How Speculative Cannabis Investment Led to An Environmental Nightmare in Canada

For the first time since Heath Canada began tracking it after legalization, they report that over a quarter of their domestic cannabis crop was destroyed in 2021. Over 425 million grams, a full 26% of the unpackaged dried flower produced last year was destroyed, along with all the resources that went into growing it, leading to an environmental nightmare for a supposedly green industry. 

Glut of Unsellable Products Leads to Astronomical Rate of Product Destruction

In addition to the unpackaged dried cannabis that was destroyed, more than 140 million grams of unpackaged extracts (17%), edibles (4%), and topicals were destroyed (4%). If that wasn’t bad enough, more than 7 million packaged products were also destroyed (on average, 3% of the total). The percent of the crop destroyed has gone up every year that Health Canada has data available, with last year seeing a dramatic increase from 19% to 26%, but experts suspect that is still an undercount. “The 425 million grams destroyed is likely only a fraction of the cannabis that was grown but has no market, tons of product remains in inventory in various formats,” says Stewart Maxwell, a crop consultant and founder of Elevated Botanist, adding “I have seen fresh frozen product offered on the market that is several years old.”

Tammy Jarbeau, Senior Media Relations Advisor for Health Canada, told High Times that the reasons for product destruction “include, but are not limited to: crop losses; post-harvest disposal of unusable plant material (e.g., stalks); recalled products; and elimination of unsold or returned products.” Maxwell noted that when it comes to packaged products, “any typo on a label can cause a recall,” which may be a contributing factor to the millions of packaged products destroyed. While, thankfully, “Producers must have recall insurance,” that costs tens of thousands of dollars per year. Unfortunately, Jarbeau was clear that, due to how they collect their data, Health Canada does not know “the amount or percent of cannabis destruction that can be attributed to recalled products.”

Quantities of Unpackaged Cannabis Destroyed (January – December 2021)

Quantities of Packaged Cannabis Destroyed (January – December 2021)

Source: Health Canada

The Root Cause Of Oversupply – Speculative Investment

The huge increase in crop destruction last year is quite paradoxical, as it came at a time when the COVID-19 pandemic drove up cannabis sales in Canada. So, while sales were very good, they were not good enough to deal with a severe oversupply in the market. Jarbeau called the destruction “a part of normal business practices” and attributed the escalating rate of destruction to “the increase in number of the federal license holders since 2018.” Maxwell had a more pointed view, “The glut of product on the market is entirely a factor of overproduction driven by investment hype.” At the onset of legalization, many large companies “were able to raise billions on promises to dominate a brand-new industry,” using square footage of cannabis canopy as a selling point, which Maxwell says led to “an exponential overbuilding of cultivation facilities.” Making matters worse, that cannabis was not very good and didn’t sell, which led to “many of these facilities were shuttered,” such as the Aurora Sky facility in Edmonton. 

An Environmental Catastrophe with Incalculable Costs

Maxwell says that based on the typical cost of goods sold, “the cost of the product destroyed is in the billions,” but that doesn’t take into account the cost of the facilities themselves and other resources spent to grow the cannabis. “This overproduction is an environmental catastrophe and the energy required to cultivate this glut is incalculable,” says Maxwell, “When facilities costing tens of millions of dollars are built, then closed without ever producing product of any quality, the destruction of capital and energy resources is astounding.” 

When asked if they collect information on the water, fertilizer, and other resources used when growing cannabis, Jarbeau told High Times that “Health Canada does not collect this information from license holders.” That means there is no way to accurately know exactly how much of and which resources were destroyed along with those 425 million grams of cannabis. This is one area where data collection can be improved both in Canada and the US to better understand how cannabis can be most efficiently grown.

Can Remediation Be Salvation?

You may be wondering, with billions of dollars of cannabis being destroyed every year, who is left in the red? Maxwell says that “Cannabis producers, and their investors are the losers here, and consumers are the winners.” Costs have dropped consistently both in Canada and around the US, where “it is now possible to purchase an ounce of decent weed for just over a hundred bucks.” According to Maxwell, that plummeting price has “almost entirely disrupted the legacy market,” and even growers using artisanal methods to produce premium flower “struggle to achieve profitability due to the glut of product on the market, excise tax issues, and the regulatory cost burden.” 

Anyone familiar with the cannabis industry has likely heard the term “remediation” before, meaning, to remedy something, which can range from methods of reducing contaminants in a product (pesticides, heavy metals) or reducing the THC content of a hemp product to ensure it legally can be sold as hemp. Remediation is a way for cannabis producers to salvage a batch of products that otherwise would be unable to be sold, and would be a massive waste of money and resources. 

Unfortunately, it does not appear that remediation is an option here. “To my knowledge, there is no avenue to direct excess cannabis flower to other product streams,” says Maxwell, “The product must be destroyed as per Health Canada guidelines,” which include incineration, composting, or mixing with kitty litter. “It may be possible for cannabis to be used in other applications,” says Jarbeau, “however, depending on the activity, it could still be subject to the requirements under the Cannabis Act and its regulations as well as requirements under other Acts and regulations.” Those regulations and requirements can be pretty burdensome, to the point where attempts to remediate products might not even be worth it. One bright spot Jarbeau mentioned was that “Certain cannabis plant parts (e.g. mature stalks stripped of their leaves, flowers, seeds, and branches) … are exempted from the application of the Cannabis Act,” and could be remediated into other uses without a license.

Bigger Than Canada, Bigger Than Cannabis

Unfortunately, the problem of widescale product destruction is not unique to Canada or to the cannabis industry. While Canada destroyed 26% of their unsold or unsellable cannabis flower last year, the US destroyed nearly 11% of our hemp crop because it tested “hot,” above the 0.3% THC limit. While 11% is the average, it is much worse in some states, like Tennessee, where the Department of Agriculture reports “42% of crops are being found non-compliant.”

While the reasons are different, the end result is the same, millions of pounds of cannabis and hemp plants being destroyed rather than used to make products, with investors, farmers, and other businesses left in the red. And remember, it isn’t just the cannabis being destroyed here, but all the water, fertilizer, and other resources that went into growing it. On a deeper level, in many cases it is someone’s dream being destroyed as well, with legacy farmers being forced out of the industry they created while being offered insultingly low prices for artisanal quality flower. 

Now that 2022 draws to a close, Health Canada will be compiling their data from this year, and if current trends hold, Canadian cannabis businesses will be destroying around 1/3 of their unpackaged cannabis crop next year. 

Follow Up After Hearing Back from Health Canada

“I didn’t realize that that number represented total cannabis waste destroyed,” says Maxwell. “Cannabis waste is regularly destroyed during the growing process and at harvest. The weight of this waste varies dramatically based on water content. Sometimes waste is destroyed right away, and the weight is mostly water weight. Other times the waste is weighed, then stored until there is a large amount, then weighed again, the discrepancy is justified in documentation as due to water loss, and the dry waste is then destroyed. As you can imagine, with all of these variables, it is not possible to determine which portion of the total waste would be saleable (but unsold) flower, as compared to stem and leaf waste. I would estimate that for every gram of saleable flower, 2 or more grams would be destroyed as unusable byproduct.“It would be much more interesting to know the ratio of finished saleable product produced, relative to the annual consumption in Canada,” Maxwell adds. “This would give a much better insight into the scale of overproduction. I would estimate that the vast majority of finished product that is destroyed is excess product rather than recalled product. I hope this helps.”

Source: https://hightimes.com/news/canada-destroys-a-record-amount-of-cannabis/