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Modelling the cost of medicinal cannabis

Cultivation and manufacturing costs

Deloitte Access Economics has estimated the cost of cultivating and manufacturing medicinal cannabis for the Department of Health through the Office of Drug Control.

Modelling the cost of medicinal cannabis
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On 17 October 2015, the Commonwealth announced an intention to amend the Narcotic Drugs Act 1967 allowing the cultivation of cannabis for medical and scientific purposes. The amendments are intended to facilitate the production of cannabis products, in accordance with the Therapeutic Goods Act 1989, for specified patients under clinical care and for clinical trials.

The Department of Health through the Office of Drug Control has commissioned Deloitte Access Economics to estimate the cost of cultivating and manufacturing medicinal cannabis. The purpose of this exercise is to cost the process from cultivation to manufacture.

The estimated cost of cultivation to meet the projected demand per annum is detailed below for each cultivation option. The results show that broadacre is the lowest cost option at $75 per square metre (sqm), or $888 per kg dried flower, and indoor the most expensive at $2,291 per sqm, or $1,909 per kg dried flower. This translates to an annualised cost at maturity of $9.9 million per annum for broadacre, $17.1 million for greenhouse, and $21.2 million for indoor cultivation.

Daniel Terrill

Deloitte - Australia
Dr Daniel Terrill is Lead Partner for Deloitte’s Agribusiness client service group and leader of the agricultural and environmental economics teams of Deloitte Access Economics. He is an economist with a unique blend of professional and lived experience in agriculture and environmental management. He comes from a livestock and broad acre cropping background from a family farm in Victoria. Dr Terrill received his PhD from The University of Melbourne, where he researched policy solutions to improved collective environmental outcomes from farming land. He has over 15 years of experience as a microeconomist, where much of his work is at the intersection of agriculture and the environment, particularly addressing the challenge of feeding growing populations more sustainably.
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