Canada legalized recreational use of marijuana nationwide in 2018. The Cannabis Act also opened the supply chain for cannabis to small growers. But getting a Micro-Cultivation License without a macro wait requires careful attention to important details.
What can a cannabis micro-cultivator in Canada do?
Small growers of marijuana can now apply all the skills they have acquired for cultivating cannabis to a lawful enterprise. They can enjoy predictable earnings and expenses in a predictable market within some strict limitations. Health Canada imposes these requirements on licensees:
Licensed small growers of cannabis can choose to grow cannabis indoors or outdoors, but not both.
• Micro-cultivators can have a grow space with a canopy space of up to 200 square meters (2,152 square feet). They can stack shelves up but they cannot extend walls out.
• The only crop that can be grown in licensed grow space by a licensed micro-cultivator is cannabis. Annual production is limited to 600 kilograms.
• A cannabis micro-cultivation license allows the grower to sell dried and fresh plants and seeds. Operating a nursery to supply plants to other growers requires a separate license.
• A micro-cultivation license does not authorize direct sales to the public. It does not permit the production of marijuana oils. Micro-cultivators cannot sell directly to outlets that sell cannabis products to the public. Canadian micro-cultivators have to sell to larger licensed providers, processors, and researchers.
Micro-cultivators can get licenses for other activities (in most cases). The micro-cultivation license itself is limited.
What are the requirements for a micro-cultivator license in Canada?
Growing cannabis as a micro-cultivator requires considerably more resources than growing cannabis “informally.” A fundamental requirement for licensing is a dedicated, fixed address. There can be only one micro-cultivation licensee at this address. The property must meet the requirements of municipal codes as well as provincial, territorial, or indigenous laws in addition to the requirements of Health Canada.
Nearly all Canadian micro-cultivators will grow cannabis indoors. The production area must be completely built out before any license may be granted. Failure to meet Health Canada requirements for the structure can turn months of waiting for a license into years.
The growing area must be built so the grower can control temperature and humidity at all times. It is also necessary to have instrumentation to document that temperature and humidity have been controlled at all times. There must be a written policy for explaining any deviations in growing conditions from Good Growing Practices. Humidifiers, dehumidifiers, heaters, and fans must be approved models. It will be necessary to keep maintenance records.
To reduce fungal and bacterial contamination, porous surfaces are not allowed in any grow room or production area. Walls, floors, and ceilings must be constructed of materials that permit the application of disinfectants. Indoor space can be modular, but it must be laid out for a logical flow of work. Seedlings should not be taken through a drying room to get to the greenhouse, for example.
Producers must practice regular quality control by engaging the services of a quality control specialist. There must be formal training for employees and documentation that has it has been completed. But then there are licensing fees and start-up costs.
What kind of cash is required before starting micro-cultivation of cannabis?
The cash outlays for new micro-cultivators begin with $2,500 for a micro-cultivation license. This covers growing plants for distribution. There is separate $2,500 fee for a processing license. This permits processing and packaging the plant. A nursery license to produce plants from seed costs $2,500, and a sales license costs another $2,500.
There are also security fees. Shareholders (above a certain percentage), directors, and key employees, such as master growers, incur security fees of $1,654 each. For most applications, Health Canada imposes a $23,500 minimum fee. Once production starts, there is a regulatory fee of one percent on the first $1 million in revenues and 2.3 percent on revenues above $1 million.
Those fees might not be too daunting, but the micro-cultivator application is 100 to 225 pages long and takes six to eight weeks to complete. Consultants offer to take care of application for fees ranging from $37,000 for the micro-cultivator application, another $30,000 for the processor application, and up to $115,000 for special situations.
And the cost of property for the grow room plus the build out may cost $50,000 to as much as $500,000. Aspiring cannabis cultivators with criminal records may face some challenges with getting loans from banks. But Health Canada has been encouraging growers formerly working in a “grey” area to particulate in the legal market. Aspiring cannabis cultivators with criminal records may face some challenges with getting loans from banks. But Health Canada has been encouraging growers formerly working in a “grey” area to particulate in the legal market.
How can micro-cultivators expect to profit with such high up-front costs?
Finding a profitable niche.
Micro-growers are the little guy in a burgeoning industry, but some of the major players see analogies to craft brewing. Larger producers recognize that cannabis from boutique growers will be of higher quality. Micro-cultivators can specialize in a rare strain, a medical application outside the mainstream, or a unique flavor or scent. Larger distributors can help their products reach a much larger market. The licensing requirements at every level in the cannabis market are strict, and larger distributors will simply have more marketing dollars to play with.
Micro-cultivators also have opportunities to help each other. In British Columbia and Ontario, cooperatives are in the process of incorporation to help “potentially thousands” of small growers participate in a larger market. Most proposed cooperatives will have annual membership fees not to exceed $500. These cooperatives will not have their own licenses to grow, process, or sell cannabis. They will provide micro-cultivators with:
• Economy of scale for mandatory testing of product and employee training.
• Channels for communication with municipal, provincial, territorial, and indigenous governments.
• A common front for eliminating organized crime.
• Ensuring small growers receive a fair price for their product.
Micro-cultivators must make lots of smart decisions to get their start in Canada’s legal marijuana market. But there is no doubt there will be many benefits, financial and otherwise, to starting a successful, legitimate cannabis business.