10 Cities With the Most and Least Expensive Marijuana in the World

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In case you haven't noticed, the cannabis industry is growing at an incredible pace. Within the U.S., according to a report from Marijuana Business Daily released in 2017, legal weed sales are expected to grow by 45% in 2018, mainly because California opened its doors to legalized recreational weed.

Throughout North America, cannabis research firm ArcView estimates the industry can grow by an average of 26% annually through 2021. That type of growth is hard for investors to ignore, and it's a big reason many pot stocks have doubled or tripled in value over the trailing year.

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In addition to rapid sales growth, the public's view of marijuana has also dramatically shifted in a relatively short period. In 1995, just a year before California became the first state to legalize medicinal cannabis for compassionate-use patients, just 25% of respondents in Gallup's survey wanted to see pot legalized. By October, this figure had climbed to an all-time high of 64%. A poll from the independent Quinnipiac University shows that support for medical marijuana is even higher, with 94% of respondents in its August 2017 survey favoring such an idea, compared with only 4% who opposed it.

But as you're probably aware, even with marijuana being viewed in a more positive light in the U.S. and many other countries around the world, the industry is completely different from one country to the next. This is perhaps no more apparent than when examining the price per gram for cannabis across the world.

Cities with the most and least expensive cannabis in the world

Recently, Seedo released its 2018 Cannabis Price Index, which examined 120 cities around the world. Seedo's analysis looked at the total consumption of these cities in metric tons, the total possible tax collection in millions of U.S. dollars, and, most importantly, the price per gram in U.S. dollars.

Here are its findings for the 10 global cities with the most and least expensive marijuana per gram:

As you'll note, there's a 23-fold difference in per gram cost between the most expensive city, Tokyo, Japan ($32.66 per gram), and the least expensive city, Quito, Ecuador ($1.34 per gram). You'll also notice that not a single U.S. city is on either list. Washington, D.C., actually just missed out on the top-10 most expensive cities with a per gram cost of $18.08, while Seattle was the cheapest in the U.S. at $7.58 per gram, good enough for 84th most expensive out of 120 cities.

Why the wide variance in price?

You're probably wondering why there's such an enormous gap in cannabis prices among these cities. To begin with, the legality of marijuana does play a major role. Cities where pot is fully or partially illegal are considerably more likely to have higher per-gram prices than cities where it's legal. The simple reason for that is supply. Legal cities usually have little issue growing cannabis and meeting or exceeding demand. Meanwhile, black market cannabis supply remains unknown in illegal cities, which puts the ball in the seller's court when it comes to pricing power.

The scope of the penalty for cannabis use or possession can also play into the pricing. For example, cannabis costs just $8.20 to $9.40 per gram across six French cities in the analysis, despite the fact that marijuana is illegal throughout the country. However, France noted last May that it intends to decriminalize the possession of small amounts of pot. In other words, being caught with cannabis isn't being viewed as a serious offense in France.

Meanwhile, possession of less than a gram of pot in Japan, which has some of the highest prices in the world, can result in up to five years of hard labor. Keep in mind that the penalty for possession doesn't perfectly dictate price: Jakarta, Indonesia, is the fourth cheapest city in the world on a per-gram basis but has been known to put people away for life for drug possession – but it correlates more often than not.

Standard of living also seems to be coming into play, at least when comparing cities on an apples-to-apples basis of legality. Cities known for more affluence and higher per-capita earnings tend to have a higher per-gram price than cities where residents don't have as much income.

All eyes are on Canada

Also noteworthy are that the five Canadian cities listed in the analysis ranked between 80th and 101st in total cost per gram. Canada is currently working through legislation that would allow it to become the first developed country in the world to have legalized recreational pot. As of now, with a tax-sharing agreement in place between the Canadian federal government and its provinces, legalization by July is looking likely.

Canadian growers have been expanding and consolidating at a breakneck pace in anticipation of recreational legalization becoming law this summer. Canopy Growth Corp. (NASDAQOTH: TWMJF), the largest pot stock by market cap, has an incredible 2.4 million square feet of greenhouse facilities under construction or in development in British Columbia, with the option to lease another 1.7 million square feet in B.C. It's also not been afraid to pull the trigger on acquisitions, having purchased Mettrum Health in early 2017.

Meanwhile, Aphria (NASDAQOTH: APHQF) and Aurora Cannabis (NASDAQOTH: ACBFF) are making deals while advancing their flagship projects. Aphria's four-phase, 1 million-square-foot project is slated for completion in January 2019. Yet that didn't stop the company from forming a strategic relationship just weeks ago with Double Diamond Farms that'll deliver 120,000 kilograms of annual production by 2019.

Similarly, Aurora Cannabis is working feverishly to complete its 800,000-square-foot Aurora Sky project, which should be finished in mid-2018. Aurora also announced late last month that it's acquiring CanniMed Therapeutics, a Saskatchewan-based grower, for $852 million, in the biggest weed deal in history.

Supply doesn't look like it'll be an issue if Canada moves forward with its legalization efforts. In fact, consumers could initially benefit from cheaper prices because of an influx of dried cannabis. Of course, it's my suspicion that the same consolidation that's allowed the Canadian pot industry to thrive is what'll help push prices up within a couple of years. However, only time will tell if that projection is correct.

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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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