Will shipping price hikes affect cannabis production costs?

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A freight container sent from China to Canada cost upwards of $4000 before 2019. By 2021, that price shot up approximately 500 percent to USD 20,000. (1) Big box companies with large enough pockets bought cargo ships. And to add insult to injury, wealthy corporations began bullying and finessing small businesses over shipping costs. (2) At the end of the day, shipping price hikes will trickle down the production line to consumers but how will they affect cannabis costs?

Goods that remain dirt cheap

This author remembers the legacy days when BC Bud was so sought after, growers in other countries would import soil from British Columbia. In other words, dirt might not be affected by shipping costs in North America. Yet, the soil used to grow cannabis is far more complex and loaded with amendments relative to dirt. And cannabis production typically relies on various supplies from many sources, often beyond local reach.

Did shipping prices during the pandemic or legalization affect cannabis costs?

Equipment costs of cannabis production

Totes, worm castings, rockwool, coir, lights, bat guano, bugs, and the list goes on and on. Cannabis production requires a lot of stuff behind the scenes. LED grow lights can be sourced from the United States but any increased local demand will still threaten to raise domestic costs. Not to mention a large change in LED technology as of recent.

For the most part, companies might feel pressured by a constellation of overhead upticks. As a result, producers might be forced to bleed extra costs onto consumers at the expense of sales. But has that happened in the cannabis market?

Grow shop prices, then versus now

Price increases at PNW Garden Supply over 2.5 years between 2017-2019 & 2.5 years between 2019 to currently in 2022, according to website prices in archived data.

  • Grow mediums
  • Green Gaia Rock Dust — 36% & 0%
  • Green Gaia All Purpose 2kg — 31% & 25%
  • Canna Coir — 8.6% & 0%
  • Botonicare Cocogro — 47% & 0%
  • Rock Wool 6″ block — 17% & 0%
  • Nutrients — The price of nutrients has been stable for five years, excluding a few products. A further exception is General Hydroponics, owned by Scott’s Miracle-Gro, which has gradually and consistently climbed 4 to 30 percent in price since Q4 2017.
  • Lights have seen a small uptick in price on some products, approximately five to ten percent over the last five years. Moreover, lighting technology has prominently evolved to LEDs.
The graph depicts the average price of products in British Columbian grow shops over five years.

Judging by archived store prices, it would appear that the cost of select growing equipment increased after Canada passed cannabis legalization in 2018.

Grow tents and nutrient costs have nearly gone without change over the past five years. Whereas some hydroponic systems and growing mediums saw price hikes as high as 47% around June of 2018. However, more recent shipping price inflations have yet to deal a double blow to cannabis production costs in British Columbia.

Let us know in the comments if you have been affected by shipping price hikes or increased cannabis production costs.

Authors note: This market analysis is limited to available archived data.

Sources

  1. Xu, M. and Khasawneh, R. 2021. China-U.S. container shipping rates sail past $20,000 to record. Reuters.
  2. Personal communication with a rice importer. Vancouver, BC. 2021

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