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Canadian Cannabis Industry May Struggle to Satisfy Recreational Demand

There may not be enough pot to get Canadians as high as they want to be once recreational legalization kicks in.

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Canada is still on track to legalize recreational use of cannabis as of July 1st, 2018. Health Canada estimates that between four to six million Canadians will legally use recreational cannabis next year, but experts are concerned that the country's cannabis industry will be unable to supply enough weed to meet this massive demand.

Canada currently has around 170,000 medical marijuana patients, but many cannabis producers regularly run short of strains or sell out of their products, according to cannabis investment analyst and consultant Aaron Salz. When “the taps are turned on” for recreational weed, Salz is “highly confident” that the country is “going to have a supply shortage.”

The combination of recreational legalization and a shortage of legal marijuana would send Canadians in search of illegal sources of pot, which compromises one of the government's primary goals in legalization - destroying the black market.

Health Canada is working to help with the projected supply issues, streamlining the application process and doubling the number of staff assigned to review applications. The agency is giving priority to the 137 applications that have already passed the initial screening, and some of these startups already have begun construction on growing facilities.

Despite the work to speed the application process along, it can take up to three years for a company to build a grow-op and ramp it up to full-capacity production. “It’s actually a pretty desperate problem,” said John Prentice, president of “seed to sale” software company Ample Organics. “As far as I’m concerned, we’re going to be in pretty rough shape come July 1.”

“I think we will be critically short,” said cannabis consultant and investor Paul Rosen. Regardless, Rosen believes that the country's “slow and steady” approach to legalization is the best idea. The country risks losing control of the regulatory process if they rush legalization, but also risks losing market share to the black market if they work too slowly.

Rosen believes that the process of overtaking the black market with legal sales will be slow, but certain. “The white market is going to overtake the black market. It just won’t be on July 1, 2018.”

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