Why Colombia Poses a Threat to Cannabis Stocks

Well-liked cannabis stocks including Canadian giants Canopy Growth Corp. (CGC), Tilray Inc. (TLRY) and Aurora Cannabis (ACB) – the advertisement companies of the marijuana wave – now face an emerging threat as North American pot growers start to move their allotments to low-cost Colombia. The migration seems to be following the earlier pattern of American rose growers moving south of the lie alongside, as outlined in a detailed Barron’s report.

Paul Henderson, whose Monterey-based company Grupo Flor was key to the growth of the district’s marijuana industry, is leading the migration. He expects North America’s cannabis growers to experience the same fate as Monterey’s numberless than 180 rose growers, which disappeared as production shifted to Colombia.

“When the industry starts to make haste toward commoditization over the next decade,” says Henderson, “Colombia is the only place that makes detect.” Henderson told the publication that his company is preparing to plant its first crop outside of the Colombian city of Cali, adjacent the equator.

By growing marijuana in Colombia, “The only difference between us and Tilray is that we can cut our value 90% and still make money,” said Kyle Detwiler, CEO of Northern Swan Holdings, which is currently erection nearly one million square feet of greenhouse and extraction facilities there.

The Colombian cannabis industry has a number of advantages compared to its compare withs in North America. For starters, the new crops won’t need expensive, climate-controlled operations that are currently required to cultivate marijuana in North America. Also, Colombia’s labor is skilled and much reduce cost. Decreased production costs also should help Colombian producers reach a cost of 50 cents a gram, compared to Canadian impresari’ long-term goal of reaching two Canadian dollars per gram, according to Barron’s.

The legalization of medical marijuana in the country for both domesticated use and export is also a plus as Colombia shifts away from a decades-long war on drugs financed by the U.S. government.

Colombia has emerged as a threat as cannabis stocks are coming under pressure on other fronts. Divers of them suffered huge declines on Friday as U.S. regulators expressed reluctance to quickly legalize CBD, one of the many cannabinoids build in the marijuana plant.

CBD proponents say it helps relieve pain, inflammation and anxiety at low risk compared to other treatments. But it was not fired from a federal ban and, instead, was placed under the regulatory purview of the FDA. Even though it’s a non-psychoactive part of the cannabis factory, and does not contain THC, the substance behind the marijuana “high,” the cloud now hanging over its legalization has affected cannabis old overall. “Considering the extent to which the CBD cat is out of the bag, it remains to be seen how the FDA will regulate this industry,” wrote Evercore ISI analysts in a modern note, per MarketWatch.