8 cents per gram: Canadian producer touts lowest harvest cost in the country
Recently, Canadian cannabis producer Aleafia Health reported that its licensed outdoor cannabis crop cost the company just eight cents per gram to cultivate and harvest.
The company says that its unaudited “all-in cash cost,” including facility capital costs with a five-year amortization, equaled just 10 cents a gram.
While the eight cent per gram figure includes all operating expenses, such as labour, supplies, consumables, and staff overhead, the 10 cent figure also includes capital costs such as irrigation, security infrastructure, and the company’s drying facility.
Aleafia said in their release that the levels of THC and CBD in each gram of harvested flower was “strong, at levels near to the cannabinoid content in identical strains harvested indoors.”
Alefia’s estimate falls well below reported costs per gram from other licensed producers.
In September, cannabis producer Aurora reported a cost per gram of $1.14, down from its previous estimate of $1.42. In the same month, producer Aphria reported a $1.43 cash cost per gram in August 2019. The company’s reported “all-in cost” was $2.52 for the same period.
Financial analysts covering cannabis have a general consensus that Canadian producers’ all-in production cost per gram stands to be around $1.50– although remember there is no standardized definition to the measurement and cannabis companies may calculate their figures differently. However, the above $1.50 figure does not consider the outdoor production of cannabis, legalized in Canada October 2018, which can ostensibly drive price on the overall production cost per gram.
Aleafia’s cash cost per gram is likely lower than any previous reported amount in Canada. However, it is higher than in other countries around the globe that have lower labour costs, and longer periods of summer that enable multiple crops in one calendar year.
For example, Colombia-based producer Pharmacielo, which cultivates cannabis outdoors, reported earlier this year a production cost of around five cents per gram.
Now that tremendous cost-savings have been demonstrated, or at least publicly touted by a Canadian cannabis producer, watch for more producers in the country to step up and grow their cannabis crops outdoors.
In early 2018, before the Canadian government authorized outdoor crop production, Bruce Linton–then-CEO of global cannabis juggernaut Canopy Growth–reportedly told a Canadian senator that authorizing outdoor cultivation could make cannabis vulnerable to aerial ‘drones.’
In Aleafia’s news release, the company doubled-down on outdoor production, reiterating a September announcement that it had acquired the 60 acres of farmland directly adjacent to its Port Perry facility, bringing the company’s total area of outdoor cannabis production to 86 acres.
And given their reported low per-gram production costs, it would be foolish to think they wouldn’t use every square inch.