Is 2020 the year Canada grows too much pot?

It’s great news for budget-conscious consumers and edibles and concentrates makers.

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Canada’s pot companies are on track to grow five times more product this year than the country is expected to be interested in consuming.

That’s the prediction of more than a few market analysts heading into 2020.

And if they’re right, the rush to supply Canada’s market – and for Licensed Producers to out-produce their competition – could substantially cut the price for weed. That’s great news for budget-conscious consumers of cannabis, but not so much for the stock market in bud.

An analysis released by Grizzle’s Scott Willis last month predicts “more rough times in 2020 if the market can’t find a balance.”

The outlook isn’t surprising coming from Willis, who has found a niche telling the cannabis industry to slow its roll-out. But he’s not alone.

Other analysts are also predicting an oversupply issue, drawing the ire of industry leaders who counter that the availability of edibles and vapes starting in 2020 will translate into increased sales.

On December 13, Ontario announced a significant expansion of the cannabis retail sector, which is also expected to improve sales. The arrival of retail in more places across the province should take a bite out of the illicit market, at least that’s the hope. In any case, expansion of the market will mean lots more wholesale cannabis leaving the vaults of producers.

But Willis argues that the availability of edibles and vape products won’t necessarily mean that buyers will spend more than they do now. He posits that consumers will spend differently, shifting what they spend now on flower to edibles, for example.

Chris Damas, the author of the BCMI Cannabis Report, has long held that industry estimates of demand for LP weed are wildly out of line with reality.

Damas writes in an email to CannCentral that being able to buy a cannabis-infused beverage or edible may provide an initial boost for producers. But he says the market for dry flower may already be saturated – it’s just that the logistics of getting product to consumers tends to conceal that fact when all they see are poorly stocked store shelves.

Willis’s “bullish” estimate puts demand for legal weed at 540,000 kilograms in 2020. Meanwhile, Altacorp Capital’s report on the industry released in June 2019 estimates some 2.3 million kilograms of domestic cultivation capacity.

If those numbers turn out to be correct, then once prices drop, already tight margins are going to leave little in the way of profits for a whole sector of mostly small and medium-sized companies that are already struggling with revenues. Oregon, Washington and Colorado — all early adopters of legalization – saw similar issues post-legalization.

To Tom Adams of BDS Analytics, a company focusing on the North American pot industry, there’s one sector that benefits from this potential oversupply: edibles and concentrates makers.

Since they require product on the cheap, falling prices and oversupply benefits their bottom lines. There’s the silver lining – for the right players.