The amount of legal cannabis cultivated in the US is expected to grow from 12.4 million in 2022 to 27.7 million in 2030, representing a 123% increase.
New Frontier Data has just released a new report, Growing Excellence: Seven Ways to Optimize Cannabis Cultivation in Newly Legal Markets.
As the legal industry moves from the West Coast market and towards the east, several factors will emerge that will redirect the cultivation of cannabis. For one, the length and depth of the Northern winters and the intensity of the Southern humidity may make outdoor cultivation untenable. There will be an increased need for odor control measures as legalization moves into densely populated municipalities. In addition, cannabis producers will have to maximize their outputs as they keep cultivation costs low to be able to compete with illicit market prices. As you can see the stakes are high and cannabis cultivators must reconsider their cultivation strategies in these new markets. The report by New Frontier Data that has just been released highlights seven key issues that producers should consider when upgrading their facilities to serve new markets.
- How Location Influences the Choice Between Indoor and Greenhouse Cultivation Facilities
States such as New Hampshire, Maine, and Dakota experience a very wide variance in temperatures, especially in the summers and winters. This will increase the requirements for heating and cooling systems drastically, especially in a greenhouse setup where the grow is more exposed to ambient conditions.
The issue of odor control will be significant in densely populated municipalities, especially in the Northeast.
- Benefits of Automation and the Need to Hire Correctly
Automation is gradually replacing human effort in cultivation facilities. This includes automated irrigation systems, photo sensors, motion sensors, and integrated remote- management systems among others. Automated systems can help to reduce labor costs and eliminate redundancies. However, these systems are only as good as the people managing them. At the end of the day, automation cannot completely replace human input. The staff must be able to troubleshoot problems without having to rely entirely on a dashboard to flag fluctuations that need to be addressed.
- Building versus Buying
In new medical markets, it’s highly unlikely that the option to buy will exist. However, such an option may exist in a new adult-use market that has a pre-existing medical cannabis program. When considering the buying option, one should ensure that the major systems are usable and of top-notch quality. It can be helpful to consult cultivation experts who will be able to advise on the suitability of the facility.
- Increased Demand for Value Added Products
Value-added products now make up about 50% of all cannabis sales and the trend is likely to continue. Cannabis flowers intended for extraction will not require as much manicuring as smokable flower. As the demand for value-added products increases, cultivators will be compelled to differentiate between smokable flowers and flowers that are grown for extraction.
This trend will also affect the pricing of cannabis flower, with flowers intended for extract attracting lower prices. It may not be feasible to cultivate flowers for extraction in a high-cost indoor facility.
- Prioritizing Resource Efficiency
As competition becomes stiffer, wholesale prices will continue to plunge. Increased resource efficiency is an effective way to reduce production costs. In an indoor facility, saving on energy costs is a good starting point. In drought-prone areas, recapturing and reclaiming water is critical. Operational efficiency can be achieved by optimizing the facility’s processes and resource utilization.
- Monitoring Climate Change
Given the recent climatic fluctuations, it will be imperative to plan ahead of time for any such drastic changes. For example, prolonged hot summers will mean investing in cooling systems while acute drought will prompt a need for an alternative water supply. The risk for flooding especially in East and southern states will dictate where cultivation facilities can be constructed to minimize the risk of losses related to flooding.
- Need for Prospective Planning
The demand for cannabis is likely to explode in the next couple of years. However, this growth will not be uniform. It is important for cultivators to understand where the market is headed both in terms of product demand and pricing.
These are the seven factors that New Frontier Data considers critical even as cannabis cultivation expands into new legal markets. NFD is committed to providing actionable data and insights to guide investors, researchers, brands, and policymakers in their decision-making.