Domestic production and sales abroad

View the most recent version.

Domestic production includes the volume of cannabis consumed by Canadians (excluding cannabis purchased abroad) as well as the value of cannabis sales abroad (Canadian-produced cannabis consumed by non-residents). As with purchases from abroad of licensed cannabis, sales abroad of licensed cannabis are assumed to be zero since it is illegal for licensed producers to sell abroad their cannabis except for authorized research purposes. While these sales abroad appear to be growing in 2017 it is still a limited market and therefore for the purposes of the CEA sales abroad of licensed (medical purposes) cannabis has been estimated to be zero.

The estimate of unlicensed cannabis sales abroad is based on several assumptions, information taken from CBSA and various research studies. Similar to the calculation made for purchases from abroad, CBSA data on export seizures (Xs) were examined and a five year average of metric tonnes seized was estimated. An estimate of the seizure rate (Xsr) was then calculated based on information from various research studies. It was assumed that 0.1% of total sales abroad of unlicensed cannabis are seized at the border. Based on these data, it is estimated that in 2017 the volume of unlicensed cannabis sales abroad was 164.89 metric tonnes.

The volume of licensed (Xlc) and unlicensed sales abroad (Xulc) of cannabis in Canada can be represented by the following equations:

(6) Xlc=0
(7) Xulc=Xs / Xsr (.178/0.001=Z)

Since CBSA data were only available for the period 2012 to 2017 and seizure rates vary from one period to the next, a model (ratio) of sales abroad to the production of cannabis for Canadian consumption was estimated. In 2017 sales abroad of cannabis were 164.89 while domestic production for Canadian consumption was 659.57. The sales abroad to domestic production (for domestic consumption) ratio was therefore estimated to be .25 (659.57/164.89) in 2017. This ratio was used to estimate sales abroad of cannabis for the period 2013 to 2017 as it was assumed the seizure rate did not change over this period. This estimate was lowered to .2 between 1994 and 2010 and gradually trended back to 1% between 1993 and 1961. The changes in the sales abroad were based on a literature review where there were strong indications that Canada sold very little cannabis abroad prior to the mid-1990s, when cannabis growing technologies were less sophisticated and unsuitable for the Canadian climate and higher levels of enforcement and stricter fines restricted production.

The estimate of domestic production of licensed cannabis started by taking the volume of licensed consumption and subtracting the volume of licensed purchases from abroad. Since the volume of licensed purchases from abroad was estimated to be zero the volume of licensed production equals the volume of licensed consumption. The same calculation was made for unlicensed cannabis in which the volume of unlicensed purchases from abroad was subtracted from the volume of unlicensed consumption to derive an estimate of the volume of unlicensed domestic production that is consumed in Canada.

The volume of licensed (DPlcc) and unlicensed domestic production consumed in Canada (DPulcc) can be represented by the following equations:

(8) DPlcc=Vlc-Mlc (57.3-0)
(9) DPulcc=Vulc-Mulc (716.9-57.3=659.6)

Total domestic production of cannabis is the sum of both the volume of domestically-produced cannabis consumed by Canadians (calculated as household consumption less purchases from abroad) plus the volume of domestically-produced cannabis destined for the foreign market.

The volume of licenced (DPlc) and unlicensed (DPulc) domestic production in Canada can be represented by the following equations:

(10) DPlc=Vlcc+Xlc (56.5+0=56.5)
(11) DPulc=Vulc-Mulc+Xulc (716.9-57.3+164.9=824.5)