Canadian marijuana makers are sitting on 1.1 billion grams (2.4 million pounds) of the drug they can’t sell as the country’s legalized cannabis industry runs out of steam.

Last October, Canadian cannabis companies stored around 1.1 billion grams of harvested or processed cannabis. About 95 percent of this grass is considered “largely unsaleable” because it has deteriorated over time and because there are simply too much supplies to sell.

The poor quality of the products, as well as the slow process by which the provinces have allowed licensed stores to sell cannabis in the years since legalization, are blamed for the stocks destroyed.

Large corporations entering the newly legalized industry were also blamed for the problem because they were expanding too quickly.

Smaller mom and pop companies, who know their clientele better, say some of the rules the corporate giants want – like growing the drug indoors to prevent teenagers using drones from stealing their weed – show how little they understand their market.

Canadian marijuana users also prefer to source their products illegally, as about 50 percent of the cannabis consumed north of the border is sourced on the black market, according to The Walrus. It’s unclear why the demand for illegally grown weed continues to boom, although experts say it may be because illegal traders are selling people more of the drug than their prescription allows.

According to MJBizDaily, Canadian producers had to destroy 500 tons – or 985,000 pounds – of unpackaged dried cannabis between 2018 and 2020.

A worker collects cuttings from a marijuana plant at the Canopy Growth Corporation facility in Smiths Falls, Ontario Jan. 4

The Canadian Marijuana Index, which lists the country's largest cannabis producers, has seen an 82 percent decline from its peak in January 2018

The Canadian Marijuana Index, which lists the country’s largest cannabis producers, has seen an 82 percent decline from its peak in January 2018

In 2019 and 2020, companies had to throw away nearly 6 million packs of cannabis that were ready for retail sale.

This included 3,783,397 packs of dried cannabis; 1.5 million packs of extracts; 714,491 packages of edibles; and 943 packages with themes.

The stored cannabis combined with the destroyed products means that at the end of 2020 at least 1.6 million kilograms of marijuana were not sold.

Businesses destroy the excess cannabis by either combining it with cat litter or either using it through incineration or composting.

The website cited statistics from Health Canada, the federal agency that regulates cannabis production in the country.

The cannabis industry was seen as showing promise in the months leading up to legalization. In 2017, the stock values ​​of three of Canada’s largest pot makers rose more than 200 percent.

Investors got rich on the hype and the promise of massive sales once legalization was official. As of April 2018, there were 102 licensed marijuana producers.

But companies have apparently misjudged demand and flooded the market with an oversupply of cannabis.

Canopy Growth Corporation, once known as Tweed, was worth more than CAD 20 billion ($ 16 billion) at one point in time.

It had several cultivation facilities across the country, including in Manitoba, Saskatchewan, British Columbia, Newfoundland, and Ontario.

A cart full of sacked marijuana rolls through the corridors of the Canopy Growth Corporation headquarters in Smiths Falls, Ontario on May 15, 2019

A cart full of sacked marijuana rolls through the corridors of the Canopy Growth Corporation headquarters in Smiths Falls, Ontario on May 15, 2019

However, as of 2018, the company has reported net losses of more than $ 3.8 billion ($ 3.2 billion) and now has a market cap of just $ 7.55 billion.

Canada’s largest marijuana producers have lost more than $ 8.8 billion ($ 7 billion) in total over the past three years.

The Canadian Marijuana Index, which lists the country’s largest cannabis producers, has seen an 82 percent decline from its peak in January 2018.

Canada’s government seems keen to help the cannabis industry by tackling the thriving black market.

Earlier this year, Canada launched a public consultation to tighten the rules for those allowed to grow their own medicinal cannabis to prevent cannabis from entering the black markets.

In a draft guideline released for consultation, Health Canada highlighted recent police raids and arrests of manufacturing sites where people were using licenses to “cover and support large-scale illicit production and sales.”

The move comes as Canada tries to repair its ailing cannabis market, where illegal producers sell more than hundreds of licensed breeders annually, even more than two years after the country became the first major nation to legalize cannabis in 2018.

According to Statistics Canada data, households spent more than $ 2.45 billion buying non-medicinal cannabis from illegal channels last year, compared with $ 2.31 billion on legal purchases.

“Abuse of the framework for medical purposes undermines the integrity of the system that many patients and healthcare professionals rely on to gain access to cannabis to meet their medical needs,” said Health Canada’s draft document.

For the first time, the draft guidelines specify factors that the regulatory authority can take into account when rejecting or withdrawing a registration for “personal production”.

Factors include approving unjustified amounts and “criminal activity and / or diversion of cannabis”.

In January, Ontario provincial police seized over 180,000 cannabis plants and numerous vehicles and firearms during raids on illegal grow facilities, many of which took advantage of Health Canada’s personal licenses to grow medicinal weed.

According to the regulations, people who consume cannabis for medicinal purposes must be given a daily amount approved by medical professionals – doctors, nurses, and social workers – to either buy from official dealers or to grow them yourself.

Health Canada announced in December that there had been an increase in the number of cannabis growers authorized to grow.

The number of patients registered to purchase from state-licensed retailers was 377,024 as of September last year, up 24 percent from June.

Meanwhile, registrations for personal cultivation rose 29 percent to 43,211 during the reporting period.

While private cultivators make up only a small fraction of total patient registrations, these individuals are allowed to grow an average of up to 36 grams per day, compared to just 2 grams approved for daily purchase from retailers.