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More companies cautiously approaching growing outdoors

Canadian asparagus making way for weed

WeedMD is one of 13 Canadian marijuana companies that have been granted outdoor cultivation licenses in an industry that predominantly grows in greenhouses or warehouses. It has planted 21,000 plants on 27 acres that formerly grew asparagus and expects to harvest more than 25,000 kilograms of dried pot from its outdoor operations this year, more than half its total production.

The amount of outdoor-grown cannabis will make up a small portion of the market this year -- less than 10% of the cultivation licenses granted in Canada are for outdoors -- but many more are in the pipeline after the Canadian government changed its rules last year to allow pot farms.

The appeal is clear: growing outdoors can cost as little as one-fifth that of greenhouse production and it can be marketed as being grown “au naturel” under the sun. It can also carry higher risk from pests, pesticides and weather.

“Growing outside is a dream,” said Derek Pedro, chief cannabis officer at WeedMD, during a tour of the farm in Strathroy, about 225 kilometers (140 miles) from Toronto. He said the natural changes in light and temperature outside result in “bigger, tastier, denser” buds with a better high than the same strain grown in a greenhouse.

As recently as a year ago many companies were disparaging outdoor-grown pot. “Restricting the cultivation of cannabis to indoor facilities, both greenhouse and buildings will ensure a safe and secure production environment,” Bruce Linton, then co-chief executive officer of Canopy Growth Corp., told a Canadian Senate hearing in May 2018, pointing to the potential for theft and low-quality product outdoors.

Thirteen months after that hearing, Canopy announced it had received a license to grow outdoors in northern Saskatchewan.

Critics say outdoor cannabis is more susceptible to pest infestations and contamination from pesticides at neighboring farms. Detractors also say the long Canadian winters don’t make the country ideal for growing pot, with the plant better suited to the benign climate of places like California, where 39% of state-issued cannabis cultivation licenses are for outdoor grows.

This is why some companies are taking a more cautious approach to growing outdoors. Aurora Cannabis Inc. last month received licenses for outdoor cultivation in Quebec and British Columbia, but is taking a go-slow approach to test the best growing methods and genetics before deciding whether it wants to embark on large-scale farming.

“It’s sort of like two sides of the same coin: the disadvantage of outdoor is you can’t control the environment if there’s an early frost and your crop gets hit hard and killed, but the disadvantage of indoor is you’re paying for the electricity to make sure the frost doesn’t get those plants,” said Jonathan Page, chief science officer at Aurora.

Lower cost
Most farm-grown pot will be used in products like edibles, beverages and vape pens, where the quality of the original plant matters less than in smokable dried-flower.

This means it’s likely to be the lowest-margin cannabis on the market, said Elliot Johnson, chief investment officer at Evolve ETFs, which runs the actively managed Evolve Marijuana Fund.

“There’s no question about it that outside-grown product is going to be the most commoditized part of the industry,” Johnson said. However, the crops will be produced “at a dramatically lower cost than if you grow them in greenhouses, and you can bring online a lot more growing capacity.”


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