Let’s be honest, most of us got into the CBD industry because we wanted to make a lot of money in as little time as possible. All we had to do was grow a little hemp, extract it, and buyers would line up to pay us thousands of dollars per golden liter. Sound familiar?
So, what happened when a lot of other people had the same idea? Instead of growing a little hemp, they grew a whole lot of hemp with absolutely no idea of where to sell it?
The answer was Overproduction, which is what we are experiencing now. Prices went from several thousands of dollars per kilo to hundreds per kilo within the span of less than a year.
What strategy makes sense when prices are low because there is too much CBD product in the market?
The answer is, “Turn the Biomass into Crude Oil, and That’s It”. No further post-processing required, until you have a buyer.
5 Reasons Why Crude Oil is the Only Smart Strategy Right Now:
1) Right now, Biomass is an opportunity. It is cheap cheap cheap. Currently the price of biomass is $5 to $10 per pound, compared to $40 to $80 dollars a year ago.
2) When you extract the Biomass into Crude Oil, you stop the clock. The extracted form of CBD Crude Oil has a shelf life of 3 ½ years; plenty of time for the market to turn around.
3) Don’t worry you won’t have to wait that long. Markets tend to over correct themselves. Most of those who jumped into the CBD business last year without a plan, will no longer be in business this year, or will not risk a second season of making the same mistake twice by growing a second crop when there is too much biomass in the market. Therefore, the Lion’s share of the biomass produced last year will rot and will not be replaced with a new crop this year. No more Overproduction production problem!
4) Those who survive and thrive in the CBD industry this year, will be buying up the biomass from last year, or if they produced the hemp themselves, will be processing what they produced last year into Crude Oil this year.
Why Crude Oil, and not anything else?
• With 3 ½ years of shelf life there is no reason to process the crude into more refined products like THC-undetectable distillate or isolate until you have an actual buyer. Post-processing can be done anytime once the material is in crude form. You’ll save hundreds of thousands to millions of dollars in post-processing equipment and operational costs today, and help your cashflow by waiting to spend the money in precisely the moment it makes sense; that is when you have an actual buyer and know the exact products they want to buy. What buyers want in a few months when prices have gone up, may be very different than what you guessimate now.
• The biggest pain point in the CBD industry is THC remediation. To comply with government regulations, CBD extracts must not exceed 0.3% THC in the final product. Traditional chromatography equipment used for THC remediation is vastly inadequate for the huge job of remediating thousands to millions of liters of oil. Not only is it inadequate, but it is extremely expensive for what you get in terms of processing power. Not to mention, lead times for chromatography equipment are nine months to one year. Even if you purchase chromatography equipment today, it is likely it will be obsolete by the time you get it. Technologies are changing. Finding a better solution for THC Remediation is so important to the industry, there are many companies working on new, more efficient, less expensive solutions to the problem. For example, Capna Systems is releasing a new patented system with capacity to remediate 100 liters of oil per hour and offers the ability to separate individual cannabinoids like CBG, CBN etc. in the fourth quarter.
5) Why process the biomass into crude oil now, can’t that wait too? No, it can’t, every day the material stays in biomass form, it continues to degrade until finally it will become an inferior product. There is still time, if the material has been properly stored, but it needs to be processed soon. Look for biomass that has been dried properly and stored in a cool, dark, dry place. It should look good, smell good, and have a moisture content of approximately 10%.
I hope this information has been helpful.