Canadian Cultivators Say Need For Reform 'Urgent'

During an unseasonably warm and windy winter day in Ohio, I took a walk on the 100-mile Towpath Trail, which is sandwiched between a river surrounded by tall, spiky grasses, and a former canal that now serves as a nature preserve for turtles, Great Blue Herons and other wildlife. A very large tree had fallen in the middle of the path. The trunk appeared to have split from the base, taking a 20-foot branch and several other smaller limbs and twigs down with it.

At first glance, it wasn’t clear if anyone would be able to navigate safely around it. But as I got closer, I saw there was a small opening, and watched someone duck under the large trunk and push aside the tangled twigs.

Before the walk, I had a conversation with a cultivator in Colorado who described this moment in the cannabis industry as “uglier than hell” and “scorched earth.” The editorial team at Cannabis Business Times has been having a lot of conversations like this with cultivators and dispensary owners nationwide about how significant price compression, tax liabilities, and illicit market competition are preventing them from not just achieving profitability, but in some cases, breaking even. Some companies are riding it out as long as possible, while others are closing their doors or considering using their facilities to grow other plants.

For years, plant-touching businesses have been ducking under hurdles and pushing aside tangled twigs in the complicated network of state-legal markets, warning that without major reforms such as sensible tax policies, licensed operators would not have a clear path forward; there would always be barriers for businesses providing tested products, and therefore barriers to access for consumers and patients.

Many predicted price compression, but the temporary pandemic-era demand that cultivators expanded to meet has contributed to an oversupply that is driving down wholesale prices far lower than imagined, and lower than production costs in some markets despite efforts to improve efficiencies.

Plant-touching companies have worked through massive obstacles, taking on the weight of trying to provide access to a still federally illegal plant, but the trunk is still blocking the path, and there’s only so much they can lift.

There is hope that banking reform and a change in cannabis’s Schedule I status under the Controlled Substances Act would at least eliminate some of the major challenges, including nullifying Internal Revenue Code Section 280E, so that businesses providing jobs to hundreds of thousands of people would be able to deduct expenses and not have to pay more for legal, financial and other business services.

But as this month’s comprehensive and compelling cover story from Senior Digital Editor Melissa Schiller illustrates, Canadian operators have similar challenges—including tax burdens, a strong illicit market and myriad provincial regulations—four years after adult-use sales launched. Federal legalization cannot and will not solve all the industry’s problems, and the need for reform and action from lawmakers in both countries is pressing.

“The timeline is super urgent. If it takes another 12 months to figure all this out, the damage will have already been done,” Dan Sutton, founder and CEO of Vancouver-based Tantalus Labs, told Schiller. “So many hundreds of firms are on their last legs today ….”

Many say the situation in the U.S. is just as dire. This urgency is part of what compelled CBT’s Cannabis Conference organizers to launch the first-ever VIP Cultivation Roundtable, a forum Aug. 15 for growers and cultivation business owners to share how they’ve worked through multiple challenges, including low-margin flower markets, production costs, pest and disease outbreaks, avoiding burnout and much more. The agenda is live, and more information can be found on CannabisConference.com.

Whatever happens policy-wise, the cannabis industry will continue to navigate roadblocks, and CBT and Cannabis Conference will continue to provide space to share ideas and solutions so that companies can solve problems together.