There's a significant difference between the attention given to big Canadian marijuana stocks, especially ones that trade on U.S. stock exchanges, like Cronos Group (CRON 0.45%), and smaller, under-the-radar marijuana stocks like Village Farms (VFF 1.20%). This difference shows up in the performance for these stocks, too. Cronos, for example, has generated much higher returns than Village Farms so far this year.

But higher levels of attention and greater year-to-date gains don't necessarily make one stock better than another. Which of these two Canadian marijuana stocks is the better pick now? Here's how Cronos Group and Village Farms compare in three key areas.

Marijuana plants growing in a greenhouse

Image source: Getty Images.

Production capacity

A marijuana grower can only make money on what it has to sell. That means that production capacity is enormously important. 

Cronos Group currently can only produce around 6,650 kilograms of cannabis per year. However, the company has a major expansion underway that should boost its annual production capacity to over 40,000 kilograms. Cronos is also part of a joint venture that plans to build a new greenhouse with an annual production capacity of 70,000 kilograms.

Village Farms and Emerald Health Therapeutics (EMHT.F) formed a joint venture, Pure Sunfarms, that is busy retrofitting Village Farms' Delta 3 greenhouse to grow cannabis rather than produce. Pure Sunfarms expects to be able to grow between 7,000 and 8,000 kilograms this year. The company thinks that its annual production capacity will jump to as much as 52,000 kilograms by the end of 2019. By 2020, Pure Sunfarms could be on track to grow 75,000 kilograms per year.  

Readiness for the Canadian recreational marijuana market

Cronos Group has secured supply agreements with British Columbia and Ontario for the recreational marijuana market opening in just a few weeks. Together, these two provinces comprise over half of Canada's total population. Cronos has also accepted supplier terms with Nova Scotia and Prince Edward Island, and has a five-year agreement to supply at least 20,000 kilograms cannabis per year to Cura Cannabis Solutions.

In addition, Cronos and MedMen Enterprises formed a joint venture to launch retail cannabis stores throughout Canada when regulations permit. MedMen is the largest cannabis retailer in the U.S.

So far, however, neither Village Farms nor its Pure Sunfarms joint venture has announced any supply agreements with Canadian provinces or territories. The company could find itself limited to selling to larger marijuana growers at wholesale prices rather than directly to retail markets.

Positioning in the global medical marijuana market

Cronos Group is active in several international medical marijuana markets. It's the exclusive medical cannabis supplier for German pharmaceutical distributor Pohl-Boskamp. Cronos signed a supply agreement with Delfarma to serve Poland's medical cannabis market. The company established a joint venture to supply medical marijuana in Australia and recently formed another joint venture to reach the Latin American market.

In early September, Cronos announced a partnership with Ginkgo Bioworks to produce cultured high-purity cannabinoids from engineered strains of yeast. If successful, this could really position Cronos well for the medical marijuana market. Current methods of extracting cannabinoids from marijuana plants at a commercial scale are costly. The approach being taken by Cronos and Ginkgo could improve the process significantly.

Village Farms has a presence in international markets with its produce business. The company sells produce in both the U.S. and Mexico in addition to Canada. However, neither Village Farms nor its Pure Sunfarms joint venture has made much progress in establishing operations to reach international medical marijuana markets. 

Better marijuana stock

Village Farms could be on track for a higher production capacity than Cronos Group. Its market cap is also around one-eighth the size of Cronos. In terms of bang for the buck, Village Farms might seem to be the better pick.

Sooner or later, though, a supply glut will hit the Canadian marijuana market. When that happens, companies that don't have significant international operations could be in trouble. My view is that Cronos Group will be in better shape when supply outstrips demand in Canada.

But while I think this makes Cronos Group a better marijuana stock than Village Farms, I wouldn't go as far as calling Cronos a stock to buy right now. Valuations have become very frothy for several large Canadian marijuana stocks. I think there are better places for investors to put their money for now.