Canada has burned 3.7 million pounds of unsold, unpackaged cannabis since 2018.

 Cannabis News

Canadian operators burned millions of packages of unsold cannabis goods and a record amount of unpackaged dry flower in 2022 and the first half of 2023, owing primarily to years of supply and demand imbalances, according to MJBizDaily.

According to data supplied by Health Canada, the federal cannabis agency, licenced producers discarded 611.7 million grammes (1.3 million pounds) of unpackaged cannabis in 2022, up nearly 44% from 425.3 million grammes destroyed the previous year.

The findings indicate that Canada's regulated cannabis market continues to pursue supply-demand equilibrium after licenced operators generated significantly more marijuana than consumers were prepared to pay for.

In 2022, the amount of cannabis destroyed accounted for almost 16% of total production, or approximately 3.8 billion grammes.

There was only partial data available for 2023.

According to Health Canada data, licence holders destroyed an additional 265 million grammes of marijuana during the first six months of 2023.

There is no data available for the second half of 2023.

However, if a similar amount is destroyed between July and December 2023, it may indicate that the industry has already reached its peak supply-demand imbalance and is moving closer to equilibrium.

Canadian cannabis destroyed by license holders

Since 2018, Canadian firms have destroyed a startling amount of cannabis.

More than 1.7 billion grammes (3.7 million pounds) of unsold, unpackaged dried flower have been destroyed since Canada became the first major country to legalise recreational cannabis sales.

This is similar to the weight of approximately 1,252 Honda Civics.

In addition to unpackaged flower, some 24 million cannabis packets have been destroyed since 2018.

What was the cause?

Too many licenced farmers began mass-producing cannabis when Canada legalised adult-use cannabis sales, according to industry sources.

Analysts and investors evaluated marijuana producers mostly based on how much product they said they would cultivate rather than how much they could sell during the cannabis stocks' heyday, which lasted from 2017 until roughly 2020.

This pushed cannabis licence holders to fund and develop huge greenhouses, the majority of which were incapable of producing the high-quality, high-potency marijuana that consumers desired.

Marie Sweeney, cannabis team adviser for the Ontario-based Cannabis Licence Experts consultancy, also suggested that a wave of business closures contributes to marijuana destruction, as insolvent companies are typically required to destroy unsold product if not liquidated before federal permits expire.

Since early 2022, at least 42 cannabis-related businesses have filed under Canada's corporate insolvency law, the Creditors Arrangement Act (CCAA).

Most of the cannabis in their warehouses is destroyed, with a few exceptions.

Last year, the Canada Revenue Agency informed Tantalus Labs, based in British Columbia, that it would visit its facilities and destroy all of its cannabis inventory and stamps once the company's excise permit expired.

This meant Tantalus, which had filed a Notice of Intention to Make a Proposal under the Bankruptcy and Insolvency Act, couldn't sell its stock.

Tantalus challenged the verdict and prevailed, allowing it to sell the inventory instead of destroying it.

Sweeney gave further justifications for destroying Canadian cannabis, including:

Companies without a sales team or a business plan, as well as their inability to pivot in a dynamic industry.

Overproduction of defective or unsatisfactory products.

Labelling rules have pushed customers towards high-THC strains such as Afghan kush and White Widow Strain leaving a glut of excellent, low-THC cannabis without a market.

Sweeney stated that the potency issue was compounded by some provincial wholesalers, who refuse to take items with less than 20%-25% THC, depending on the product type.