Cannabis in the news December 12, 2018

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In volatile markets, news on cannabis stocks and the cannabis industry is at a premium.  As always, we examine all the news and select for you the articles that are most likely to shed light on your future investments.  

1. The CEO of one of Canada’s biggest cannabis producers points to growing interest from institutional investors as an industry gamechanger.

The country’s big cannabis producers have already attracted a handful of big corporate investors, including alcohol-beverage giants Molson Coors and Constellation Brands. Collectively, those deals are now spurring institutional investors to take a closer look at industry stocks, Bruce Linton tells BNNBloomberg.ca.

Vanguard Group, Morgan Stanley and the Macquarie Group are among several institutional investors that have already invested in cannabis stocks.

Large Canadian pension funds such as Alberta Investment Management Corp. and British Columbia Investment Management Corp. have also made early investments.

Those kind of deep-pocketed investors may help to stabilize cannabis stocks, which have been marked by a high degree of price volatility.


2. Canadian cannabis producers are now looking to Mexico for market opportunities, although that country’s new legislation effectively limits their imports.

Although Mexico recently legalized the use of medical marijuana, it continues to prohibit the cultivation, import, and sale of dried cannabis flower. Still, what’s left—medical-grade cannabis oils and concentrates—offers higher profit margins. That’s been attractive enough to lure Canadian cannabis producers.

Aurora Cannabis, for example, has now reached a deal to buy a Mexican pharmaceutical manufacturer and distributor. The purchase should give the company direct access to Mexico’s existing drug system. It also provides Aurora with a base of operations from which to sell medical cannabis to the growing number of Latin American countries considering legalization.


3. Marlboro maker Altria Group Inc. has now cemented its place as the first big tobacco company to buy a significant stake in a Canadian cannabis firm.

The deal announced Friday will see the cigarette giant invest $2.4 billion for a 45% stake in Cronos Group. That firm, which is listed on both the Toronto stock exchange and Nasdaq, saw its shares rise 22% on the news.

Altria also has the option to invest another $1.4 billion within four years, which would give it majority interests in Cronos.

The agreement comes as big tobacco looks to new markets to offset weaker cigarette sales in North America. For Cronos, the deal could allow it to tap directly into one of the world’s biggest networks of tobacco farmers. Many U.S. farmers in states where cannabis is legal have expressed an interest in growing the plant.

Adding outdoor cultivation sites in the southern U.S. could help to lower Cronos’s overall production costs.


4. The U.S. Senate has now passed a bill to legalize the cultivation of hemp.

Under the new five-year farm bill, which still needs the House of Representatives to pass it, along with the signature of U.S. President Donald Trump, commercial hemp cultivation would be made legal.

Just as important, the bill would allow U.S. farmers to insure their hemp crops.

Although in the same family as marijuana, hemp doesn’t produce the euphoria, or high, associated with cannabis use. Hemp also has agrifood and industry applications. More recently, researchers have pointed to early indications that hemp can be effectively used to treat pain and anxiety.

The farm bill would do nothing to legalize cannabis production or use on the federal level.


5. Canada’s cannabis industry has spurred the startup of a number of tech firms focused on helping producers do everything from improve their crop yields to extract more cannabis oil from the plant’s flower.

There are already more than a dozen Canadian cannabis tech companies trading on North American stock exchanges, according to industry professionals. While established agribusinesses have also begun to offer cannabis growers their products and services, these startups are primarily focused on the industry.

Toronto-based Braingrid, for example, makes high-tech sensors that help growers monitor the temperature, moisture, pH and other key elements of their cultivation sites.

Increasingly, cannabis growers—there are now 130 licensed in Canada—are turning to tech companies to streamline their operations and lower costs. The moves are designed to enhance their competitiveness as cannabis prices fall.

“The conventional wisdom is that the price of cannabis at wholesale is going down to the $2 per gram range,” Ryerson instructor Brad Poulos, who teaches a class called the Business of Cannabis, told CBC News.

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