The German government has clarified the portions and price of medical cannabis flower it may purchase from home producers, confirming that growers have the choice to promote – and, to a sure extent, the government is obligated to purchase – considerably more than the often-cited 2,600 mixed kilograms (5,732 kilos) per yr.
The reply to a parliamentary question additionally indicated that the common price per gram the home grows may fetch is as little as 1.87 euros ($2.11) per gram in a doable situation by which the government buys 150% of the annual contracted portions.
The price of about 2 euros per gram is consistent with what producers have provided to win provide tenders in different European international locations, akin to Italy, or the price the Dutch government mounted in its ongoing utility course of.
The price additionally means that will probably be difficult for German growers to make a lot revenue from their develop operations, contemplating the restricted economies of scale and period of the contracts in addition to comparatively excessive working bills and capital expenditures to construct bunker-style services required by German laws.
Exporters gearing up
Several international locations and dozens of corporations are gearing up to export to Germany as a result of they anticipate domestically produced cannabis will probably be inadequate for the rising German demand.
While that may doubtless be the case, corporations planning to export to Germany ought to understand that totally different eventualities for the home grows may play out, a few of which suggest the government will purchase considerably more than 2,600 kilograms per yr.
Flower imports in Germany in 2019 had been 6,500 kilograms. If, as an illustration, the government buys 150% of the agreed-upon portions with home growers, the three,900 kilograms would characterize a good portion of the home market.
That would imply a considerably smaller export market being up for grabs for worldwide corporations intending on capitalizing on Germany’s burgeoning medical marijuana market.
The contracts between the federal government and the German subsidiaries of Canadian-based Aurora Cannabis and Aphria in addition to Germany-headquartered Demecan are for a complete of 13 numerous 200 kilograms per yr apiece.
Demecan has three heaps; Aurora and Aphria have 5 apiece.
However, the precise portions to be purchased by the government and the price it can pay is dependent upon how a lot the producers successfully harvest and the way a lot the government is prepared to purchase. Only minimal portions are assured.
The first harvest is anticipated later this yr.
Important to notice is that the contract between the government and growers establishes that an computerized 50% price discount applies for any gram offered exceeding 120% of the contractually agreed-upon portions – which begin at 200 kilograms per lot per yr.
Germany is by far the most important European medical marijuana market. But not like Canada or some European markets akin to Denmark, Germany proactively discloses little or no in regards to the measurement and breadth of its market.
In reality, most of the essential knowledge factors about Germany’s medical marijuana market come from parliamentary queries made by elected representatives – and that info is disclosed to the general public.
The precise price corporations provided for every of the 13 heaps has not been revealed.
But primarily based on a earlier parliamentary question, Marijuana Business Daily reported final November that the common wholesale price at which the government anticipated to purchase the mixed manufacturing of home producers was 2.Three euros per gram.
This was as a result of the government mentioned it anticipated to pay – per quarter – roughly 1.5 million euros to purchase 650 kilograms.
The government’s reply additionally mentioned it may purchase one other 325 kilograms per quarter paying the identical price per gram.
But as MJBizDaily beforehand reported, paying the identical price per gram for the additional portions – because the government mentioned final November – would contradict the contract that the German Federal Institute for Drugs and Medical Devices (BfArM) has with the growers.
In its most up-to-date reply to parliament about this problem, the government aligned with MJBizDaily’s authentic evaluation.
The new disclosure revealed that if the BfArM buys 150% of the agreed-upon portions – which might be 3,900 kilograms per yr – the company would pay a complete of seven.Three million euros.
This would translate into a mean price per gram of 1.87 euros, considerably lower than the two.Three euros per gram disclosed within the earlier government reply.
Price, portions may differ
If the three home growers harvest more than the yearly agreed-upon portions, the government can be contractually obligated to purchase up to 150% per lot.
In different phrases, if a firm harvests and needs to promote 400 kilograms of a lot as an alternative of the agreed-upon 200, the government is obligated to purchase up to 300 kilograms with an choice to buy more.
For any gram exceeding 120% – or 240 kilograms, on this instance – the price drops to 50% of the unique.
This means the common price of simply above 2 euros per gram applies solely so long as the government buys no more than 120% of the agreed portions.
According to the newest disclosure, the German government expects to pay about 5.5 million euros for the contracted yearly 2,600 kilograms of cannabis flower – or roughly 7.Three million euros if it ends up buying 150% of the yearly agreed-upon portions.
In the brand new disclosure, it turns into clear that in a situation by which the government buys 150% of the agreed-upon portions, the common price per gram – 1.87 euros – is lower than if it buys up to 120%.
Independently, there’s an possibility to extend the portions 10% cumulative per yr, which could possibly be executed individually for every of the 13 heaps, if each events agree.
This would imply that the 200 kilograms would flip into 220 kilograms with the primary improve.
Alfredo Pascual could be reached at [email protected]