June 27, 2018 – In a move that will have implications for Canada’s nascent cannabis industry, this week the federal government is expected to announce new regulations for the cultivation of legal cannabis which will allow companies to grow their crops outdoors. For existing producers heavily invested in indoor and greenhouse cultivation, there is concern the move will put pricing pressure on their bottom lines and further the commodification of cannabis.

Up until now, regulations for growing medical use cannabis — and, come the October 17 start date, for the production of recreational use bud — have required that licensed producers grow in greenhouses or other indoor facilities. But the new rules will now allow for outdoor cultivation.

“Our decision to allow outdoor grow under strict rules is the result of extensive consultations and will contribute to creating a diverse and competitive legal cannabis industry with the ultimate goal of displacing the illegal market,” said Thierry Bélair, a spokesman for Health Minister Ginette Petitpas Taylor.

That stipulation has been campaigned against by established industry representatives, including the Cannabis Canada Council, which has stated that outdoor growing will hinder the government’s stated aim of taking cannabis out of the black market.

Last month, Cannabis Canada Council executive director Allan Rewak told a Senate standing committee that along with increasing the likelihood of theft, outdoor growing will impact the quality of cannabis crops and potentially lead to “cross pollination and contamination.” Rewak said that he’s also concerned about “the danger of unintentional exposure to agricultural pesticides.’

There’s a reason however why the Big Cannabis lobby has consistently attempted to stifle attempts at outdoor grow legalization. As outdoor cultivation costs are much cheaper, they fear the resulting downstream margin pressure will accelerate.

While several greenhouse producers in Canada have already achieved less than $1.00 per gram cash costs, existing producers fear the inclusion of outdoor cultivation could see production costs decline substantially lower, leading to commoditization and putting substantial pressure on their bottom lines.

However, comparing indoor cultivated cannabis to outdoor is like comparing apples to oranges. Outdoor cannabis is a different end product altogether – it will not be as high a grade as indoor and it’s potential uses are different too. There are several reasons for this.

The first factor is weather—or more specifically—lack of ideal year-round growing conditions. Sativa plants can typically take up to 10-12 weeks once it begins flowering to produce commercial yields—sometimes longer. That extensive growing period (compared to indoor cultivators) may limit the harvesting to two crops per year. Indoor cultivators can produce yields year-round.

Secondly, outdoor cultivators face inferior environmental conditions versus their indoors competitors. Everything from lighting/soil/air flow limitations to greater exposure to bugs and pathogens will likely make for lower quality yields. Thus, outdoor cannabis cash crops will not be suitable for inclusion in many refined medical products.

Lastly, outdoor cultivation is more challenging given the requirements for pesticides and treatments to prevent mold and mildew. Those variables are more tightly controlled indoors, where state-of-the-air HVAC and humidity control systems are commonly used. The natural environment hosts a wider ecosystem of hard-to-control variables which will limit the predictability of yields from year to year.