Are Fertilizer Companies the Best Way to Invest in Legal Cannabis?

The ever growing interest in legal marijuana investing may have a lot of merit with all of the growth projections that are being released. However, legal cannabis stocks are as volatile as most penny stocks which never makes investors feel comfortable. A lot of investors will then turn to non-marijuana businesses that could play a major role in the marijuana industry like fertilizer companies. Scotts Miracle-Gro is an example of a fertilizer company that also has a subsidiary that is supplying fertilizer to legal marijuana growers.

The marijuana industry is growing like a weed. Sure, the pun is eye-roll worthy, but it accurately describes the superior growth rates at the moment for legal cannabis.

According to leading cannabis research firm ArcView, North American legal-weed sales are expected to grow from just $6.9 billion in 2016 to an estimated $21.6 billion by 2021, representing a compound annual growth rate of 26%. This growth is expected to come from a combination of new legalizations, organic growth within already legal states and countries (Canada and Mexico have both legalized medical marijuana), and the movement of consumers from illegal to legal channels.

Favorability toward pot has also shifted noticeably over the past two decades. Before California became the first state to legalize medical cannabis in 1996, just a quarter of those surveyed by Gallup in its periodic pot polls wanted to see the drug legalized nationally. As of 2016, this figure had jumped to an all-time record high of 60%. Presumably, the higher this percentage goes, the more pressure politicians in Washington will have placed on them to make scheduling changes at the federal level.

But therein lies the problem for the marijuana industry: It’s still a Schedule I substance at the federal level, meaning it has no medical benefits and is wholly illegal. Additionally, because of this strict scheduling, it’s extremely difficult to gain approval to run clinical studies involving cannabis, most weed-based businesses are unable to take normal corporate income-tax deductions, and financial institutions typically won’t lend to marijuana businesses. In short, the pot industry is placed at a major disadvantage, which is what makes marijuana stocks such a dangerous investment.

Because of this bifurcation — the federal government standing pat on its scheduling, while individual states legalize — it’s always possible that the federal government shifts from its currently lax attitude toward cannabis and cracks down on the industry. President Trump has previously thrown his support behind medical cannabis “100 percent,” but he’s been less than amicable toward the recreational-weed side of the equation.

Furthermore, Attorney General Jeff Sessions has been a primary opponent of marijuana’s expansion. He’s not minced his words when describing what should happen to the pot industry, and in May he sent a note to Congressional leaders requesting that they repeal the Rohrabacher-Farr Amendment. This is the amendment that gives weed businesses the right to lawfully operate in states that have passed cannabis laws. In effect, Sessions is asking Congress if he can trample states’ rights.

Considering that only two groups of people currently oppose marijuana’s expansion — Republicans and senior citizens — it’s not inconceivable that Sessions places enough pressure on lawmakers to win concessions in the battle against the industry. Should this happen, it could be potentially devastating to dozens of publicly traded marijuana stocks, and the industry as a whole. Let’s also not forget that back in February, now-former White House press secretary Sean Spicer intimated that a crackdown on the marijuana industry was coming.

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Source: MJFeed

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