scant and many companies pointed to supply chain issues as a major cause of the bottleneck.

And on this 4-20, the first annual celebration of cannabis culture post-legalization, many pot enthusiasts are still smoking joints they did not buy through legal channels.

The vast majority of cannabis, or 79 per cent, was bought illegally in the fourth quarter, according to Statistics Canada, down from 90 per cent in the third quarter.

Legal sales of dried flower across Canada in February were down 8.8 per cent from January, partially due to a shorter month, but average daily sales of dried cannabis in February remained relatively flat, up one per cent from the previous month.

Meanwhile, inventory of dried cannabis products which are finished — meaning packaged, labelled and ready for sale — at cannabis companies rose by more than 19 per cent to 12,110 kilograms in February. The amount of unfinished dried cannabis held by licensed producers increased to 120,731 kilograms, up 4.1 per cent from January.

“Health Canada is aware of reports of localized shortages of cannabis products in some markets and for some product lines,” said Tammy Jarbeau, a spokeswoman for the government agency. “The supply of cannabis is not the issue. The issue is the supply chain, in other words, converting raw product into packaged goods and moving it to distributors or retailers and to customers.”

Based on industry figures, there is enough cultivation space to produce approximately one million kilograms of pot per year, she added.

Allan Rewak, the executive director of the Cannabis Council of Canada, said much of that unfinished inventory is product unsuitable for sale to consumers. As well, licensed producers face various regulatory hurdles such as obtaining necessary licenses for processing product that does meet the bar, he said.

“It’s a multistage process. If it was simple as put plants in the ground and they’ll grow, you would have seen the situation fully resolved by now,” he said. “But this is a complex system by design.”

Aphria Inc. sold less cannabis to recreational users during its latest quarter ended Feb. 28, compared with the previous one, due to supply shortages and packaging and distribution challenges.

But Bruce Linton, co-chief executive of Canopy Growth Corp., said it has ramped up the amount it can package and ship, from roughly 300,000 units in October to 1.3 million in March. With automation and new equipment, output is getting better, but as more stores open their doors demand grows, he said.

“The equation keeps evolving… It’s not a static market,” he said.

Several provincial government retailers and distributors say they have seen marked improvement in recent weeks, but supply remains an ongoing challenge. Many of these provincial entities have signed on additional licensed producers to boost supply as Health Canada gives more companies the green light to cultivate and sell.

In B.C., the Liquor Distribution Branch has been receiving a larger share of the amount ordered from suppliers compared with the initial weeks of legalization, according to spokeswoman Kate Bilney.

Manitoba Liquor and Lotteries is receiving, on average, about 30 per cent of the product it is expecting each month, spokesman Lorne Kletke said.

In Quebec, supply is getting better “week by week” and the Societe quebecoise du cannabis expects significant improvement by the end of spring, said spokesman Fabrice Giguere. But the crunch is “not over yet,” and its outlets will remain shut on Mondays and Tuesdays, he added.

Cannabis retail chain Fire and Flower is seeing a boost in supply, but at a slower rate than expected, said its chief executive Trevor Fencott.

The company — which has stores in Alberta, Ontario and Saskatchewan — is seeing more product from the latter province which has a more efficient, private distribution model, he said.

“In Saskatchewan, we buy directly from licensed producers,” Fencott said. “And we have never ever had anyone not deliver to us. Ever. They always meet their commitments.”

But even when legal retailers are stocked up, price remains an issue.

The unweighted average price of a legal gram of dried cannabis is $9.99 per gram, compared with the average illicit price of $6.37 per gram — a price gap that appears to be widening, according to an analysis by Statistics Canada of submitted price quotes.

Regular cannabis users are unlikely to make the switch until the price of legal cannabis becomes more competitive, said Fencott.

He points to Colorado where prices have dropped dramatically since legalization, at the expense of illegal dealers. Legalization at a national scale is a massive endeavour, and things will improve, in time, he said.

“We are still doing something that no country on the planet is doing,” Fencott said. “So while it is frustrating on some level, we always keep in the back of our mind the enormity of the task.”

 

Armina Ligaya, The Canadian Press

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Agriculture

City Council urged to get back to the table to vote on future of Westerner Park

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Letter submitted by Lyn Radford (Chair of the 2019 Canada Winter Games)

Lack of Council Leadership or Election Posturing?

In this unprecedented time of the pandemic, of polarized political views I have tried to stay out of commenting on decisions our political leaders have to make. We all know there is not usually a clear-cut answer. But this delay situation by City Council regarding the Westerner clearly baffles me.

First, I want to send out a thank you to both the Westerner and City Administration for their hard work and excellent reports and options for this very unfortunate situation. Second, I want to thank the Westerner Board for not running from a situation but rather staying to try to sort out a mess. As a volunteer myself, I know this has not been an easy situation for you and your families. I also want to acknowledge Councillors Wyntjes and Dawe for wanting to move this forward, whatever their decision would have been.

The City’s Vision Statement and Strategic Goals clearly lays out a pathway to help guide Council to make a positive, community benefiting decisions. “Innovative Thinking, Inspired Results, Vibrant Community” are their key words.

Strategic Goal #4 “A chosen destination: We are a four-season destination where visitors and residents enjoy our parks, trails and distinctive amenities, all within our “city in a park”. Centrally located in the province, we attract events that generate investment and enhance our community identity.

My question is how by delaying a decision does City Council justify following their Vision Statement and Strategic Goals.

I add these queries and statements:

  • You have had more than year to gather information, make enquiries, have closed council information sessions, spoke to community members, and should have delved into this. You received the report far in advance of the special session and should have come ready for a decision without delay. Why did this not happen?
  • The City has been locked and instep with the Westerner in the last year. The Westerner has fulfilled all requests and have been measured through two (very expensive) audits by Deloitte.
  • There is over $3.5 million generously donated by a private family, held in trust for the Westerner Foundation, that could be doubled with a potential matching grant that will be dispersed upon a sustainable decision for Westerner Park, if a deal has been reached by May 15th. And our community will most likely lose this because of this delay. Sad.
  • If CIBC closes on the loan for default (community this is very, very real), there will be hundreds of thousands of dollars spent putting this into receivership, of which our community will have no gain or say. And further, we will not have an event center capable of hosting the economic driver our community so sorely needs right now, as we know what the vacant downtown and business parks are looking like today.
  • How much staff time has been spent already? Spend more money delaying a decision, no matter what the cost?
  • Twice, not just once, in your session, councillors questioned the capabilities of the Westerners CEO. Did you not have time in the closed sessions to request a character assessment? Do councillors feel this was the right, very public forum for this? Rather than being able to say you did your due diligence in a professional and respective manner?
  • Through the whole poor decision making by the Westerner Board that brought this terrible situation forward, there were three members of today’s council that actively sat on the Westerner Board. Maybe some ownership needs to happen here and a review of the responsibility process for Councillors to be revisited, giving a level of responsibility to council. If you want to sit at the table, then accept all the responsibility as every other board member has had to do.
  • Further, the initial loan that started this process way back in 2017 and subsequent refinancing all had to be signed through a tri-party agreement by the City of Red Deer, fully knowing that this result could happen. Why is there any hesitation here?
  • The window of borrowing from the province is very small now, missing this will create more costs.
  • The Westerner annually, has been contributing a $150 million/year economic impact to our community. They were one of the largest employer’s, well over 600 employees each year and then add all the employees of the supporting vendors, we can comfortably say that in a year well over a thousand of our community members that pay property taxes are impacted by the Westerner directly.
  • The Westerner has been a volunteer ran organization for 130 years. These volunteers and eventually along with paid staff have contributed so much to our “vibrant community”, building an asset value of over $57 Million dollars. This is a big bump but not a mountain, lets deal with it.
  • No matter who you are or what your interests are, the Westerner has been providing experiences for us for 130 years – concerts, sporting events, rodeo events, fairs, shopping opportunities, cultural experiences, first jobs, first dates, health fairs, Agri trade, a place to first learn to drive, the day you wed, celebrating the season, ringing the New Year……all for our community

In conclusion, what we need right now is Council members to host a special meeting immediately and make a decision one way or another. I sincerely hope the decision will be to support, empower, trust and not control or try to compete with the community run Westerner Board, volunteers, and staff to rebuild a “distinct community amenity”. It can become a strong thriving contributing member of our broken community once again. We are in need of some strong leadership.

Respectfully submitted,

Lyn Radford

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Agriculture

Carbon Tax and Clean Fuel Standard a double blow to Canadian farmers

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This post is submitted by Red Deer Mountain View MP Earl Dreeshen

MP DREESHEN TABLES PETITION ON CARBON TAX

AND CLEAN FUEL STANDARD IN HOUSE OF COMMONS

MP Earl Dreeshen tabled a petition in the House of Commons today, on Canada’s Agriculture Day, calling on the Liberal government to exempt all direct and indirect input costs that the Carbon Tax imposes on farmers, while also calling on the government to repeal the Clean Fuel Standard.

“Canadian farmers and ranchers are losing tens-of-thousands of dollars in net income each year because of the Liberal government’s ill-conceived carbon tax and that is simply not sustainable for most of them,” MP Dreeshen said.

‘Our global competitors are not burdened by the huge carbon tax debt. But Canadian farmers and ranchers do not have the ability to add the carbon tax levy to the price of their product. They have to pay this tax as it is levied by their input suppliers. Exempting input costs will put Canadian farmers on an equal footing with their international competitors and allow them to keep producing the world’s best and most nutritious foods.”

The Liberal government announced at the end of last year that the carbon tax will triple to $170 per tonne by 2030 following a commitment made in the last election that the tax would not increase beyond $50 per tonne. According to the Parliamentary Budget Officer, a farm in Alberta with 850 seeded acres of crops can expect the Liberal government’s carbon tax cost it more than $17,000 per year once the tax reaches $50 per tonne in 2022.

The Liberal government is also proceeding with the so-called Clean Fuel Standard, which some studies estimate will represent a total cost to the Canadian economy of $7 to $15 billion and 50,000 lost jobs, including an impact of $389 million to the Agricultural sector. “Nobody needs or wants an extra tax on top of another tax so we need to repeal the CFS before it even gets off the ground,” MP Dreeshen said.

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june, 2021

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