Will Canada Implement a Supply Management System for Cannabis?

Canada's cannabis industry is on the cusp of significant change, with the introduction of a legal, regulated market. However, the question of whether this market will resemble a supply management system (SMS) previously seen in agricultural sectors like dairy, is a contentious one. In this article, we will explore the challenges and considerations surrounding the implementation of an SMS for cannabis in Canada.

Understanding the Current Regulatory Landscape

Canada's approach to cannabis regulation emphasizes affordability and accessibility. Unlike a traditional supply management system which aims to create a stable market for producers by limiting production and driving up prices, the Canadian model seeks to keep prices low to reduce the appeal of the illegal market. This strategy balances the need to discourage illicit activities while ensuring that the legal market is competitive.

The Unforeseen Challenge of Home Growing

One significant factor that the proponents of an SMS for cannabis have overlooked is the prevalence of home growing, particularly in regions like Quebec. Legally, many provinces allow individuals to cultivate up to four cannabis plants for personal use. This presents a unique challenge not seen in other agricultural contexts like milk production (which is regulated by SMS).

Regarding milk production, an SMS allows for complete market control due to the specialized nature of dairy output. However, cannabis cultivation involves a different dynamic. With the advent of advanced LED lighting and the reduction in electricity costs, the barrier to home growing has been significantly lowered. Illegal producers will likely have to cut costs to remain competitive, but this also means that both illicit and legal sellers will struggle to compete against home-grown product.

As a result, the impact of home growing on the market for legal cannabis is likely to be significant. If personal cultivation is widely practised, market prices may become irrelevant for many consumers, leading to a diversification of the cannabis market.

Comparison with Home Brewing and Winemaking

While home brewing and winemaking are often cited as parallels to home growing cannabis, these activities involve higher input costs and more invasive processes. The ease and cost-effectiveness of home growing cannabis, especially with the current technology, make this comparison less impactful.

Home growers can produce their own cannabis with relatively low labour and financial investment, potentially leading to a significant portion of the market being served by home-produced products. This shift could fundamentally alter the dynamics of the legal cannabis market, making it challenging for large-scale producers to maintain their market share.

Legal Battles and Provincial Rights

The implementation of an SMS for cannabis in Canada may also involve legal battles, particularly in provinces like Quebec where home growing is illegal. Quebecers could argue that their rights as Canadians are being infringed upon by provincial authorities, given that they are denied the same privilege as their fellow Canadians in other provinces.

Such arguments would likely centre around financial considerations rather than social or political ones. A ban on home growing implies an additional cost that is not borne by other Canadians who are allowed to cultivate their cannabis. The "Notwithstanding Clause" of the Canadian Constitution allows provinces to make such laws, but this clause is not without controversy.

Proponents of home growing could challenge these laws based on the idea that the ban places an unfair financial burden on Quebec residents. This could lead to a series of legal challenges, potentially testing the limits of provincial jurisdiction and the federal government's ability to enforce a national legal framework for cannabis.

Conclusion

While an SMS for cannabis may be challenging to implement, the current regulatory landscape leaves significant room for home growing to influence the market. This shift could fundamentally alter the dynamics of the legal cannabis industry, creating a more fragmented and diverse market landscape. Legal battles over provincial rights may also play a role in shaping the future of cannabis regulation in Canada.