Cannabis Research
Medical Cannabis Exports Are Leaving Small Growers Behind
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For many countries, the rapid expansion of the global medical cannabis industry has been promoted as a once-in-a-generation agricultural opportunity. Regions with favorable climates have been encouraged to cultivate medical cannabis for export, with promises of new jobs, rural development, foreign investment, and economic growth.
Yet the reality is proving to be far more complicated.
Emerging research1 examining South Africa’s role in the emerging global medical cannabis supply chain suggests that exporting medical cannabis is not simply a matter of growing high-quality plants. Success increasingly depends on navigating expensive pharmaceutical regulations, building advanced processing capabilities, and competing in an international marketplace where distributors, processors, and buyers often hold far more power than cultivators. The findings offer an important lesson for countries hoping to build equitable cannabis industries, that cultivation is only one small part of where value is created. Let’s dive into the research and what it means for the global cannabis industry.
Medical Cannabis Is More Than Farming
Unlike many traditional agricultural exports, medical cannabis operates within highly regulated pharmaceutical markets. Producing flower is only the first step. Companies must also demonstrate rigorous quality assurance, maintain extensive documentation, satisfy international manufacturing standards, and consistently meet strict testing requirements before products can enter many overseas markets.
These regulatory demands require significant investments in infrastructure, laboratory testing, quality management systems, security, and specialized personnel. For many small cultivators, those costs create barriers that are difficult to overcome. As a result, success often depends as much on regulatory compliance and downstream processing as it does on agricultural expertise.
South Africa Shows the Challenges
South Africa has become one of the emerging suppliers of medical cannabis exports thanks to its favorable climate and relatively low cultivation costs. However, interviews conducted with cultivators, consultants, brokers, civil society representatives, and other participants between 2021 and 2024 reveal an industry facing substantial structural challenges.
Many producers described navigating:
- Complex regulatory requirements
- Increasing international competition
- Limited bargaining power with buyers
- Costly certification requirements
- Pressure to continually upgrade facilities and operations
Rather than creating an easy pathway into global markets, many growers find themselves competing in an increasingly crowded export industry where margins continue to shrink.
| Indicator | Study finding | What it shows |
|---|---|---|
| Global medical cannabis production | Rose from 100 tonnes in 2015 to 707 tonnes in 2022 | Legal production expanded more than sevenfold in seven years. |
| International cannabis trade | Increased from 30 tonnes in 2018 to about 400 tonnes in 2022 | Cross-border trade grew rapidly as the global medical supply chain developed. |
| Estimated South African start-up costs | R20 million to R100 million (approximately US$1 million to US$5 million) | The capital required to enter the regulated industry creates a major barrier for smaller cultivators. |
| Reported wholesale price decline | From around US$8 per gram to US$2 per gram or less in the early 2020s | Increasing global supply has placed severe downward pressure on cultivation margins. |
| Cultivator share of final selling price | Generally estimated at 5% to 20% | Much of the industry’s value is captured farther downstream in the supply chain. |
| Distributor share of final selling price | 50% or more, according to some interviewees | Control over market access can provide intermediaries with substantially greater bargaining power. |
| South African medical cannabis exports | 489 kg in 2021, 1,283 kg in 2022, and 1,632 kg in 2023 | Exports grew, but remained small relative to global trade and South Africa’s licensed production capacity. |
The Global Value Chain Favors Powerful Players
Researchers describe medical cannabis as part of a global value chain, an international network connecting growers, processors, distributors, manufacturers, and patients across multiple countries. However, within these supply chains, value is not distributed equally.
While cultivators perform the labor-intensive work of producing cannabis, much of the financial return can accumulate later in the supply chain through processing, pharmaceutical manufacturing, branding, distribution, and retail sales. Companies that control market access, intellectual property, regulatory expertise, or customer relationships often capture a much larger share of industry profits than growers themselves, mirroring patterns already seen in many conventional agricultural export industries.
Compliance Costs Can Exclude Small Growers
One of the study’s strongest findings is that regulatory compliance creates a significant financial hurdle. International medical cannabis markets generally expect cultivation and manufacturing practices that align with pharmaceutical Good Manufacturing Practice (GMP) standards and other quality systems. Though achieving those standards often requires expensive facility upgrades, sophisticated environmental controls, comprehensive recordkeeping, laboratory testing, validated operating procedures, and ongoing inspections.
For large companies with substantial investment capital, these requirements may be manageable. For smaller producers, however, the costs can be prohibitive. Without targeted financial assistance or technical support, many small cultivators struggle to participate in export markets despite having strong agricultural knowledge.
Competition Is Driving Prices Down
As more countries authorize medical cannabis production, global supply continues to expand. Greater production has intensified competition among exporters, creating downward pressure on prices. Researchers warn that growers who cannot differentiate their products or move into higher-value activities risk becoming suppliers of relatively interchangeable biomass.
When cannabis is treated as a commodity rather than a specialized medical product, cultivators become increasingly vulnerable to price swings and buyer pressure. This dynamic can create what economists call a commoditization trap, where producers compete primarily on price while profitability steadily declines.
Processing Creates Much of the Value
Growing cannabis is only one stage of production. Many higher-value activities occur after harvest, including extraction, formulation, pharmaceutical manufacturing, packaging, quality assurance, distribution, and branding. Countries that primarily export raw flower may therefore capture only a limited portion of the industry’s total economic value.
Developing domestic processing capacity allows more economic activity, and potentially more skilled jobs, to remain within producing countries rather than shifting overseas. The research suggests that investment in downstream industries may be just as important as expanding cultivation acreage.
Inclusion Requires More Than Legalization
Medical cannabis legalization is often promoted as an opportunity to include small-scale farmers and historically marginalized communities. However, legalization alone does not guarantee equitable participation. Without policies specifically designed to support smaller operators, industries can become dominated by well-capitalized companies that are better positioned to absorb regulatory costs and secure export contracts.
The South African experience illustrates that inclusion requires more than simply issuing cultivation licenses. Meaningful participation depends on access to financing, technical assistance, certification support, cooperative business models, and investments that help smaller producers move beyond cultivation into processing and manufacturing.
Domestic Markets May Offer Better Opportunities
The research also raises an important policy question. While international medical exports receive significant attention, domestic adult-use cannabis markets may offer a more accessible pathway for local participation.
Adult-use markets generally operate under different regulatory frameworks than pharmaceutical exports and may create opportunities for smaller businesses, local brands, craft cultivation, tourism, and regional processing that are difficult to achieve in export-focused medical supply chains. This does not diminish the importance of medical cannabis, but it highlights that different markets create different economic opportunities. A balanced cannabis strategy may ultimately require both medical and adult-use frameworks that serve different segments of the industry.
Building a More Equitable Cannabis Industry
The global medical cannabis market continues to grow, but South Africa’s experience demonstrates that participation alone does not guarantee meaningful economic development. Expensive regulatory requirements, concentrated buyer power, increasing global competition, and limited downstream processing can leave cultivators capturing only a small share of the industry’s overall value.
For policymakers, the findings suggest that successful cannabis industries require more than cultivation licenses. Investment in processing infrastructure, practical pathways toward international quality certification, targeted support for small producers, and thoughtful domestic market development may all be necessary to ensure that industry growth benefits a broader range of participants.
Medical cannabis exports remain an important opportunity, but they are not a simple agricultural success story. As the global market matures, the countries and businesses that capture the greatest value are likely to be those that combine cultivation with advanced processing, regulatory expertise, and strong market access, rather than those that simply grow the crop.
References:
1. Andrew Bowman, Value capture in the emerging medical cannabis global value chain: insights from South Africa, International Journal of Drug Policy, Volume 155, 2026, 105400, ISSN 0955-3959, https://doi.org/10.1016/j.drugpo.2026.105400
