Colombia: Poised to Become the World’s Leading Cannabis Growing Jurisdiction

The global legal marijuana industry continues to boom with analysts predicting a massive surge in demand over the next decade and that the global market could expand to be worth US$66 billion by 2025. That represents an annual compound growth rate (CAGR) of 24%, highlighting the considerable growth ahead for an industry that is still in its infancy. While Canada has become the leading producer of global legal marijuana production because it was the first developed nation to legalize the recreational use of cannabis, it may not hold that position for long.

Superior jurisdictions for cultivation

A key problem with cannabis cultivation in Canada is the need for it to be conducted indoors in climate-controlled greenhouses, which is extremely energy intensive and costly. It has been estimated that, on average, to cultivate one kilogram of marijuana indoors produces 4,600 kg of carbon emissions, which is estimated to be proportionally more than other forms of agriculture and far greater than manufacturing or mining activities.

Indoor cultivation uses approximately 10 times the electricity per square foot of greenhouse that it takes to power a standard office building. This is a massive amount of energy and, aside from straining already stretched electricity grids, is indicative of the significant costs associated with marijuana cultivation in North America.

That emphasizes that other jurisdictions with far more favourable climates, geology, and geography possess a significant competitive advantage over Canada and the U.S. for intensive high-quality cannabis cultivation.

Colombia’s competitive advantage

One such jurisdiction is the equatorial South American nation of Colombia. The strife-torn country, which has long been associated with the war on drugs, cocaine trafficking, and violent drug cartels, possesses a climate that makes it possible to effectively cultivate cannabis in outdoor greenhouses.

Cannabis thrives in Colombia’s equatorial climate, where long, even periods of sunlight, temperate conditions, and consistent rainfall makes low-cost outdoor cultivation almost effortless. For decades, marijuana has been grown as a cash crop by various illegal groups, meaning there is an existing pool of labour with multi-generational expertise. The Andean nation’s long tradition of marijuana cultivation in its rich volcanic soils produces iconic globally renowned strains such as Colombian Gold from the Sierra Nevada mountains, Mangobiche, and Punto Rojo.

When that is coupled with Colombia’s low labour costs, clear regulatory environment, and long history of cut flower cultivation, it underscores the significant competitive advantage the equatorial nation possesses. It is estimated that cultivators operating in Colombia can legally produce marijuana at a fraction of the costs of Canadian growers.

One estimate is that a gram of dried flower in Colombia costs US$0.50 to produce, whereas for the last reported quarter it cost Canopy Growth around US$4.81 per gram. Aphria, another leading cultivator, reported that one gram of marijuana had a cash cost of US$1.11 and all-in sustaining costs were US$2.82. Some analysts believe that it only costs US$0.35 to extract one gram of cannabinol in Colombia compared to around US$3 in Canada.

Colombia also has low start-up costs, which, coupled with easily understood licencing, production, and export legislation, further enhances Colombia’s appeal as a destination for marijuana cultivators. Canopy and Aphria have acquired property in Colombia’s rich agricultural departments of Huila and Caldas, respectively, because their climates are well known for coffee, illegal marijuana, and coca cropping. 

Pulling it together for investors

While both leading Canadian cultivators offer considerable upside, it is local grower PharmaCielo (TSXV:PCLO) which is shaping up as an exceptional opportunity with 15 million square feet of cultivating and oil processing facilities. It has first-mover advantage in Colombia and is one of the few licensed cultivators authorized to produce CBD-dominant and THC-dominant cannabis as well as having distribution agreements in Mexico and Italy.

PharmaCielo recently announced that it was acquiring Creso Pharma for around $113 million. On completion, this will allow the cultivator to turn its Colombian production into sales, give it a licensed Canadian production facility, and add established sales channels into 13 markets globally. This positions PharmaCielo to benefit from the impending legalization of cannabis edibles, extracts, and topicals in Canada on or before October 17, 2019, which analysts estimate will add $2.7 billion to the domestic market.

You might be missing out on one of the biggest opportunities in Canadian investing history…

Marijuana was legalized across Canada on October 17th, and a little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.

Besides making key partnerships with Facebook and Amazon, they’ve just made a game-changing deal with the Ontario government.

One grassroots Canadian company has already begun introducing this technology to the market – which is why legendary Canadian investor Iain Butler thinks they have a leg up on Amazon in this once-in-a-generation tech race.

This is the company we think you should strongly consider having in your portfolio if you want to position yourself wisely for the coming marijuana boom.

Learn More About This TSX Stock Now

More reading

Fool contributor Matt Smith has no position in any of the stocks mentioned.

Source: The Fool
Colombia: Poised to Become the World’s Leading Cannabis Growing Jurisdiction
The Fool

The Motley Fool
Contributor for
The Motley Fool is dedicated to helping the world invest — better. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, mutual funds, and premium investing services.

In all we do, we take a different approach.

We believe – and have proven over decades – that the individual investor can beat the market.

We believe that anyone can do it, even if they don’t have a lot of time or money to devote to investing.

We believe in a long-term outlook, helping people build wealth over time.

We believe that the person best positioned to take care of your financial future is you.

And we work tirelessly on behalf of our hundreds of thousands of members who are enjoying the opportunities that come with having enough money to do the things that matter to them.

While we are headquartered in Alexandria, Va., The Motley Fool advocates for the individual investor around the globe with offices in the UK, Australia, Canada, Singapore, and Germany.

Related posts