After a brutal 5 years of price decline, high CBD biomass prices have been making steady climbs in recent months. Growers are finally seeing prices go above break even point for the first times since a glut of material hit the market in 2019.
As seed breeders, and arguably among the only still producing high CBD biomass genetics - the last 5 years have been just as rough on us as it has been for growers. With material prices on the rebound, growers will also be paying more for bulk seeds.
Aside from the fact that they just cost us more to produce than they used to, it is worth delving into traditional agriculture to learn what seed costs actually should be, and how we got to where we are.
Bulk Seed Prices vs Gross Sales Revenue
Seed costs for farmers typically range from 8% to 25% of gross revenue, depending on the crop and its associated value. This is across dozens of food commodity crops. For example:
- Corn: Farmers allocate 10-15% of gross revenue for high-yield hybrid or genetically modified seed.
- Specialty Crops: Crops such as tomatoes or strawberries often require 20-25% due to the critical importance of seed quality in achieving premium market prices.
For hemp, it hasn't worked that way in years. Currently, we are seeing prices reach above $0.30 per percentage point of CBD extracted from high CBD biomass. This means decent quality biomass at 10% CBD can earn over $3.00 per pound. Growers shoot for at least one pound of material per plant, with experienced growers hitting double that.
With this in mind, bulk high CBD seeds should cost at least $0.30 a seed. Yet, if we charged those prices to biomass growers they would balk after years of paying only a fraction of that. Why is hemp different than other agricultural sectors? History.
The Rise and Fall of the US Hemp Industry
In 2017 and 2018 growing hemp for biomass was highly profitable and limited to a handful of farmers in a handful of states. The new industry saw entrepreneurs throwing up extraction facilities across the country and there was not nearly enough hemp grown to keep things rolling. With high biomass prices came the masses looking for the next cash crop.
By mid-2019, 47 States had passed legislation to allow hemp production. Planted acreage reported to the USDA increased from 32,464 in 2018 to 146,065 in 2019. What followed was nothing short of a collapse. Biomass prices fell through the floor. If you've been in the market you know the sob story. With massive stock piles of CBD material, farmers sold whatever they could for as low as possible just to get some return for their investment.
Processors and extractors ate it up and small amounts of CBD went into everything. Unfortunately, demand didn't catch on nearly as well as anyone in the industry had hoped. CBD doesn't get you high, and the small doses being added to products is hard to notice for most. Meanwhile the FDA flat out refused to approach the cannabinoid as being even mildly beneficial leaving major retailers and producers gun shy to make and sell products that were still technically illegal. Material prices continued to drop.
Then came the Delta craze.
Enter Delta 8, Delta 9, Delta 10, THC-O
The 2018 farm bill states that hemp products must contain less than 0.3% Delta 9 THC by weight. With loads of material to play with, savvy chemists began converting CBD to intoxicating cannabinoids, such as D8 and Delta 10 not covered in the farm bill. These lab derived cannabinoids are either sprayed back onto CBD flower, or added into products such as vaporizers, drinks, edibles, etc. The craze caught on fast and vendors got on board across the country. People everywhere started getting high, and liking it.
Fortunately for extractors, with the massive amount of material produced in 2019 there were stashes that could be picked up for penny's on the dollar. Not only were these new cannabinoids quasi legal, but they were cheap to produce. Even Delta 9 crept into piles of products with labels showing they contained only 0.3% by weight. This opened up the beverage market in a big way, as even a small amount of THC in a can, can pack a punch.
As labs continued to gobble up material at bargain basement prices, few farmers remained in the game. With costs of production often above market prices, farmers were forced to cut every corner possible to try to bag a few cents per pound - especially when it came to seeds.
2020-2023: The Seed Breeders Demise
Farmers weren't the only ones to see dollar signs in 2019. Would be seed breeders jumped into the market just as quickly producing huge stockpiles of genetics. Some okay, some terrible, but most unverifiable. With substantial drops in acreage the following years, all were caught with big inventory and few to grow it.
Naturally, breeders began liquidating stock. The few remaining bulk biomass farmers grew accustomed to spending under $0.10 a seed, that had likely cost the breeders substantially more to produce. Brands like High Grade Hemp, IHempX, Beacon, Arcadia, Phytonyx, and Phylos Biosciences that seemed unstoppable slowly drifted into the shadows. There was no money in breeding seeds, let alone good ones.
In 2022 it was estimated that around 7,000 acres were cultivated for floral hemp - and at $0.10 a seed would have yielded around $1,750,000 to be split between all the big names. This number is hardly enough to keep any one seed company going, let alone over half a dozen. Not to mention all the small independent breeders.
As signs that the supplies of biomass were slowly starting to fade in 2023, a few more farmers crept back into the ring. Moving their models to planting higher seed densities, or even direct sow. While few struck it rich, it plowed through vast quantities of old seed stock bought well below production costs.
2024: The Supply Chain Ends
Then, in early 2024 the realization hit extractors that the large quantities of cheap material was finally gone. Weary buyers had exhausted every resource, looked in every last moldy super sack and forgotten barn from Washington to South Carolina. But the appetite for CBD, Delta 8, Delta 9, Delta 10, THC-O and others had only grown. Labs needed more material, and they needed it cheap to compete.
And biomass prices slowly rose. Farmers were encouraged to jump back into it with the promise of mediocre payouts. Labs and middle men setup contracts and farmers signed away - not realizing the prices being offered were going to get smacked by inflation. The juice was just enough to keep growers coming back but the normal repercussions of low supply and high demand didn't hit hemp like other industries.
The Great Lab Disconnect
There are several stages in the process of turning a CBD flower into consumer ready intoxicating cannabinoid products like vaporizers or drinkables. Flower is first dried, mulched, and eventually shipped off to a lab to be extracted into crude CBD oil. Labs will either buy the material outright, charge the grower to extract it, or take a portion of the oil for their extraction fees. Then in most cases the crude oil is turned into CBD isolate, a crystallized version that is often above 98% CBD, or distillate, a liquid that hits around 90% pure.
From there, it is often shipped off again to other labs for conversion into Delta 8, Delta 9, etc. From there it heads to consumer brands or wholesalers who have created formulations for products to be packaged up. Sometimes there is more vertical integration along the way - but in general it is a long journey from the field to the gas station in Texas that slings it.
With a long supply chain, its taking everyone a while to realize prices have to go up. For the farmer to sell their material for more, every processor along the way must raise their prices. Unfortunately major players like the large scale CBD isolate producers have been slow to catch on. Everything costs more money than anyone has been used to paying. But competition between the major players is intense, and the few all want to keep their spots at the top.
Today: Has the Hemp Biomass Industry Rebounded?
CBD biomass prices have finally gone up, and for the first time in years some farmers even sound excited about it. While it may not ever be the cash cow it once was, it is another crop to throw in for those with large acreage, a steady work force, and some fancy equipment.
After liquidating the majority of our old seed stock produced from the revenues we made in 2019, we are back in the swing of things making seeds. With inflation it certainly isn't as cheap as it used to be, but it still offers us some cautious optimism.
Industry Stabilization
The most important thing that can happen to the industry is stabilization which will only happen when the real costs of every sector of the industry are realized. From seed prices, to high cannabinoid biomass, to crude oil, to distillate, to isolate, to Delta 8, to gas station vaporizers - they can no longer be based off of desperate times. The traditional rules of supply and demand will hopefully bring the industry back where it should be.
If you are interested in growing biomass for CBD, CBG, CBDV, THC, or THCV, reach out to us, we can help.
For a list of our best high cannabinoid producing, most economical CBD, CBG, and CBDV seeds, visit here. We offer great bulk pricing and the most reliable genetics in the industry.
