VANCOUVER, British Columbia (Reuters) - The strong Canadian dollar has hit the illegal marijuana sector just as it has other industries that export to the United States, one of Canada's best known legalization advocates said on Thursday.
But western marijuana growers have also benefited from Canada's strong economy, especially the booming Alberta oil patch, which has increased domestic consumption, according to Marc Emery, a founder of the British Columbia Marijuana Party.
The Canadian dollar touched parity with the U.S. dollar last week, topping a rise of some 60 percent over the past five years. On Thursday, it was still hovering around par, at C$1.0014 to the U.S. dollar or 99.86 U.S. cents.
A stronger loonie -- so called for the bird engraved on the one dollar coin -- has cut the profit of selling potent "B.C. Bud" marijuana in U.S. markets at a time when producers in Canada struggle with tighter border security and competition in the United States with pot from other sources.
Top quality Canadian pot is selling for $3,500 (1,725 pounds) a pound in the United States, compared with C$2,400 (1,180 pounds) in domestic markets, according to Emery, who is also editor of Cannabis Culture magazine and fighting extradition to the United States.
"When you factor in all the risk and transportation, that (higher export price) is not a big deal any more," said Emery, adding that when the Canadian dollar was weak exporters could double their money selling into the United States.
U.S. authorities seized 26,414 kilograms (58,233 pounds) of marijuana in northern border states in 2005 compared with 11,546 kg (25,455 pounds) in 2001, according to the U.S. Drug Enforcement Administration's latest National Drug Threat Assessment.
A study in 2004 estimated the street value of British Columbia's annual marijuana crop at more than C$7 billion, which would make it one of the western Canadian province's largest industries.
Simon Fraser University economics professor Stephen Easton, who authored the 2004 report, said there has been no specific study of the impact of currency on drug exports but it should be the same as with legal exports.
"Basically, what happened is the cost of producing the stuff went up in U.S. dollar terms," said Easton, who is planning to further investigate the issue.
Emery said Canadian marijuana is also facing price competition in the United States from Mexican-grown pot, which has benefited from a relatively weak peso, as well as increased domestic production in the Western U.S.
The U.S. anti-drug agency said in its 2007 report that large scale cultivation of marijuana by Mexican criminal groups was expanding beyond California and into the Pacific Northwest, and that the potency of the pot available was rising.
"What's happening is that they're producing tons and tons of marijuana this fall. It will considerably add to the U.S. total (supply) and bring their outdoor pot price down," Emery said.
But a healthy Canadian economy has allowed marijuana producers to sell more at home. "They're making a lot of money on those oil rigs, and everywhere Canadians are making decent money they are doing a lot of drugs," Emery said.
Canadians have the highest rate of marijuana use in the industrialized world, according to a United Nation's study released in July.
Emery was arrested in Vancouver in August 2005 at the request of U.S. authorities, who have accused him of breaking U.S. drug laws by illegally exporting marijuana seeds to the United States.
He is fighting extradition and faces a January court hearing.