Should I Invest in the Cannabis Testing Sector?
Jan 20 2016 Read 2370 Times
With the legalisation of cannabis for medical and recreational use in several US states — new legitimate industries have been created which hopefully will be profitable. And where there is a profit to be made you can guarantee that banks and financial institutions will be keeping an eye on the market.
So will we soon see cannabis farms listed on Wall Street? A recent Bank of America report suggests that Wall Street institutions are interested in the sector — one day rolling a joint could increase your pension.
Supply and demand
Since the legalisation of marijuana for recreational or medicinal use in several US states, what was once an operation that carried the risk of a prison sentence or hefty fine is now a legitimate business. As with any legitimate business, there are different components that make up the supply chain from raw material to customer — and in cannabis supply, two of the biggest are the growing and the testing of cannabis.
The industry has the potential to be a significant money-maker. It is estimated that in Colorado alone, recreational cannabis industry will be worth $1 billion in 2016. As more states join in the legalisation of cannabis — for either medical or recreational use — the market is only going to get larger.
Cash only please
But there are potential problems facing investors in the industry — especially in the sector concerned with growing marijuana. Although some states have legalised cannabis — it remains illegal under federal law which is set at US Government level. Banks are regulated by federal laws, which makes it more difficult to deal with cash from cannabis sales, even when those sales are legal in certain states. The vast majority of US banks will not handle transactions or cash from the cannabis farmers
This has meant that many cannabis growers have to deal in cash only, which in a billion-dollar industry is a lot of cash. Growers have to make payments in cash — wages, taxes and buying supplies — meaning extra security is needed to protect employees and the piles of notes lying around. This would end if cannabis were legalised on a federal level.
But good news for chromatography
But one area where the increase in the cannabis market is making the bankers take note is in cannabis testing — and this can only be good news for chromatography companies. A recent Bank of America report suggested that the cannabis testing market could be up to $100 million by 2020 — but others analysts forecast a much higher total with some estimates up at $900 million.
Both gas and liquid chromatography are used as major analytical tools in cannabis testing — with GC used for total cannabinoids and HPLC for cannabinoid concentration. Developing methods to test new cannabis compounds and strains will be an important tool for analysts and is covered in the article Modelling HPLC Method Robustness.
Should the UK follow the US lead and start to legalise cannabis?
Image via Wikimedia Commons
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