Cannabis in the news July 3, 2019

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News on cannabis stocks and on developments in the industry haven’t let up in today’s volatile markets. Here are this week’s stories that we believe will mean most to you as a Canadian investor.

1. The United Nations’ latest world drug report shows more Canadians started using cannabis each year in the lead-up to the drug’s legalization for recreational use.

The report says there was a 40 per cent increase in usage of the drug between 2013 and 2017, which it attributes to a decrease in the perception of risk around cannabis use and the national debate around legalization.

It says the increase in Canada during this time was more pronounced in adults aged 20 or older, while it declined among young people aged 19 or younger.

According to the UN, Cannabis use overall is still higher among people between the ages of 15 and 24 than people who are 25 and older.

At just over 23 per cent, more people in British Columbia used cannabis in 2017 than elsewhere in the country, while the report says Nova Scotia and Manitoba were also above the national average of 15 per cent.

2. It’s been a quarter to forget for cannabis investors.

Canadian pot stocks were among the biggest laggards in the second quarter of the year as a myriad of reasons, ranging from softer-than-expected sales to supply chain issues, continue to punish the sector.

“We’re finally seeing some frustration that cannabis has not been the blowout that investors were expecting,” said Greg Taylor, portfolio manager at Purpose Investments, in a phone interview.

“People were paying the high valuations thinking they’d get high growth and strong revenues, but so far that hasn’t come to pass.”

As of Friday’s close, CannTrust Holdings Inc. traded 36.7 per cent lower, the biggest decline in the second quarter among the Canadian cannabis companies that trade on the Toronto Stock Exchange. Alberta-based natural gas producer Peyto Exploration & Development Corp. is the largest decliner on the TSX overall during the second quarter, slumping 44.6 per cent.

3. National inventory levels of unfinished cannabis rose in April, potentially accentuating the risk of a glut of unsold legal marijuana in Canada that could wind up being worthless.

The total inventory of finished and unfinished dried cannabis held by cultivators, processors, distributors and retailers stood at 215,665 kilograms in April, approximately 24.4 times the amount of total sales in the month, according to data released by Health Canada late Tuesday. The total amount of finished dried cannabis products held in inventory at the end of April was 31,880 kilograms, up 3.5 per cent compared to March.

Last week, BMO Capital Markets analysts Tamy Chen and Peter Sklar published a report suggesting the growing amount of unfinished inventory stuck in Canadian licensed cannabis producers’ vaults may wind up being worthless, and could lead to industry-wide writedowns. Unfinished inventory is described by Health Canada as cannabis held in stock by a cultivator or processor that is not packaged, labelled, and ready for sale.

While some of the unfinished inventory is believed to be set aside by Canadian cannabis producers to be refined for future products such as infused-edibles, extracts, topicals and vape products, the BMO Capital Markets analysts said an unspecified amount might not be appropriate for consumption in the recreational or medical markets.

4. TORONTO — Canadians looking to enjoy soon-to-be-legalized pot-infused edibles could get hit with higher insurance premiums — depending on the size of their appetite.

Many insurers no longer treat cannabis users as cigarette smokers — who pay much higher premiums due to the high-risk activity — provided there is no tobacco or nicotine in the products they use.

The shift came in recent years as Canada moved to legalize pot for recreational use, starting with dried flower, oils, plants and seeds.

However, to avoid paying more, cannabis usage must stay below a set number per week and many insurers count any kind of pot, whether it is smoked or sipped or chewed.

The threshold ranges from two to four cannabis usages per week, depending on the insurer, said Lorne Marr, LSM Insurance’s director of new business development.

5. Robin Wasicuna hopes to develop recipes for multi-course gourmet meals containing cannabis

A Yellowknife chef says he’s the first nationally certified cannabis sommelier in the N.W.T.

Robin Wasicuna recently completed a two-level course on the subject and said he wanted to learn more as the sale of edible cannabis products will be legal in Canada in mid-December.

“It’s a lot knowledge crammed into two days, you learn quite a bit of stuff,” he said.

“I can look at any bud of a cannabis flower now and just by looking at it, touching it and smelling it, I can tell you whether that plant was grown at a high elevation or a low elevation, whether it comes from the southern hemisphere or the northern hemisphere and what the genealogy of that plant is.”

Wasicuna said he’s hoping to work on a line of edible cannabis products, but not to expect the gummy candies and chocolate bars many cannabis consumers may be familiar with.

“I want to do like four to five course gourmet meals as well,” he said. “My background and my direction is not a candy maker but a chef so that’s where I’d like to see it go.”

The chef said his aim isn’t to overwhelm people with the intoxicating effects of cannabis but to educate people about its flavours.


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