Uruguayan cannabis exports diversified products and expanded markets

2023 represented the sixth consecutive year of exports for the cannabis industry since its regulation in 2013. From 2018 to 2023, the country placed exports for more than USD 27 million, based on solid work to achieve market and product diversification in a sector still in full development globally.

With an ecosystem of more than 100 companies, the exportable supply of the industry expanded both at the level of industrial hemp and medical cannabis. As of 2018, the country exported a variety of products, including seeds, biomass, and hemp flowers for non-medical use, as well as flowers with high THC content for medical use and medicines and finished products.

Over the years, foreign trade has been strongly driven by the medicinal sector, specifically high-THC flowers and, more recently, finished products.

Hemp accounted for an average of 23% of exports, with a record 36% in 2023. This resulted from a relative recovery in international prices between 2022 and 2023 and a more moderate performance of the medicinal sector.

As in previous years, exports of flowers, both hemp for non-medical use and high THC for medicinal use, exceeded 80% of the total value exported in 2023. They were followed by the highest record so far for exports of medicines and then by the highest record, both in terms of value and tons exported, for hemp seeds.

In the case of medicines, the figure is mainly explained by exports to the Brazilian market, both under the compassionate use regime and through the registration of products for sale through pharmacies. The largest market for exported seeds was Argentina, which recently regulated the sector and intends to position itself as a global industrial hemp producer.

The high record in the placement of medicines did not offset the more discreet performance compared to previous years of total exports of medical cannabis as a whole. However, a considerable increase in the number of exporting companies can be observed, with six selling abroad. This may indicate that long sales cycles, such as those of the pharmaceutical industry, are beginning to crystallize.

In addition, new markets such as New Zealand, Australia, the Czech Republic, and Spain are opening up. The export of medicines to Brazil has led to significant growth in that market, which, with the registration of drugs in progress by several companies, is expected to continue to be one of the leading export destinations in the region by 2024.

There was an 18% increase in total value exported at the industrial hemp level compared to 2022. Although hemp flowers for non-medical use continued to account for 94% of total exports, 2023 saw the largest export of seeds to date, with 11.5 tons destined mainly for Argentina and smaller exports to Paraguay, Costa Rica, and Spain.

In 2022, Switzerland was the primary market for this product, with 93% of total sales. At present, there is significant diversification, with a smaller share of this market (47.8%) and exponential growth in both the United States (18.6%) and the Czech market (18.4%), both of which opened in 2022. In the case of the Czech Republic, its increase of the THC limit to 1% allowed it to occupy the place of a competing logistic hub with Switzerland within Europe, but with the advantage of being part of the European Union.

Another relevant market for industrial hemp was Paraguay, which, with 5.2% of exports, is a spot market, similar to what Ecuador was in 2022, with short-term needs to supply inputs until they consolidate their local industry. Argentina accounted for 4.1% of placements, mainly due to exports of hemp seeds. Lastly, with 3.6%, Brazil represented an opportunity for a few months when the compassionate use regime allowed hemp flowers to enter the country.

Present and Trends for 2024

The relevance of medical cannabis and its weight in figures in these first six years of exports is unquestionable. Beyond a lower performance in 2023, the increase in the number of exporting companies generates expectations for 2024 of a relative recovery.

In terms of markets, we expect continuity with destinations such as Germany and Portugal and the opening of new markets such as Australia, New Zealand, Czech Republic and Spain. Israel, one of the leading export destinations in previous years, decreased its role, mainly due to sanitary requirements.

Regarding industrial hemp, there has been a growing diversification of markets and a decrease in dependence on the Swiss market, but not in reliance on intermediary markets. Measured both by value and by tons exported, 80% of total exports are concentrated in a few companies, indicating the division of tasks in the production/commercial chain or difficulty in accessing retail channels abroad. The establishment of industrialization plants represents an opportunity for the export of extracts or isolates and the possibility of remediating flowers locally for subsequent placement in markets with lower THC thresholds.

The regulatory frameworks of the destination countries continue to be fundamental for generating commercial opportunities in an international market that still has the characteristic volatility of markets in formation. Having been the first country in the world to legalize fully, the existing stability in all its dimensions as a country, the existence of an innovative ecosystem with ten years of validity, a solid track record in related industries such as pharmaceuticals and agribusiness, a sustainable production system and a solid public-private institutional framework continue to position Uruguay on the international scene as a destination for foreign investment, as well as when positioning itself in new markets.