There’s a real buzz within the US cannabis market. And why wouldn’t there be? After all, over the past decade US state after US state has legalized marijuana one after the other, not only for medical use (now legal in 33 states), but also for recreational use (now legal in 10 states). The black market alone is worth a staggering $52.5 billion.
Yet despite these promising stats and facts, the US doesn’t lend itself well to setting up shop in the cannabis business; nor should it be a destination for the cash of the savvy investor. Here’s why…
The Hustling, Bustling Rush of US Cannabis Companies
There’s a rush going on to produce cannabis in the US. Yet, those that produce cannabis are severely restricted in terms of their markets. They cannot cross boarders into states where cannabis is yet to be legalized.
The current administration has made their position clear on this matter, and had this to say back in February 2017…
“The United States Department of Justice may seek greater enforcement of marijuana legislation at the federal level against states who sponsor and distribute recreational marijuana.”
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⁃ Sean Spicer, White House Press Conference
This leads to another important fact about the US cannabis market; at the federal level cannabis remains unlegalized. While US wide legalization could happen three years down the road (following the next election), nothing is set in stone…
“There is a big difference between the medical use […] that is very different from the recreational use, which is something the Department of Justice will be further looking into.”
⁃ Sean Spicer, White House Press Conference
Whatever the outcome following the 2020 election, there is one thing for certain – there is no chance for quick investment wins in this market. But what about the longer term – are investors being prudent in hedging their bets for the long haul?
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The Problem with Cannabis as a Commodity…
Presuming that the political winds blow in the right direction, many predict the impending legalization of cannabis US-wide. But what then? If this happens, cannabis will instantly become a commodity. And that is a problem. When a resource becomes a commodity, the companies within that market become focused on price competitiveness. In one of the world’s most expensive places to live, there’s only so much that can be done to attempt to compete with growers in countries with lower living costs, labor, materials and land. All of these things take away from investor and company profit, totaling to a massive acre-by-acre dollar difference.
Currently, cannabis prices in the US are sky high, with an average price of $320.1 per ounce (the lowest price of $210.6 can be found in Oregon). While pricing has steadily risen, investors should take heed not to rely on these figures. In fact, if anything they would do well to predict a significant downturn (and potentially big losses) following the legalization of cannabis.
“It is undoubtedly an exciting time for the US cannabis market. Never has so much change happened so quickly, and all the signs are there that legalization may become a reality in the medium-term future. At Massive Therapeutics, we watch with anticipation as to what may come next.
That said, the influx of multi-billion-dollar cannabis companies is perplexing, to say the least. Setting up shop to produce cannabis in North America or Canada is an expensive, restrictive and logistically challenging business move. For investors it makes little sense – now or in the foreseeable future”.
⁃ Bruce Caven – CEO of Massive Therapeutics
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Setting sail for the Caribbean – A natural environment for cannabis cultivation according to Massive Therapeutics
Massive Therapeutics is based strictly in the Caribbean, where their operations team have managed agri-business for thirty years. Over the coming 12 – 18 months they have ambitious, yet attainable plans for business growth.
Being based in the Caribbean provides Massive Therapeutics with clear cost advantages – labor, land, resources, operations and transportation is more cost-effective. Simply growing cannabis in a country where cannabis is approved at a national level, leave minimal legal and logistical issues to grapple with.
So, while many investors clamor to the US and Canadian markets, the grass is clearly greener in the Caribbean.