Ever since the supply chain problems triggered by the pandemic were worsened by Russia’s invasion of Ukraine, cannabis producers are facing rising costs that could shake the industry in ways that have never been seen.
Russia and Ukraine together account for 28% of NPK fertilizers (nitrogen, phosphorous as well as potassium) sold on the world market. The war and the sanctions placed on Russia have shaken this supply source, and the cannabis industry as well as other segments of the agricultural industry is feeling the heat.
“Modern Farmer,” a magazine published every quarter, paints a graphic picture of how fertilizer prices have gone up in recent times. It writes that the price of anhydrous ammonia has risen by 225%, while the price of liquid nitrogen has gone up by 192%. Urea has seen a 149% price hike over the past 12 months.
The news agency Reuters also estimates that after registering a 17% price increase last year, fertilizer prices are likely to increase by at least 12% this year.
These price increases are so serious that the U.S. federal government announced in June that it plans to double its initial investment of $250 million so that efforts to produce fertilizers locally are boosted. However, the cannabis industry isn’t too excited about this development because the feds are likely to be more interested in supporting farmers of crops such as soy or corn rather than spreading the benefits of this push across the board.
These price increases as well as the supply chain hiccups that started when the pandemic struck suggest that players in the cannabis industry need to be innovative and find ways to weather this storm. For example, there is need to rethink how procurement is done so that companies can buy in bulk instead of buying small batches of inputs at the precise moment when those inputs are needed. This consolidation will ensure that the cultivators get what they need and at reasonable prices instead of buying at a higher price each time they reenter the market.
Producers can also become more conscious about fertilizer use in order to use just enough to give the expected yield without anything going to waste. For example, many fertilizer manufacturers recommend product usage that is at the higher end of the spectrum, but cannabis plants can grow well with much less fertilizer application.
Technologies such as electrical activity monitors can also alert farmers when their fertilizer use has reached the optimum level, hence preventing waste during cultivation. Regenerative farming methods can enable cultivators to depend on fewer artificial inputs, thereby cushioning themselves from the inflation affecting conventional growers.
While the shocks the industry is facing are the same, they aren’t affecting all industry players, including American Cannabis Partners, in the same way since these external factors normally find a differing mix of internal efficiencies or weaknesses.
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