In the month of February, our focus is on understanding the global cannabis market, delving into its historical roots, cultural significance, and the evolving landscape shaped by both medicinal and recreational applications. We look at the market's growth driven by tax revenue and the potential commoditisation of cannabis coupled with regional-scale growth.
Historical Roots and Medicinal Use:
Cannabis has been utilized since antiquity, serving as a vital food source, fibre, and integral components in medicinal practices. Traditional medicinal applications highlight the efficacy of cannabis and its extract or resin in alleviating pain, nausea, anxiety, enhancing appetite, improving sleep quality, inducing muscle relaxation, and producing euphoria. The earliest traces of cannabis dates back to 10,000BP (Before Present) in Japan, while fibre usage is reported as far back as 27,000BP in the Czech Republic.*1
Nomadic Trade and Migration:
Around 5,000 years ago, the nomadic Yamnaya tribe initiated the first transcontinental trade of cannabis.*2 The historical journey of cannabis spans over 12,000 years, mirroring the migration of nomadic peoples and facilitating commercial exchanges after the last glacial period. This global dispersion has led to the omnipresence of cannabis, with the plant now flourishing on every continent except Antarctica.*3
Current Market Landscape:
The global cannabis market size was valued at $25.7 billion in 2021, and is projected to reach $148.9 billion by 2031, growing at a CAGR of 20.1% from 2022 to 2031.*4 The market's evolution is driven by the increasing acceptance of cannabis for both medicinal and recreational purposes, supported by the prospect of substantial tax revenue and the ongoing commoditisation of cannabis.
Culture:
The cultural acceptance of cannabis encompasses both medicinal applications and a global trend towards recreational use. Cannabis markets and cultural appropriation, however, remains at distinct stages globally. In Michael Wanke’s article, 'Culture matters! Changes in the global landscape of cannabis,' he highlights that the values and cultural significance associated with cannabis are intricately linked to the evolving landscapes and legal frameworks surrounding cannabis, both on local and global scales.*5 As a result, the varied cultures, legal environments (including social and institutional responses to cannabis liberalisation), diverse cannabis markets, and societal attitudes towards cannabis contribute to significant differences in cultural contexts and perspectives among different countries.
Increased recreational use of cannabis in the US has led markets to believe Cannabis is highly lucrative and of interest to State Government; driven mainly by its tax receipts.
Table 3 above *6 illustrates the top 11 states of the United States collecting State Cannabis Excise Taxes for fiscal year 2022, ranging from $28.9 million in Alaska to $822 million in California.
To compare this to other government collections, Figure 5 below *7 illustrates State “Sin” Tax Collections in Colorado and Washington for 2022; Among all 11 states that collected cannabis tax revenue for the entire 2022 fiscal year, eight collected more revenue from cannabis taxes than alcohol taxes, while Colorado, Nevada, and Washington collected more from cannabis taxes than cigarette taxes.*7
Though new states continue to legalise adult-use recreational marijuana, existing markets face barriers to growth.
The Safe Banking Act as of 2023 permitting regulation of recreational Cannabis business has been passed through US Congress seven times*8. The Safe Banking Act would explicitly prohibit federal regulators from handing down penalties on banks who serve legitimate Cannabis businesses, meaning that they could operate with safer, more trustworthy financial practices rather than relying entirely on cash.
Indications of support for cannabis and its benefits are indicative with governments producing papers on cannabis.
Since 1970, the U.S. federal government had considered marijuana a schedule I controlled substance.
In 2023 the United States HHS (U.S. Department of Health and Human Services) and Attorney General had been requested to initiate the administrative process to review expeditiously how [cannabis] is scheduled under federal US law. This outcome comprised a cover letter accompanying a comprehensive 250-page scientific and medical assessment of botanical cannabis (Cannabis Sativa L).*9
The evaluation discusses the Currently Accepted Medical Use (CAMU) of cannabis in two parts .
Part 1 of Cannabis in medical practice concludes ‘ there exists some credible scientific support that the available data provides some level of substantiation to support the way [marijuana] is evidently being used in clinical practice.‘
CAMU part 2 evaluates systematic data including the National Poison Data System (NPDS), Drug Involved Mortality (DIM), National Vital Statistics System Mortality (NUSS-M), National Emergency Department Sample (NIS), FDA’s Sentinel, FDA Adverse Event Reporting System (FAERS/CAERS), Medicare, ToxIC Core Registry and Drug Abuse Warning Network (DAWN). It concludes ‘none of the evidence from the systematic reviews demonstrated substantial safety concerns that would argue against the use [of marijuana] in any of the indications where there exists some support for its benefit.’*9
The report recommends that Cannabis should be moved from schedule I and placed in schedule III of the CSA.
Across the cannabis industry, there is a prevailing agreement highlighted by insights from the US evaluation, confirming that it's difficult to ignore the ’scientifically consistent and proven health benefits of cannabis‘. *10
Cannabis and Cannabis seed - a recreational commodity:
North America regionally dominates the cannabis market trends with the largest share during the forecast period of 2021 to 2031. Notably, the majority of U.S. states have either legalised or decriminalised cannabis, allowing for tax-free home growing in nine out of eleven states that have legalised recreational marijuana. This variance in regional approaches is reflective of cultural differences, with the UK leaning towards stricter medical platforms, while other European countries explore social club expansions like Germany, and a few adopt adult-use programs akin to Canada and the U.S. Government proposals are actively considering cannabis legislation reviews in several countries, including Spain, Czech Republic, Ukraine, Greece, Japan, Thailand, Brazil, and Albania.*10
Global Shift :
A global trend is emerging, indicating a shift towards Medicinal and Recreational Use in the business of cannabis. Irrespective of the government's methodology, it is apparent that many major economies are gearing up to implement policies that encompass both medicinal and recreational use of cannabis.*10
Future as a Crop:
As global THC prices witness a decline, akin to the trajectory CBD prices experienced in recent years, a surge in home growers entering the market is noticeable. This has resulted in the proliferation of cannabis seed banks, as growers switch from selling flower to selling seeds offering a variety of cultivars from the cannabaceae plants. Noteworthy examples include the Millennium Seed Bank in the UK, listing 27 accessions*11, and the Svalbard Global Seed Vault, which conserves 73 accessions from Cannabis sativa.*12 'Franchise Global' in Copenhagen, Denmark, stands out as Europe's first legal and registered cannabis seed bank, arguably the largest globally with an audited value exceeding C$9 million (~€8.64 million).*13 With an extensive collection of strains, including multiple Cannabis Cup winners, the question arises whether this proliferation of seed banks and large-scale farming, driven by price competition, will lead to the commoditisation of cannabis as it becomes increasingly mainstream.
Pros and Cons:
In the U.S, the cannabis industry is poised for substantial growth, with projected revenues reaching $40 billion this year. Legalization for medical purposes in 37 states and recreational use in 23 states contributes to this flourishing market.*14 The potential for mainstream commoditisation is evident, requiring standardisation and the establishment of a cannabis commodity exchange environment for fair and orderly trading, along with efficient price information dissemination.*15
Pros:
1. Simplicity in Taxation System: The implementation of a state government cannabis taxation system is relatively simple to establish and administer.*6
2. Projected Sales Growth: Reports forecast a compound annual growth rate of nearly 14% in cannabis product sales from 2024 to 2028, indicating sustained market expansion.*16
3. Substitution for Alcohol: Approximately one-fifth of individuals participating in "Dry January" substituted cannabis products for alcohol, reflecting a potential shift in consumer preferences.*17
4. Global Market Dominance: North America dominates the global cannabis market, with 45 U.S. states legalizing cannabis-based products. Asia-Pacific, including countries like Thailand, Pakistan, Indonesia, and Malaysia, is also poised for substantial expansion.*18
5. Increased Online Presence: The rise in online sellers and creator content supports cannabis benefits, providing various ways to vet sellers and offering educational resources through forums, podcasts, and interviews.
6. Government Support and Scientific Validation: Governments are actively engaging in the production of comprehensive papers on cannabis, emphasizing a collective acknowledgment of its importance. Notably, the United States, has conducted an evaluation that underscores a unanimous consensus within the industry, advocating for the reclassification of cannabis from Schedule I to Schedule III of the Controlled Substances Act (CSA).
Cons:
1. Price and Revenue Relationship: Cannabis taxation creates a relationship between cannabis price and revenue collections, posing a challenge in achieving stable tax revenues.*6
2. Price Volatility: Fluctuations in cannabis prices, influenced by factors like the pandemic, make forecasting tax collections challenging. Also as cultivation techniques improve and economies of scale kick in, prices are likely to drop. In the event of federal legalization and interstate competition, such price declines could accelerate, affecting price development.*7
3. Expertise Requirement: The cannabis market demands expertise in genetics and evolution for sustainable growth. The high barrier to entry stems from the necessity for real-time updates and expert knowledge, impacting the sustainability of newcomers in the cannabis seed market.
In conclusion, while the cannabis industry presents lucrative opportunities, there are challenges to navigate, including price volatility, taxation complexities, and the demand for expertise. We continue to monitor the market and indications of support for cannabis as a agricultural product and commodity. The evolving global landscape and cultural narratives surrounding cannabis continue to shape our food security and our continuous evolution of cannabis culture.
Appendix
1. Cannabis: Evolution and Ethnobotany Robert C. Clarke and Mark D. Merlin. Berkeley, CA: University of California Press, 2013. xv and 452 pp., maps, timeline, and index. (ISBN 9780520270480).
2. https://www.ancient-origins.net/history/cannabis-journey-through-ages-003084
4. https://www.alliedmarketresearch.com/cannabis-market-A16908
5. Culture matters! Changes in the global landscape of cannabis https://www.tandfonline.com/doi/full/10.1080/09687637.2022.2091301
6. Taxes. 2022 report; THE PROS AND CONS OF CANNABIS TAXES By Richard Auxier and Nikhita Taxpolicycentre.org
7. https://taxfoundation.org/research/all/federal/recreational-marijuana-tax/
8. https://www.govtrack.us/congress/bills/118/s1323/text
9.PDF document: cover letter and 250 page scientific and medical evaluation for botanical cannabis (Cannabis Sativa L)
11. https://apps.kew.org/seedlist/SeedlistServlet
12. https://seedvault.nordgen.org/
13. https://www.globenewswire.com/news-release/2022/04/28/2430881/0/en/Europe-s-first-Legal-Registered-Cannabis-Seedbank.html or https://www.globalfranchise.com/press-releases/
15. https://www.forbes.com/sites/roberthoban/2020/10/31/what-happens-when-cannabis-becomes-a-commodity/
18. https://www.alliedmarketresearch.com/cannabis-seeds-market-A16909