At 25 cents a gram to produce, is outdoor-grown cannabis the key to lower legal prices?
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Ontario outdoor cannabis grower 48North says it produced flower at this fall’s harvest for 25 cents a gram, far lower than indoor growers’ cost of $2 a gram.
48North’s lowest-priced dried flower will end up selling at retail in Quebec for under $7 a gram in a 3.5-gram container, Canada’s cheapest legal cannabis sold in that size.
Lower-cost outdoor grows, the company’s CEO argues, are key to competing with the illegal market on price.
“When you factor in the government’s mandate, which is to eradicate the black market, then of course cost plays a huge role in that,” Alison Gordon says. “When we have such a robust black market that people have been using forever, what is the motivation to go to the legal market if the prices are significantly more?
“You pay a dollar in excise tax, then there are taxes on top of that, there is bagging or pre-roll, logistics, distribution — there are a lot of costs. It’s very difficult to compete at $2 a gram.”
Most Canadian cannabis is grown in purpose-built, energy-hungry indoor facilities.
But given how much much cheaper it is to grow it in a field like more or less any other crop, should it be?
The illicit market competes on price. Are cheaper outdoor grows the answer?
More than a year after legalization, it’s become obvious the illicit market isn’t going away any time soon. In mid-2019, 42 per cent of Canadian cannabis users said they bought from the illegal market, while only 28 per cent said they bought only from legal sources.
A shortage of retail stores in Ontario and Quebec, and to a lesser degree in B.C., are also factors, but price is a major one.
For a number of reasons, illicit cannabis mostly costs less than its legal equivalent. Excise taxes of a dollar a gram and the costs of operating in a highly regulated industry are big reasons why.
It might seem obvious to level the playing field a bit by cutting out construction and energy costs that legal growers have to pay for.
But, B.C.-based cannabis breeder Ryan Lee explains, it’s not that simple.
“There are huge problems with that,” he says.
Some buyers dislike outdoor-grown flower
Fairly or unfairly, many cannabis consumers see outdoor-grown weed as lower-quality, he argues. So in the illicit market, indoor-grown cannabis commands much higher prices than outdoor-grown.
“The legacy market, illicit market, whatever you want to call it, has already done this experiment,” he says.
“The market has decided that it prefers indoor-grown cannabis to outdoor-grown cannabis.”
Part of the issue, he says, is the way outdoor-grown flower looks. With more contrast between day and night temperatures, outdoor plants stretch and create sparser-looking flowers.
“The buds appear a little airier and fluffier,” says eastern Ontario outdoor grower Mark Spear.
This is why a large amount of outdoor cannabis has been sold for processing into products like oils and edibles instead of being sold as dry flower, Gordon explains.
“For outdoor, in the U.S. a lot tends to be used for extraction, if for no other reason than that it looks different than what people like to get for baggable flower,” she says.
Spear argues that the bias against outdoor cannabis is a holdover from prohibition, when it was often grown under sketchy conditions.
“A lot of the outdoor-grown cannabis that people would be familiar with, and had a bad experience with, was guerilla-grown cannabis,” he says.
“Going on Crown land, planting a few hundred clones, maybe showing up three or four times throughout the season and coming back at the end and taking whatever is left. That typically isn’t great quality.”
But the legal product, he argues, can be much better than that.
“There are a number of people in California who are producing cannabis outdoors that’s indistinguishable from anything grown indoors.”
All the old problems of farming — and a new one
Outdoor growing has all the same problems as traditional agriculture: too much rain, not enough rain, rain at the wrong time, unluckily timed hailstorms.
“You’re outdoors, so whatever happens in the weather and all that can have an impact,” Gordon says. “It’s no different from any other form of agriculture: corn farmers or soybean farmers or alfalfa.”
However, indoor growing has its own problems, Spear says.
“That’s not to say that you don’t get crop losses on indoor crops as well, but that’s not discussed nearly as much. Pathogens like powdery mildew and pests like spider mites can really get out of hand indoors more so than they would outside.”
One problem that’s unique to cannabis agriculture is that a crop can be wrecked by pollen from a field of industrial hemp, even if it’s not that close. (Once a female plant is pollinated, it starts producing seeds instead of flowers and becomes far less valuable.)
“Cannabis pollen travels really far,” Lee says. “They estimate the size of the hashish crop in Morocco by capturing pollen samples in southern France. That’s the way cannabis breeds.”
(Until recently, Washington state required a 6.4-kilometre buffer between hemp and cannabis farms.)
In a northern climate, only varieties that can complete a flowering cycle before frost can be grown outdoors, Spear says.
“It’s the 10- or 11-week longer-flowering sativas you can’t do up here,” he says. “The majority of commercial production is seven- or even eight-week strains.”
‘People love buying purple cannabis’
Spear argues that the cannabis sold now has been bred for decades for indoor conditions. With legalization, breeders can branch out and start developing plants for cold-climate outdoor grows.
“You are going to see more and more visually appealing cannabis, such as purple.
“It’s easier to grow a very purple strain here, especially in the Ottawa Valley, where we do get those cooler nights toward the end of the growing season. That’s what really brings out those colours.”
Terpenes, the flavour compounds that give cannabis its taste and smell, are stronger in outdoor cannabis, he says.
“You can actually get higher terpene content outdoors, and that’s what the market is headed toward. There is an argument to be made for growing outdoors just for taste, flavour, aroma and environmental impact.”A brand of outdoor-grown cannabis will soon be among Canada's cheapest, at under $7 a gram. Are low-cost outdoor grows the key to beating the illicit market?
Hydroponics Cannabis Crop Expenses
Once hydroponics grow rooms are up-and-running, they still require significant amounts of money to function. For the indoor cannabis gardener, the constant use of high-powered lighting, fans, A/C’s, and pumps directly converts into excessive electrical bills. Furthermore, there are a number of more “hidden” expenses within the everyday operation of a hydroponics crop. These expenses include rent, water, materials, and nutrients. For the prudent cannabis cultivator, it is possible to “break down” these costs into quantifiable expense categories. This process gives them insights into their operational overhead for a hydroponics crop. In the ideal situation, practical hydroponic gardeners can highlight unnecessary spending through this analysis and save money.
In order to calculate the operational expenditures of growing a hydroponics cannabis crop from seed to harvest, a hypothetical cannabis horticulture scenario is required to provide a structural example. Therefore, this analysis will be based on an active ebb-and-flow hydroponic flood table system that constantly recovers and recycles un-utilized water and nutrients. Furthermore, the numbers involved in this cost analysis are taken from a theoretical 10,000 watt hydroponic flowering room. It also includes major rent and utility expenses based on U.S. averages. With this notions in mind, here is a simple guide for breaking down costs on a 9 week flower cycle:
Rent and Mortgage
Rent and mortgage costs are always included when pricing out a hydroponics cannabis crop. Because, these gardens generally require a great deal of square footage. Point being, indoor growers must rent or purchase homes with far more space than required for their normal living needs. According to nationally accredited rental companies, the average price for a rental property in the U.S. is $1,500 per month. For simplicities sake, one can assume that 1/4 of the home will be used for cultivation, resulting in $375 per month in rent expenses.
Total rent charges for a 9 week crop: $843.75 (based on U.S. averages)
Electrical and Water
Electricity rates fluctuate greatly throughout the country. Also, some power companies charging inflated “tiered” rates for high-power users such as indoor gardeners. Nonetheless, paying attention to the kilowatt hours used, as well as fluctuating rate systems for daylight hours and seasons, will give a solid foundation for analyzing one’s own costs. According to a qualified source, $0.13 per kilowatt hour is the average cost of electricity in the U.S. To place this number in context, our hypothetical 10,000 watt grow room uses approximately 5,000 kilowatt hours a month. This usage represents a running cost of $650 per month.
Total electrical charges for a 9 week crop: $1462.50 (based on U.S. averages)
The price of water per gallon can vary significantly according to a number of factors. However, following these mathematical examples will provide a framework for computing water expenses on an individualized basis.
According to a national database, the average water cost for a U.S. citizen is $1.50 per 1,000 gallons. In our hypothetical 10,000 watt grow-room scenario, a cultivator must keep a 100 gallon reservoir full at all times to keep the system functioning properly. This is because, with a 25 % evaporation rate, one can count on losing 25 gallons a day to evaporating water. This water loss totals 175 gallons a week. Moreover, a hydroponics crop in a 10,000 watt room can easily consume 40 gallons of water every other day. This consumption totals 160 gallons in a week. Finally, in an active hydroponics system, it’s a good idea to clean one’s reservoirs once a week to ensure a consistent PH level. This cleaning results in using another 100 gallons a week. Therefore, a hydroponic gardener can count on using 3,915 gallons of water in 9 weeks for a 10,000 watt flower room.
Total water charges for a 9 week crop $5.87 (based on U.S. averages)
The most popular and affordable growing medium for an active hydroponics system is rock wool cubes. It should be noted that the choice of rock wool cubes is purely subjective. However, this example provides a logical format for pricing. Following our hypothetical 10,000 watt growing set-up, let’s assume that each of the ten 1,000 lights will have 9 plants. To this end, 6 inch rock wool cubes cost about $3.30 a piece, with a total cost per light of $29.70, or $297.000 for the whole grow room.
Total grow mediums expenses for a 9 week crop: $297.00
Nutrients and CO2
There are literally a surplus of options of excellent nutrient lines on the market today, and they will all probably will yield pretty good results. It should be noted that, in time, each indoor gardeners develop their own nutrient “recipe” that works for their particular crop as well as infrastructure. However, for the novice hydroponics enthusiast its best to follow the feeding charts provided by nutrient companies. After some market research, findings show one of the most affordable feeding schedules comes in at about $324.00.
As a result, a low-end nutrient cost for a 9 week ebb and flow hydroponics cannabis crop is $324.00
The use of CO2 enrichment is not necessary for the beginner indoor gardener. Nonetheless, once one has their feeding schedule and climate perfected, the use of CO2 can greatly increase the size of a yield. A 20 pound CO2 tank costs $30.00 to fill and will last for about 3.5 days in a sealed room.
Therefore, the total CO2 expenses for a 9 week crop are $540.00
Every indoor cannabis cultivator has a different idea of what items are “essential” in growing a healthy hydroponics crop. Still, all growers use additional materials for plant support and pest control. A 10,000 watt room requires six 5 ft. x 15 ft. pieces of trellis netting for two layers of canopy support throughout the entire grow room. The cost of this trellising is about $10.00 per unit, or $60.00 total. In addition, for pest control and mildew control neem oil is an effective and inexpensive spray that can be sprayed on plants throughout their life cycle. One pint of neem oil is approximately $15.00.
Total costs of additional materials for a 9 week crop are $75.00
According to our figures, one can count on a 9 week, 10,000 watt active/ebb-and-flow hydroponics cannabis crop costing a minimum of $3, 538.12 to produce.
Different indoor cannabis growers have different theories on what counts as an “expense.” Nonetheless, this analysis has provided a bare-bones guide for understanding why hydroponics gardening is so expensive. Moreover, if the savvy horticulturalist gives critical attention to rent/mortgage expenses, kilowatt hour rates, water price per gallon, and nutrient feeding schedules they can make some educated decisions concerning budgeting and expenses for indoor gardening.M&F Talent Blog: Guide to pricing out a hydroponics cannabis crop. Learn how to guage your operational expenses for home-based hydro growing. ]]>