F.Y.I.
While the Australian cannabis market has made great strides over the last two years, it is still in an embryonic stage of development. Despite arriving moderately late in the game, the country is well positioned to become a major global player in the export market—which is expected to be worth $55 billion by 2025—on the back of its’ already thriving agricultural sector.
Although Australia only legalised marijuana exports in 2018, it already has plenty of experience in the agri-phrama business and is responsible for approximately 50 percent of the world’s legal poppy supply. These poppies eventually are processed by pharmaceutical companies into medical grade opiates such as codeine and morphine.
However, the country still has several hurdles to overcome if it wants to fulfill its ambition of dominating the global cannabis export market, such as heavy financing requirements, a repressive and convoluted licensing system, and a medical profession that is reluctant to prescribe the product.
Data from the Ministry of Health shows that despite the legalisation of medicinal marijuana in 2017, the number of patients being prescribed cannabis is still lagging behind other countries.
Additionally, much of the market demand is currently centered around North America and Europe, leaving Australian suppliers with a geographical freight disadvantage. To counter this, many companies are positioning themselves as premium product producers, similar to the country’s thriving agricultural industry.
The nascent Asian market is also beginning to gradually expand, following the 2018 legalisation of medical marijuana in Thailand and South Korea. In recent years countries such as China, Japan, and Indonesia have also become some of Australia’s biggest trading partners.
Considering Australia’s close geographic proximity to the region, it seems likely that local suppliers will be well-positioned to capitalise on Asia’s growing cannabis market as it begins to reach maturation.
Australian cannabis stocks started last year on a high—following the announcement that government would be legalising marijuana exports—however, most shares spent the following twelves months in freefall. This was partly the result of an ongoing downturn that affected much of the industry, as some traders became nervous in response to growing market volatility.
This has left many pot stocks highly undervalued, which is good news for long position investors who are looking to buy into the sector, or consolidate their investment—while incurring minimal costs—if they are willing to ride out the market fluctuations.
