These 5 cannabis stocks will slash production in 2020

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Bethan Rose Jenkins, Cannabis News Writer/Editorial

The year 2020 brings pot investors a stroke of bad luck. According to data from the Marijuana Index – which monitors cannabis industry stocks – a 63 percent reduction in 45 of the leading North American cannabis stocks has been noticed since April 1. 

Such a drastic decrease has been attributed to changes in regulations across North America’s biggest legal weed markets; Canada and the U.S. state of California. To make matters worse, excessive costs for consumers are driving down sales. As a result, the following popular cannabis stocks intend on cutting production in 2020:

Aurora Cannabis

While it might not have been the first cannabis stock to reveal that production would be slowing down in 2020, Aurora Cannabis (NYSE: ACB) is a prominent player in the industry and probably deserves first mention. This is especially true considering the fact that Aurora has been heavily focused on expanding production facility capacity over the last couple of years. 

Based on estimates when the Canadian cannabis company’s 15 facilities are fully operational, as much as 700,000 kilograms of the plant could be churned out every year. However, the company reported in its first quarter of operating progress that it would be stopping construction of its Denmark-based Aurora Nordic 2 facility and its Alberta-based Aurora Sun facility as a means of saving on capital.

Although six cultivation rooms will still be utilized by Aurora throughout 2020 – stretching over 238,000 square feet – the remainder of the projected 1.62 million square feet will go unused. As a result, Aurora’s cannabis cultivation in 2020 will work out at around 325,000 kg.

The Green Organic Dutchman

Cannabis production cuts were first announced by The Green Organic Dutchman (OTC: TGODF). Cultivation cuts were announced for its flagship Valleyfield facility in October 2019; reducing the annual predicted yield of 130,000 kg to 10,000 kg this year. 

Once the yields from its Ancaster campus – approximately 12,000 kg – are added to the equation, annual output rests at a measly 20,000-22,000 kg. This is sure to have left investors feeling deflated, what with the initial projections set at 219,000 kilos annually. Cuts have been attributed to the importance of meeting current demand and generating sufficient profit.

HEXO

Headquartered in Quebec, HEXO (NYSE: HEXO) will also reduce cultivation output in 2020. Previous estimates – around 150,000 kg annually following the acquisition of Newstrike Brands – have shrunk to somewhere in the range of 90,000 kg and 100,000 kg this year.

The news of HEXO minimizing production was confirmed in the company’s Q4 2019 results. Investors were alerted about the fact that production would lessen at its Niagara facility and its flagship Gatineau facility. Approximately 50,000 kg less is likely to be produced annually moving forward.

Cronos Group

Cultivation cuts may not be as hefty for cannabis stock Cronos Group (NASDAQ: CRON), but the company still revealed some changes production in its third-quarter report. For example, specific cultivation zones at the Peace Naturals Campus will be reallocated for warehousing, derivative product manufacturing and R&D (research and development). 

This move from Cronos emerges in light of an announcement that derivative products would be making their way to Canadian dispensaries in the coming weeks. Since these types of cannabis products offer higher profit margins, it’s not really surprising that Cronos made the decision to switch things up.

CannTrust

Finally, we have Ontario’s CannTrust Holdings (NYSE: CTST). This cannabis stock may see less interest after declaring that Health Canada has suspended its cultivation and production licenses. As a direct effect of this, production has come to an almighty halt. 

Why was CannTrust’s license suspended? Five of the company’s unlicensed rooms were discovered to contain illegally cultivated plant’s back in July 2019. Production took place outside of the law from October 2018 to March 2019, resulting in the dismissal of former CEO Peter Aceto. Until CannTrust gets the necessary licenses back, annual output ranging from 200,000 kg to 300,000 kg will be put on the back burner.

Practicing caution when investing in cannabis stocks

Keeping a close eye on cannabis industry stocks will ensure that you don’t invest in something that isn’t worthwhile. Pay attention to activity on the Marijuana Index, as well as the cannabis industry news, to make an informed investment decision.