Where Did the Good Weed Go? Exports, Excise and the Domestic Shelf

The flower has not disappeared. A growing share of what Canada grows is now destined for export, because export pays more per gram and carries no excise duty. Writing for StratCann on 10 June 2026, Walker Patton set out the arithmetic: the upper end of domestic wholesale ran roughly $2.00 to $2.75 per gram in 2025, while export pricing in 2026 sat north of $3.00 per gram, duty-free. Kevin Varner of Royal Harvest put it directly in that piece: "The good cannabis didn't disappear; it got redirected overseas because prices were better and no excise tax."

We think that account is substantially right, and we also think it has a consequence for a retail shelf that is worth arguing about. This post is our view, not a neutral summary.

The tax arithmetic, without the outrage

Canada's cannabis excise duty is charged at the higher of two calculations. There is a flat rate of $1.00 per gram of flowering material for a product sold in Ontario, made up of a $0.25 federal cannabis duty and a $0.75 additional cannabis duty. Or there is an ad valorem rate of 10 percent of the dutiable amount. Whichever produces the larger number is payable, calculated transaction by transaction.

The structure was designed around an assumption that dried flower would wholesale near $10 per gram, at which price a $1.00 floor is a tidy 10 percent. That price never arrived. StratCann's January 2026 review of Canadian wholesale pricing put newly harvested flower at an average of $1.51 per gram across 2025, with material more than a year old at $0.96 and a seasonal low of $1.22 in the autumn.

Run the flat rate against those numbers and the effect is immediate.

Producer wholesale price Excise duty payable Duty as a share of the wholesale price
$0.96 per gram $1.00 per gram 104 percent
$1.51 per gram $1.00 per gram 66 percent
$2.75 per gram $1.00 per gram 36 percent
$10.00 per gram $1.00 per gram 10 percent, the original design assumption

A flat duty is regressive with respect to price. It falls hardest, proportionally, on the cheapest grams, which are also the ones with the thinnest margin to absorb it. And because domestic retail prices have compressed under competition, producers have limited room to pass it along.

Why export changes the calculation

Cannabis products removed from a licensed producer's premises for export under the Cannabis Act are relieved of the duty. That is set out in the Canada Revenue Agency's excise duty memorandum on imposition and payment, which lists export among the circumstances where cannabis duty is not payable. The producer still bears the cost of growing, testing, packaging and shipping, but the $1.00 per gram floor comes off entirely.

Put the two together. A gram sold domestically at $2.00 wholesale carries $1.00 of duty downstream. The same gram sold into an export contract at $3.00 carries none. That is not a close call, and it is not a moral failing on anyone's part. It is a producer responding to the price signal the tax system creates.

The volumes are real. Health Canada data showed 79,280 kilograms of dried cannabis exported in 2023, and 67,475 kilograms in the first six months of 2024 alone. StratCann reported exports doubled in 2025, with the Global Cannabis Exchange expecting a further 27 percent rise in 2026. As at the time of writing, no reform to the excise structure has been enacted.

What this means for a shelf in Toronto

Here is where we will take a position. Three claims, in order of how confident we are.

One: freshness is now the variable that matters most

If a large producer's better lots are allocated to export contracts, what reaches a domestic distributor is disproportionately the material that had no contract waiting for it. That is not the same as bad material. Often it is the same cultivar from the same room. What it frequently is, though, is older, because it sat while allocation decisions were made.

Age is the mechanism by which quality is lost here, more than genetics or growing method. That makes the packaging date the number to read first, and it makes stock turnover the thing a retailer is actually responsible for. How to read that date is in Packaged on is not harvested on, and keeping what you buy in good condition is in How to store cannabis.

Two: THC percentage is the wrong signal, and price pressure made it worse

When purchasing power is squeezed, buyers reach for the two numbers that are easiest to compare: dollars and THC percentage. That combination rewards the cheapest high-testing gram on the shelf and penalises everything that costs more to produce, which is precisely the material at risk of leaving the country.

We are not going to pretend this is a consumer failing. Comparing flower on anything other than price and potency requires information that has historically been hard to get. It is getting easier: terpene profiles appear on more labels, and packaging rules loosened in March 2025 to allow inserts and QR codes. Our argument for reading past the percentage is in Beyond the THC number.

Three: the domestic shelf is where small producers actually sell

This is the constructive part, and we think it is underrated in the export conversation. Running an export contract requires scale, capital, foreign regulatory approvals and the ability to hold inventory against a shipping schedule. Micro cultivators and small standard producers largely do not have those things.

So for a small Canadian grower, the domestic shelf is not the leftover channel. It is the channel. What they grow arrives here by default, because here is where they sell. The badges and designations that identify them are covered in Finding genuinely craft cannabis in Ontario.

What we do about it

Three things, stated plainly because they are the only part of this a shop controls.

We order in smaller quantities more often rather than buying deep, which costs more per unit and keeps dates tighter. We read producer and packaging dates before we read potency figures. And we stock small producers whose material is not competing with an export order, which sometimes means carrying a gram that costs more than the cheapest one on the shelf.

None of that solves the excise problem. Only Parliament can do that. But the gap between what Canada grows and what Canadians can buy is partly a distribution problem, and distribution is where a retailer sits.

Where the money goes

One last figure for scale. The OCS reported a weighted average wholesale price of $3.75 per gram for dried flower in Ontario in 2025. The producer wholesale average in the same year was $1.51. The gap is excise duty, distribution and wholesale margin before a store has bought anything or a customer has paid HST. We broke that chain down in Where your $10 gram actually goes.

Our staff can talk through producers, dates and growing methods on anything we carry. They cannot give medical advice, and we do not make claims about what a product will do for you. What is on our shelf is in our full range, and our hours and directions are on the visit page.

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