I’m thinking there’s a possibility to create a huge farmer demand for simply tolling into unwinterized undecarbed crude. If you have 21 pounds of 7% biomass and the market is only giving you $2.50/percentage point, you’re only getting $367.5 for that biomass. If you pay $8 per pound to get it into 1 kilo of unwinterized undecarbed crude, that’s $168. You can now sell that kilo of crude for $750 per kilo, making $535.5 off that 21 pounds of biomass instead of $367.5. Not to mention it’s going to be much easier to store, just by paying to get your biomass broken down into raw crude.
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That’s exactly the kind of thing I’m talking about @coppertop. Great point and appreciate the use of real numbers. Is it fair to say your numbers are national or specific to your region?
An assumption we would make is that while hemp/ CBD is a game that can be played on the national not just the state level, at a certain stage in the value chain, there is still a need for local ops when dealing with the farmers/ biomass (drying, processing to crude). So to expand on your point the farmer’s market broadens as well, because of the transportability of the crude, for the same reason it makes sense for storage.
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Looking at it from the outside it seems like limiting the movement of the biomass should be a major consideration, and time to dried material also to some extent.
Drying in a barn saves on transport, but takes longer. The longer it takes and the more farmers following suit, the more biomass comes on the market all at once, price volatility etc.
Drying in someone’s warehouse (for discussion purposes I’m going to assume the warehouse is somehow optimized for faster drying) is faster but there’s the cost of transport.
Assume some active drying mobile unit is the best option (the dryer comes to the biomass, not vice versa), except for its capital intensive upfront cost and the sporadic need of the farmer (which is the case with all their equipment).
Assume there’s enough business for it to make sense for a company to buy those units and lease them out and make a living at it. Even one farmer out of every several could do it (like they used to do with wheat threshers).
Assume the active drying process is also more precise and remediates the moisture issues @Roguelab mentioned, improving yields and the economics @coppertop brought up. If the values are so great to where the farmer actually SAVES money leasing an active drying unit, by MAKING more money on the biomass through higher crude yield, or faster time to market, then the drying business becomes as essential as one’s accountant.
All theoretical without the numbers, and equipment sellers are generally not the folks to get the numbers from, though reputations matter in that respect.
I suppose it would depend on the business model. As a toll processor there would definitely need to be a value proposition to bring clients to your door, so their economic quandary has to become the processor’s to the extent they need to add value to get business. The actual selling of what you produce would not be your problem, however, in a fee for service model paid in cash not production splits.
If pursuing payment by splits, it seems like part of this would need to include takeoff agreements with local farmers, to de-risk their cultivation so they plant and to secure supply at better terms. As you say that only solves half the equation (you still have to sell what you processed).
When you say margins are getting thinner, what were they before and where are they headed now, generally speaking? My buddies are raising $10m for a vertical play in MMJ, from cultivation through to dispensary, and they are saying the numbers are stupendous. They are engineering types relying on consultants and are conservative in their estimates, not gold rush minded. I am more interested in hemp, but I do see the appeal of some level of market protection afforded by the Federal vs. State legislation aspect.
Great point on the deals aspect and its variability. To the extent any agreements could be pre-negotiated that would certainly contribute to de-risking the venture. And making back the cost of a plant within a year is a pretty great rate of return for any mature industry, even if it is more prolonged than it was previously for this industry, which is still surely far from reaching its maturity.
I wonder whether getting into one of the more esoteric industrial hemp lines as an early shaker and not CBD as a late comer is something to consider. It seems like the risk of being too early is still prominent, because the farmers are planting to go primarily after those CBD returns, not fiber, even if they are compressing, and while it may make sense to assert some first mover advantage in fiber, the rate of return could become quite prolonged.
@RiverleafBiotech Let me also add that we’re already seeing folks who have vertically integrated end up with idle capacity and then start looking to offer toll services to sweat their assets. So targeting toll processing specifically carries the risk of not only other toll processors competing, but captive capacity holders flipping into that business as well.
I think that whoever made the comment that the independent processing business is past its peak and large corporations will soon push independents out is thinking well.
My career in the chemical industry includes many examples where major corporations turned a independent, profitable specialty chemical businesses into low cost commodity business where small enterprises cannot compete.
This will happen over the next five years as ever more states legalize and chem/pharma producers respond.
Much like the beer industry, there will probably be a niche for “craft brewed” concentrate but high purity distilled concentrates will be sold at unbelievably low prices.
Based on my experience with other specialty, agriculturally derived commodities, I can see distillate being produced for 50-100 $/liter in million liter per year quantities.
Put that in your pipe and smoke it.
Dried biomass is not process ready biomass don t forget !
I agree with this, but I think that “craft cannabis” aspect can still be big, just as there are hugely successful craft breweries right now. This is why the “craft cannabis” industry need to be one step ahead of the big guys. I think that differentiation will come about with the deeper exploration of the lesser-known cannabinoids. As the big guys focus all their attention on just CBD, the ones who start educating the public on CBG, CBC, CBE, etc. will truly shine.
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Those are local numbers. Nationally I see around $18-$25 for crude, but that’s usually for decarbed and winterized crude. The only issue I see with breaking down into crude vs selling as biomass is the THC level being above .3%, making interstate sale much more tricky.
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This phenomenon can (and probably should, according to one’s objectives) inform an owner as to the business they should create whose structure lends itself to acquisition by this group.
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I think the consumers in this space are a group whose preferences will prop that up. Also the big players are going to be and already are looking at the synthetic route. Far less variability, far greater reliability, far easier patentability.
Does that occur by definition as a result of the extraction? Meaning that crude from a plant that is less than 0.3% THC by dry weight will be greater than 0.3% THC?
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What! Whaddaya gotta do between drying it and extraction? Separate it? Grind it up?
Yep gota get the flowers of the stems
Gota try to get the leaves not the sugar leaves of the flower
Iam not an expert in large cbd biomass
so maybe another cbd extractor can chime in on the procedure used now a day s but it takes more than drying the whole plant 
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It s called a concentrate
So you concentrate the cbd
And as a GIFT all other canabinoids present
Resulting in a ThC a concentration of ar least 1.4% but more often around 4%
Wich for most is a nightmare
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I see. So hemp crude as an interstate commerce commodity has issues in the present day. Good to know as both a prospective buyer and seller.
So what happens to all those fats and waxes nowadays? Just get thrown out?
Yes as far as i know most trow them out
Some people are using the fats/waxes as additives to their manufactured CBD topicals.
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Transporting biomass is a huge pain in the ass, but also, like somebody else said, the easiest to navigate legally. Many of the larger cultivators will have their own drying facility, or at least one very close to them.
I have heard of a mobile service similar to what you are suggesting. I believe they also offered milling services. The problem with this is that everybody would need the service all at once, and then not until next year. Buying drying equipment and renting it out has the drawback of requiring lots of storage for the majority of the year. You would almost need to purchase a complete set of drying equipment for every farm you worked with.
The next problem is the final product isn’t much more valuable than the starting product. I don’t see how you could charge more than a few dollars per pound for the service. Adding in labor, equipment maintenance, and anything else, you’re looking at a HUGE capital investment with a comparatively small ROI.
When I say the margins are getting thinner, I’m saying that because the wholesale prices of CBD products like isolate and distillate are dropping fast, but the costs to build and operate a processing facility are not. Your buddies investing in seed to sale have the right idea: the more pieces of the supply chain you control, the easier it is to manage efficiencies. Margins are only getting thinner for those who must purchase their starting product, or those who rely solely on tolling contracts.
To your last point, I think it is a very good idea to explore the more esoteric bits of this industry. One idea is to explore the other cannabinoids, which are only now becoming more mainstream. I believe you will start hearing a lot more about CBG and others soon. Another, completely different, idea is to explore the world of bioplastics. There will be a lot more hemp grown in the US this year, which means there will be a lot of “spent” biomass; there are definitely opportunities for those who can turn that into a marketable product (especially since any processor would be happy to offload it). Hell, they might even pay you to come pick it up…
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