The ‘Lo Down: Hemp Farming Mistakes with Bert James

The ‘Lo Down: Hemp Farming Mistakes with Bert James

Christian Gray:
My name is Christian Gray, I’m part of the HiLo Seed Company. I’ve been working with cannabis and hemp genetics about the last five years

Kevin Nowell:
My name is Kevin Nowell. I’m the head of farmer relations for HiLo Seed Company. I have been farming certified organic vegetables here in California for going on eight years now, and been nerding out on hemp since it first got kicked off in Colorado, and really becoming well versed on the crop and knowing the crop inside and out. In 2019, we grew our first certified organic hemp crop here in California, it was seven acres of the Autopilot actually and had a very successful year.

Bert James:
So quick background is, NC State start there. I got my education there, great Ag school, tied into North Carolina very tightly, took my degree and became a crop consultant registered with the state. I still am. Did that for 20 years. And so I saw a lot change in those 20 years with technology and different problems. And that’s actually how I came to the hemp dance if you will. Was a very practical, practical path. I was looking for a rotational crop to do battle with pigweed. And little did I know I would get swept away into the green swirl of magic La La land. However, I tell people all the time we developed the co-op, I give them all the credit for our state’s progress. They basically helped fund the initiative here in the state to get our first industrial hemp pilot program going.

And so I still manage that co-op right now. And I just recently told our growers that, where we thought we were four and a half years ago, is actually where we are right now. And so that’s actually a very positive thing. That didn’t sound like much, but four and a half years is a long time to wait for the real players and the real business to get involved. And that’s what’s happening now. So other than that, real big on family, I still farm. We’ve got about 950 acres that I’ve helped my dad manage, and also have a small farm with livestock, with pigs and cows, and we rotate those on some of our local land and we try to practice regenerative farming as much as we can.

So lastly, I worked for a company in Canada, World-Class Extractions, helped them identify partners here in the States. And then also, I recently joined a group out of the UK, the Quality Hemp Initiative, and they’re pursuing fiber and whole plant utilization. So that’s my quick background on where I’m coming from.

Kevin Nowell:
The primary goal today is just to talk about, talk brutal honesty, and talk about some of the pitfalls in the industry and some of the common mistakes. And by no means to dissuade you from farming hemp, it’s just to, if anything, it’s to help you avoid some of these pitfalls and better set you up for success versus a lot of folks that didn’t know some of these pitfalls or certain nuances or caveats to the crop. We’ve heard plenty of stories of failure. And so opening the conversation to discuss these pitfalls, and common failure points, is like I said, not to dissuade you from planting hemp, it’s really just to bring these forth into the light and be very evident about what’s going on. And like I said, help set you up for success.

So, I mean, two of the biggest, and I think Bert would probably agree, but two of the biggest critical failure points we see for farmers right now are sales and or contracts, as well as harvesting and post-harvest considerations. So I think working everything backwards and making your plan for your farm from the end, working to the beginning, that’s really how you should be approaching this and planning your farm. So I think it really makes sense to start with that sales and contracts discussion. Like I said, let’s be very transparent about this and just talk the reality of where we’re at. So Bert, you want to just kick it off with your general feelings about sales and contracts. And we’ll just have this as an open discussion. So we’ll just back and forth, and we’ll just have a discussion about it.

Bert James:
Yeah, sure. We saw the good, the bad and ugly, there’s no doubt about that. We were in the game very early on in 2017. And a lot has evolved since then, in a lot of ways in a very good way. So a lot of the, I guess you call it the geeks on the street, they’re gone. The people that were going to jump in here and mislead people and just do a cash grab, they’re starting to go away. So that’s a great thing for new growers and current growers. So I think the legitimacy has improved greatly for anybody who’s now looking at the industry. I think something that can’t go unsaid is farmers are a little bit too good at what they do.

And so nine times out of 10, a farmer is going to over produce, even when he contracts. It’s in their nature to plant more to make sure that they deliver. And a lot of these guys, there’s a lot of pitfalls, but some of them just jumped up to the plate and just hit a Grand Slam. And I think we saw a lot of that go on this past year. So there’s good contracts that are coming out, I’ve reviewed a few. And nobody anticipated the entire country shutting down. So I think now we have a time to review some things and if somebody is offering a contract and they’ve got their funding now, and they’re ready to move forward, they’re very well-funded. So caution is always what you have to start with.

And so we saw that Kevin, over the last few years, and even sometimes when you vet people, and actually went to their place and met them, it still didn’t matter when it came time to pay, they just couldn’t do it. And I’ll say this quickly too, just not create them companies as the villain, nobody had the pace of the oversupply and the correction. Nobody did. There’s a few old timers, a few farmers that saw it coming from, saw it somewhere back in 2018. But for the most part, even the most shrewd businesses in this industry, they didn’t see the sharp slope that was headed their way. And so they got strapped, some of them as bad if not worse than the farmers. And they were forced to deal with that just like the farmers were.

So there’s a lot more transparency here, a lot more people are asking the farmers to be realistic with them, because it is uncharted territory. And it’s like the script is being written every day, there’s not really a lot of solid ground to build on. And so the good companies are coming out and being honest with farmers and saying, “Hey, not what you’re used to. This is not a per point per pound anymore, this is what’s the quality of all that comes out of your pound of flour. We don’t care what the test said, we process it and we get what we’re going to sell out of it. That’s what matters.

And so even the companies now that were offering contracts, they too, are beginning with that end in mind. So this will evolve through the year and obviously, throughout the decade, as it settles in and becomes commoditized.

Kevin Nowell:
Yeah, I agree completely. And I think Bert brought up something that we really see in agriculture across the board and specialty crops as they come around. I like to put it as farmers are great at killing markets. And it’s because we’re good at what we do. And as soon as there’s opportunity, everybody’s looking to make some money and catch a break on the farm. So when people start realizing that opportunity, you see folks start jumping in. And the more folks jump in, obviously, we are over supplying on some extent. And I think part of the issue that we’re seeing right now is we’re at this, I’ve been calling it the grassroots plateau.

And until the FDA really opens the doors for CBD where, I don’t want to say our demand, we’re looking at a supply and demand curve. I don’t want to say our demand has stopped. But it has slowed from where it was for the past three or four years, it was really gaining traction year over year, and prices weren’t plummeting quite so badly. Whereas last year, I think, that’s where we hit that grassroots plateau more or less, and we saw over supply really kick in. And prices are reflecting that right now.

And then to elaborate a little bit more on contract, I think there’s a lot of… Look at conventional, just industries, just any old industry and look at how they do contracts. It’s important to keep in mind, contracts, usually there’s a backdoor out of the contract. And if lawyers are doing their job properly, a lot of times, there’s a backdoor for both parties out of that contract. And so it’s very important to know what those backdoors are, when you’re getting into this and why somebody might back out, whether it’s you or the buyer, that’s something just, as I said earlier, this is the reality of things. And so it’s important to bring that up, but then in some of the more legitimate contracts I’ve seen, some folks are willing to put down non-refundable deposits or they’re willing to put that money in an escrow account. Obviously, there’s ways to get out of escrow. But non-refundable deposits, not really something you can get out of per se. So that gives you a little bit more protection as a farmer.

So for the most part, I’m trying to talk about protecting you as a farmer. The only other thing that I can think of along the lines of a non-refundable deposit would be some type of bond. And I actually haven’t seen anybody bonding contracts yet. But it is common in other industries. And so I think those non-refundable deposits and bonds might be with people who are real players in the industry, they have funds. I think we’ll start seeing folks using those types of, I shouldn’t say fail-safe, but they’re using those as measures to help the farmer I guess, to prove to the farmer that they’re more legitimate buyers. Anything else on that front, Bert? Sales, contracts?

Bert James:
No. It’s, again, just know who you’re dealing with and who you’re talking to, and then clearly define the expectations and do the best you can. And at some point too, I’m sure this conversation will get into a little bit of the fiber and grain aspect, but there’s a lot better protection for that, that we’re I guess, comfortable with regarding insurance. And so that’s going to help every contract, for both sides. Currently, there’s no way they’re touching that on the phytocannabinoid side. It’s just an emotion and it’s hard to pin down. But yeah, I think that’s adequate.

Real quick before we leave the… I’m not sure that we will. But yeah, all I hear about is CBG now, right? And it’s real clear to see that the exact same cycle is getting ready to repeat itself. Because I’ve heard that far and wide, I get asked about it all the time. And I would advise extreme caution, because the same thing could happen to them that we just saw happen with CBD. And they may not know it like we may not know it. So the contract they offer now, if CBG is over supplied, the market crashes, they’re going to be in the same awkward position they were, this past fall.

So I just advise caution, it’s important to build out. If it’s a new cannabinoid and a new use, we don’t need to just all of a sudden start growing it, producing it at scale because again, farmers are too good already. So the thing to do is work with a company and potentially some research partners to figure out, “Okay, now what’s the best variety, the best practice, the best harvest?” And let these things get developed out in front of the need so that we maintain some of that supply demand.
Right now it’s just like, “Oh CBG is great, boom.” A couple of hundred thousand acres, “Let’s go. What are we going to do with it?” And the reality is… I failed to mention, which I’d get in trouble if I didn’t, we started a brand called Root to Flower, and we’re trying to set up whole plant utilization, but I’ve truly understand how far 100 pounds of biomass goes in the retail world. It’s ridiculous. It’s like 2000 tiny tincture bottles. And I’m talking about 1000 mg, the good stuff. Think about that. Hundred pounds, 2000 bottles. Didn’t do that math on the several million pounds that are leftover in our country right now.

I think we, Brittany Johnson and I, I think we did the math. It’s like 144 million tincture bottles, something to that effect. And that was, I think just in North Carolina. Think about that. Just in North Carolina. I mean, the good news is, we can create medicine to cure all. So if any of this stuff pops up that does battle with COVID-19, we’re good. We’ll have everything produced for everybody in one season. But the point is, is wait for that information to come out and wait for that need to come out in front of the production. And right now, we’re not doing. Very clear to see that’s getting ready to happen all over again.

Kevin Nowell:
Yeah. And before we move on, it might be important to just touch on sales and we’ve talked a lot about the contracts more or less, but the open market and what that means for you as a farmer, if you don’t have a contract, and when you’re getting into this, some of the considerations you need to make.

Bert James:
Yeah. You’re talking about Wildcatters, period. That’s what they’re known as in the tobacco world and other crops. And so farmers don’t like the word but it surely weren’t good for us with peanuts and tobacco for a long time. And I wonder if quotas aren’t a consideration, to protect the value and the integrity, if you will, of the market. We had that thought process early on, that basically you would get the buyers and let the market settle in, and then pre determine about what was needed for the market.

And then basically determine a quota that was fair to a farmer’s production model. Farmers don’t like to hear that, but at the same time, they don’t like to get stuck with a huge oversupply of crop that doesn’t have a home. So where’s the balance? I think now’s the time to consider what we need to do to preserve the marketplace and let farmers win. So I’m open to that discussion personally. We were trying to do something similar to that in the Co-op early on and then the tidal wave crashed and there was no order, it was all chaos. Despite our best plans to implement some type of strategy to prevent oversupply, at the end of the day 100 people came to town knocking on the door saying, “Hey, well, you grow CBD.” And despite our best efforts, farmers are desperate whether they say it or not, more than not, they’re desperate. And so when they see an opening, they all flock to it. And it’s going to be a problem over and over and over, unless we create a little bit of system or order to the flow of contracts moving forward.

Kevin Nowell:
Yeah, and just to, elaborate a little bit more on the open market is, it really seems like right now the movers and shakers in the industry, the people that actually make things happen, it’s a relatively small group of people. I mean, the industry is growing fast. There’s a lot of people coming into the industry, but the folks the relationships and the networks that actually make things happen, it’s still a relatively small group of folks. And so that’s important to note as a farmer if you’re just getting into this, or you’re still in the first couple of years is, really make a point of networking with folks and building relationships. Because I think a lot of farmers that have jumped into this, not having a buyer at the end of the day, most of them also don’t have relationships and networks, they don’t even know who to call at the end of the day, if something were to arise.

And so it’s something just very important to keep in mind because there’s no guarantees in any of it, and it’s still farming at the end of the day, and even if you come out with a successful crop, if you’re in the open marketplace, hey, what are you going to do with it?

Christian Gray:
I got one question from Apple: “What is your feeling about 50-50 revenue splits?”

Bert James:
Outstanding. If you trust the person that you’re dealing with, that protects the processor and the farmer. So my quick feeling for that is, it’s a pretty great deal. It started out as 60-40, 70-30s, there’s even a few 80-20s in the good old days, but I think 50-50 is likely fair for now. But we have to be mindful that CBD, our leverage in that conversation is diminished. So actually, I feel 50-50 as a grower is a fantastic deal. And now knowing the cost of extracting, marketing and selling retail goods, because that doesn’t just happen either. That’s proven to be very difficult. I think most would share that with you that the oil that everybody thought was going to fly off the shelf, it just did not. So they’ve got equal risk, and now greater risk as we get more efficient with our pricing and cost of production. So if you’ve got a 50-50 deal and you trust who it is, that’s a great deal.

Kevin Nowell:
Yeah. And especially if that’s a revenue split, that’s huge. If you’re getting half of the product at the end of the day, or hey, remember, that’s a total split on the CBD oil, you still have to go move that oil at the end of the day. So I know the question was about a revenue of 50-50, that’s great. That sounds fine and dandy, if you trust that they have a market for it, and it’s going to be sold.

You’re doing this whole processing and you’re getting CBD oil back at the end of the day, hey, just remember, you’re a farmer, you’re now in the position that you have to sell this oil versus the crop.

Christian Gray:
So let’s back up the bus just a bit because, 80-20, 50-50, 60-40 let’s just talk about tolling and the basic nomenclature, because there’s folks that have farmed this before, some folks are coming from different types of crops and aren’t familiar with these terms. Can you just talk about the basic relationships between a farmer at the end of harvest and the next step, whether it’s totally a buyer, etc, and just walk through that a little bit.

Bert James:
Yeah. I’ll go quickly and then let Kevin comment on it. But that can be viewed in two different ways. He spoke to it quickly, but right now there’s splits regarding your crop as it is processed into crude oil, so that you can get 50% of the oil and the extractor keeps half. That can also be regarded, as Kevin mentioned in biomass. So 50 to the farmer, 50 to the provider of funds, if you will for the grow. And then lastly, which is the best which Kevin mentioned is 50-50 sales, where you provide the crop and then once they sell said crude oil, you get some of that revenue.

And so that’s the one I said if you’ve got that going on, that’s hard to find. So that’s a great one. But at the same token, crude oil is not what it was either. That was 4000 bucks at one point in time. And we’ve seen that slot all the way down now to $400 crude. And so you have to match that up with your production costs to make sure it’s going to cover your production cost. So it goes back to the same adage, you have to know what you’re starting with, and be very open with your… Get educated to really talk to your contract holder and say, “Hey, I heard crude was in the tank like flour. How’s that going to pencil out?” It’s the same same.

But I think now, like I said, production costs are starting to meet, they’re starting to go down so that we can be competitive. And I think the market is really starting to show us where we need to be as farmers getting in and out of the field, so the days of $20,000 an acre are long gone. We need to be thinking more, and I hate to compare the two, but tobacco, it’s 4000. 3000, $4,000 an acre is where we’ll have to get to in the future. Because basically cannabinoids on some level, they could become a co-product with the whole plant utilization in the fiber and the grain side. As genetics mature, we’ll be capturing the chaff and the green micros from those production models, and a little bit goes long ways.

So if we’re not careful, our horticultural style of production will go by the wayside, and that’s likely not too far out. So just don’t be caught in the year then, that goes away will be my suggestion.

Christian Gray:
So another really good question. So obviously, when we have 50, 60 plus folks, there’s a wide variety of experience. So some are much newer to the conversation. Some folks are quite a bit more sophisticated. So this is from Mark and he want to know what your perspective is on developing preferred field commodity form for fiber? So is it the big rounds, big squares, bound ripped, what has emerged as the critical characterization parameters, density, moisture, so what’s he trying to get to, in format and in biomass that’s going to be the commodity that folks are looking for? What’s your guess?

Bert James:
Yeah. Well, fortunately, right now, I don’t have to guess. The markets that I’m working with, which again, the reason I signed up for QHI, the Quality Hemp Initiative, really quickly, there’s three members there, Josh Newsomebaum, he’s tied to the retail and to the fiber patternization model. He’s already worked with brands and he has product in the market. Nick Boss is the second and most important in my humble opinion. He’s the farmer who’s actually done this for 15 plus years in the UK, where they’ve actually taken the plant, from the field, from the seed all the way out, through a factory production model. And their model is square bales. And of course the moisture, you begin to liken it to hay production at that point, what moisture has to be low enough to satisfy that material being in a four by six bale, stacked up for as long as a year before they run it through their house.

So right now, I’d say square bales is what we’re going to work with. I have seen some of the core indicators from Colorado, I’ve seen them in round bales, and they looked like they were pretty good for that system. If you can imagine a roller or belt system where that bale would be unwound and then it’s only a six inch map that goes through decortication. So also it depends on your buyer. Some of those factories or models, they’re going to want to pre-process that fiber and handle it before it goes into their production system.

And so everything is going to be relative, this goes back to the same conversation, it’s whatever your buyer wants. They’ll give you the proper criteria and parameters. And if we’re lucky, whoever’s asked that question, and then if I’m lucky enough, potentially there’ll be some type of relationship with a group like ours, if not ours, that clearly lays out the SOPs. And I’ll always tell people, “You give farmers a one pager with what they’re supposed to do, and they’ll make you happy every time.” That is what we’re used to, is no need to get too complicated, but just give me the numbers that you want to hit. And farmers are just… Again, they’re one of the most resourceful groups in the world, period. Some getting preached a little bit now but the answer is, whoever you’re dealing with is going to tell you what they want regarding moisture and the style of bale for storage.

Kevin Nowell:
Yep. And I second that, I think. And the same thing goes for the cannabinoid side of the industry is what does your buyer want at the end of the day? Can they take a wet round bale? Or do they want their material being shucked. Bucked or shucked, or will they take whole plant biomass? I mean, what’s their minimum CBD percentage that they’re willing to run through their machines? And these are all things that are very important to know, when you’re getting into it. And regardless of whether it’s fiber, grain, or cannabinoid, how does the buyer want to receive this? And you don’t want to overlook that at the beginning, that’s something you need to take into consideration from day one, because hey, if you need to have special equipment to do a certain task to get it prepared, how they would like it, well, you need to know that getting into it, because that could cost you a pretty penny or you’re going to have to outsource it and find somebody to rent that, or contract out those services from.

And those are just all things you have to know ahead of time, because that’s a line item on your budget, and everything has to pencil out at the end of the day. So it’s important to know exactly what you’re getting into.

Christian Gray:
Another point or statement, I think this is right on in line with what you were talking about a little, Bert and this is from M Baker, it’s the, “The market has already crashed in CBG, relative to 2019 values.” And this is the first year where multiple companies are pushing CBGC. So I think we’re seeing these bubbles come faster and maybe not get as big and it might help for some new folks on the phone or obviously if somebody has been doing veg and row crops versus large scale commodities and hay and whatnot. Let’s just talk about just the last two year horizon and what we’ve seen in terms of what an acre is worth, of either fiber, grain or CBD production, and what an acre was worth in 2019. And what you think an acre is worth this year. I can guess what that might look like.

And then if you talk about extraction value versus smokable flower, smokable flower is a big conversation for a lot of folks. And that may be a niche boutique thing, or it might be something that somebody can pull off at a certain size, just talk about biomass and value and what’s happened over the last couple of years.

Bert James:
So I’ve had the opportunity or privilege if you will, to talk to some guys back in ’13. 2013 they were in this game, before the pilot programs even came online in our country. And I hear some of those numbers and I realized what happened to us all. I mean, they were literally a handful of people that got more than rich. So I won’t even mention the numbers that I heard back then. But if you come online to, let’s just go to recent history, 2016 which was very limited. There was only two states really in the game during that timeframe, that was Kentucky and Colorado, and they were… Everybody knows their story, Charlotte’s Web and whatnot.

At that point in time, at that small niche level, now you had biomass that was coming out of your worth, $60,000 – $75,000 on paper. Then it got cut in half from there, so I’ll keep it short and sweet. When we came along in ’17, I saw spreadsheets that demonstrated $40,000 to $50,000 on the high side. ’18, more realistic we were going to talk people down, $30,000, $25,000 to $30,000 grand, was what we needed to plan on.

And then last year, again, we were trying to measure our costs and keep them close to 10 grand because we thought we might be able to get 15. And so, enter 2020 it’s fair to say, from where I’ve seen things go that 7500 bucks could be the mark towards the end of this year. And that’s assuming that somebody don’t get wise and go safe in this, several 10s of millions of pounds of flour that are in the house right now. If somebody takes the initiative to go and safe in that and preserve it, then it could be lower than that.

So you we’re telling people, “Honestly stay below $5,000 if you can per acre.” And quickly the numbers break down at that point, if you’re a seed dealer or clone provider, traditional crops, which I’ll slide real quickly to fiber and grain, traditionally, the seed stock is 25% of your budget. That’s the model. I’m not saying it’s right, I’m saying that’s the model that’s in place. Cotton, corn, soybeans, wheat. You can go down the line and if you have a $500 production budget, best believe, $125 is going to be some hot dollar corn or cotton seed, and you’ve got seven different modifications to help manage Mother Nature.

So this is no different. The $5,000 model, you best be thousand to 1500 bucks tops, in your genetics. And that’s a hard pill to swallow, but that’s what the market seems to be dictating. And if you’ve got a CBG, it may be crashing, but it may not crash down below $10,000 an acre. So you might have a little bit of a budget there, but I’ve seen some CBG guys trying to get five bucks, $6 a clone. And to me, that’s not going to work. I think that’s going to be some disappointment for the provider and the farmer.

So that being said, we’re talking gross per acre. Canada is the best model to look at for grain, because they’ve been doing it for 20 years. And they’ve been doing it very well. I always tell people to go to Manitoba’s website, look at their production budgets, that you’re looking at maybe $600-$800 gross money. If genetics are improving, I’m hearing bigger yields, you might creep up to 1000. But that’d be like a ticker tape year. Production costing grain or we estimate to be 500, 600 bucks depending on your storage model and land rate.

So you’re looking at a modest 150 to $100 net per acre, which is reasonable for most farmers at scale, and then fiber, that’s the one that nobody knows. Everybody says they know. But there’s no way. There’s no way that we can have that penciled out just yet because there’s nobody who bought it at scale. So be careful you’re not getting information from a small niche opportunity that’s getting reported out of the Montana flatlands or something that is not going to be relative to what you do in the Florida Panhandle.

So just be real cautious where you’re getting your numbers. But we feel like if we’re… And the big money, again, circle back, the big money is awake. I’m not talking about a little bit of money. I’m talking about billions and billions of dollars is awake and is being accumulated as we speak. But because the money is being gathered, it doesn’t mean that the house is being built. And so reality is we’re 2021, 2022 before you really see fiber level out, and you’ll get some sense of what it’s truly worth. Cottonized fiber is what we’re working on, that’s only 10% of the plant.

And so you can’t grow that crop, you can never pencil it out, even though it’s potentially one of the more lucrative parts of the plant. It’s only 10%. So you better be getting a premium price for that cottonized fiber along with the herd and some of the other bass fibers that have a market. So you can’t… I think herd’s going to be the real… If we figure out what to do with the herd, I think the fiber is going to be easy because it’s a 70-30 ratio, so that, you’ve got 30% of that crop, is going to be fiber of which we identified 10% could potentially be cottonized which everybody wants to see and wear, then from there, it gets very industrial very fast.

So it’s going to be industrial pricing, there’ll be no… We’re going to skip past the get rich in fiber, straight to the industrial commodity model. But that’s also going to help us be very cautious with our budgets in production. And I tell people all the time, don’t just grow a fiber crop and think it’s got a home. Because if you don’t grow it at the right seed ratio, and you don’t harvest it at the right time, and you don’t handle it properly, it will be worthless. And there’s nothing regenerative about a crop you have to destroy, or put in the woods or burn. So that’s the quick market update there from my perspective.

Christian Gray:
And before we move on, Bert, I think it’s really interesting because of your exposure to what’s happening in Europe and Canada, it’s just such a different perspective. One of the things we’ve been working on is bring in hemp and fiber grain into our portfolio, right? So we’re not a one trick pony, we want to play in all the rings in the circus. Can you give folks the URL or how to find more information about QHI?

Bert James:
Yeah, I can. As a matter of fact, if you’d like, I can just provide some their information if we can send it out to the group. I’ll provide a list of resources, not only mine, that I’m a part of, but also those that I tend to follow and get some of this information.

Christian Gray:
Yeah, I was thinking about you and the Jacob Report.

Bert James:
Chase Hubbard, shout out to the Jacobsen Report, he’s doing an excellent job.

Christian Gray:
Yeah, he and I have a call scheduled, we might be hosting him on one of these.

Bert James:
I’d highly recommend it man, I look forward to that email every day.

Christian Gray:
Yeah. So a couple of more questions from the floor, what are your views on being… This is from Tabeling, what are your views on being proactive regarding the upcoming regs? And I’m assuming regs here, USDA rules, there can be local regs, depending on what your jurisdiction is. How do you play that game in 2020?

Bert James:
I think the resources of our country, are going to be so strapped, and there’s going to be such disarray. I’m not telling anybody to do anything illegal. But the reality is, that this is a new reality, our resources as a country and the states and counties, they’re going to be so sideways and so strapped the next several months. I don’t want to say it’s not something we should be concerned with. But it certainly is certainly something that’s going to probably get delayed and postponed. So I think you’ll see that can get kicked down the road as our leaders focus on things that are now more important, and everybody can agree that they’re more important.

You see a lot of states just rolling back to 2014, I think you’re going to see that trend repeat itself over and over, especially in the wake of our first truly global pandemic that we’ve actually had to respond to. So that’s my quick answer, is you’ll probably be forced to wait longer than we had once thought.

Christian Gray:
Roger that. So right back to the analytics and market data. So I know somebody from our team, Brad, headed out to the auction that happened or didn’t happen earlier this year, or last year, I should say. And then also taking a look at different resources, there’s three or four at least. There’s probably a half dozen or more folks that report on biomass prices on, fiber grain commodity prices. What they want to know is what’s your recommendation on analytics sources to determine the performance of existing market segments that sell cannabinoids rich good. So they’re focusing on cannabinoid farming it sounds like. So how do you know when it’s worth? And this goes back to trust, right? You hear what the market says it’s worth, but then you have a whole other conversation with your buyer processor, and then after they’re done processing, then you get a really funny piece of paper that looks a lot different than what you thought was going in the door.

Bert James:
Yeah, it brings up a really good point. And I’ve talked to many processors, they really struggled in that and I won’t name the websites by name, because that’s not appropriate. But there was a time when some of these reporting models were misleading farmers and putting the processors in a really bad position where guys could go out and find a few numbers on the website or on the internet, and then they’d come to the processor and the processor would just look at them like deer in the headlights like, “You’re crazy man. We could never pay that.”

And so, again, it’s the resource that you’re looking into. You have to be careful, but I saw a quick tag on CBN. I have no way, I can’t tell you how much CBN isolate is right now. And I should know that. But it’s still new and it’s still floaty. So I think that’s a really difficult question to answer. I’m not qualified to. So I’ll kick that over to Kevin.

Kevin Nowell:
I mean, I think that’s where there’s a lot to be said for your relationships and your network. I think pricing is a little bit different from state to state and through different parts of the country. So it’s, I don’t want to necessarily dodge the question either. I mean, I’m seeing, for the most part, I’m seeing biomass anywhere from 50 cents to $1 per point per pound. But as Bert said, early on in this webinar is that a lot of buyers and a lot of processors are moving away from paying per percent per pound. They’re looking at what comes out of their machine.

And the tricky thing for the farmer to be bought in to that through the processing is, well, every piece of extraction equipment, and depending on what the equipment is, and then the expertise, how long they’ve been running it, how dialed they have their systems, the extraction efficacy of everybody’s equipment in their operation varies. So I’ve heard numbers as low as 60% and I’ve heard numbers as high as 90%. But even in a 90% scenario, which is few and far between, you’re still losing 10% of that CBD.

So on the backend, and this, I would by no means set 90% as the benchmark. The majority of processors are not achieving a 90% extraction efficacy. But with that said, whatever that loss is, out of their extraction efficacy, you’re taking hit on that loss as well. And so it’s important as I said, like Bert said, don’t look at that dollar per point per pound things, companies are moving away from that. And they’re moving towards paying you on the back-end based on what comes out of the machine. Because COAs are not perfect. And there’s no way on a crop that’s thousands, 10s of thousands, hundreds of thousands or millions of pounds, there’s no way to accurately determine through just a core sample in the test how much CBD is really in there?

And there’s no amazing way to calculate what the extraction efficacy, what that loss is. I mean, you can test the waste product and see what’s getting lost. But I guess the gist is, no extraction is perfect and if you’re getting paid on the back-end, like Bert said, keep in mind, the numbers are going to be different because you’re sharing in that extraction, efficacy loss, for lack of better word.

Bert James:
Real quick to follow up on that, some of the new listeners or people new to the industry, they will want to probably tune in to the next low-down that might specialize in extraction, because that’s a real fun side of the market to watch. And to Kevin’s point 60 to 90%, some of that’s going to be determined about are you using alcohol, hexane, butane on the alcohol extraction side? Which are usually super, super efficient. But they’re so efficient that you lose some of the elements of the plant that a lot of people now consider as medicine, such as the Miners and Terpenes and Flavonoids. Some people will even go so far as to say that that is the medicine. And if you strip those out, then you’re not doing a whole lot. I don’t necessarily agree with that, but I do know that in unison, the entourage is king. And that gets you to more of a potentially crafty extraction model or base model or CO2, Cold CO2, Cold-Pressed.

And so that 60 to 90% floats big time between those models. But I think in time, so will the value that they command. And this is another thing that is just not been determined right now. It’s hard to put this… The genie is out of the bottle and he’s just everywhere right now. And I think it’s going to be that way for a while.

Christian Gray:
So we’ve got a underscoring a point but it’s probably worth revisiting and this is coming from someone I think you know Bert, M Gigneck. So good point on testing issues, USDA guidelines did little to eliminate the lab discrepancies. That’s Mark at I-A-L-R, if you don’t know Mark, you should, IALR, Danville, Virginia and very active with The Industrial Hemp Summit and just good people. So keep an eye on them. They’re actually in the slide deck, I had looped, it’s a highlight of an event that’s worthwhile in your area.

So can we talk about labs for a hot minute and before we do, I’ll just say this, I’ve said this, I’ve said it once, I’ve it said a million times, both Kevin have heard and Bert have heard me talk about it, people talking about big pharma and big alcohol and big tobacco and who’s going to… Is it the government, USDA, who’s going to take down the hemp industry? I think it’s Photoshop. So, let’s talk a little bit about COAs and labs for a minute.

Bert James:
Well, to your point, I happened to attend what I considered to be one of the premier events in the country, was The Industrial Hemp Summit in Danville, Virginia. And there was a stellar presentation there, that I’ll give the credit to this comment too. There was a panel of several different labs, and they were as honest and transparent as any group you could ask to be. And their point was, that from one test to another, even if a lab is doing everything as it should, it’s all over the place. The margin of error is always 15%, 20%. And then farmers do what… We did the same thing with soil samples, just for fun, we take a couple of soil samples, homogenize them in a bucket, box them up and send it to three different labs.
Well, what people don’t realize is, all science is not perfect. We’re used to thinking that everything we see and read the back of a box is, oh, wow, that’s exactly how it is. But the reality is not so. And it’s very, very true with COAs. They’re just getting you warmed up. They’re getting you to a starting point. And I think you’ll see, again, a broken record, but you’ll see the COAs as they apply to the oil and the finished good, being much more accurate and much more important, and the fields, the test out of the field, they’re just going to be a 30,000 foot view, to even know what process potentially to use to extract your process. And so I think that’s where you’ll see this land and knock on wood, maybe their cost to go down with their usefulness.

Christian Gray:
Right. The other thing that we’ve seen, and this is a current event update, and then just the reality of the state, whether it’s DEA certified labs or your local lab that’s been active in the cannabis and hemp markets, delays are starting to happen. And you can want to see data and you can want to pay a rush fee and it’s going to take as long as it takes. So it’s critical for us as an objective genetics vendor, selling seed and knowing we get to look at the original documents from the lab, and we might see discrepancies between various labs, but at least we have our eyes on the originals, right?

And unfortunately, there’s a lot of folks that don’t get to see the originals or they see something entirely different and they make a big purchase based on that. So there’s a thing both you and Kevin said early on in the conversation today, it was related to trust. And you can have contracts, you can have attorneys, you can have all these other things. But just talk a little bit about trust and about building a trusted network in your farm operation as relates to hemp.

Bert James:
Man, I’ll speak briefly and then give it over to Kevin, I think we both have two unique experiences, and we won’t get into the details or weeds, but my favorite group that I work with currently today is a group of investors I connected with early on. And we got started with the one pager and I couldn’t believe it. I felt exposed, I thought I was… I was very concerned. And their comment to me simply was, “There’s not enough paper in the world to build trust, that we will have to have to move forward.” And so the initial capital was exchanged on that one pager, basically an LOI and we moved forward to the course of the year, and then after that year, we knew where everybody stood. The trust had been established. The second year, we slightly increased. Repeat, repeat, repeat.

And I think that’s going to be the winning model, is to go slow. To go to someone and get into a small relationship, prove it out, learn together, hopefully win together. And as you need to expand, follow that same model. Trusted everything. And it turns out it’s actually in shorter supply than I believed. Turns out Bethel is a little bit of a small fishbowl. And I’d heard about some of the goings on and misgivings. But, man, this hemp industry, and if there’s anything that if there’s any environment where mistrust is rampant, it is in a get rich economy model.

And so I saw some of the shadiest people, I had the chance to meet some of the shadiest people I’ve ever met in my life, thanks to industrial hemp. I have met some of the greatest people I’ve ever met in my life, thanks to industrial hemp. And so I think that’s beginning to average out now. And it’s like regular business. But there was a moment that this was a really treacherous place. And I think that that’s somewhat subsided. But you still have to keep your guard up. And check the facts, because it’s trust, but verify.

Kevin Nowell:
Yeah, I mean, and the second that, I think maybe for the past few years, when a lot of folks were drinking the Kool Aid and it really was looked at as a get rich, quick opportunity, we had an interesting mesh of people in this market and one of those categories would be the category of the snakes, the fakes and the flakes and they were running rampant. I would say not all of them are in it for ill intentions. That would be more so the fakes. They might not just not be in it for the right reasons, but nonetheless, the snakes, the fakes and the flakes as Bert said, they’re getting weeded out, they’re getting pushed out because, well, one, prices are coming down. And in addition to that, everybody is realizing it’s not the get rich quick, they thought it was to begin with anyways.

And so now that everybody’s spitting that Kool Aid out, we see everything coming full circle right now. And that’s the people that were in it for the wrong reasons getting out, and I think this is the… Any industry has a way of doing that in time. And there’s always going to be bad players in any industry. It doesn’t matter what industry you’re coming from. But yeah, more so in a get rich quick scenario, which definitely as we all know, it’s not what it was ever made out to be. So yeah, we’re seeing those people slowly but surely fizzle out. And yeah, I mean, I think things are looking up from that, I guess on that front.

Christian Gray:
So we’re going to bring this home pretty soon. What are two or three key topics you think we should make sure we hit for any farmer whether they’re experienced or brand new to the conversation in future webinars?

Bert James:
Soil health. That needs to be worn on everybody’s hat. And it’s something that as much as I feel like it’s starting to really take off and get hold, the reality is that we’re just barely scratching the surface of that truly impacting production and act. So Michael Melendez, thanks to the World Ag Expo, in the hemp pavilion, I got to meet him there, Christian and he made that point. He said that there’s no crop that doesn’t start with soil health.

Christian Gray:
Soil first, yeah.

Bert James:
Soil first. And that also is becoming a bit of a movement, if you will, because it’s worthy of one. So I’ll start with soil health. That’s my big, big thing to watch.

Christian Gray:
Kev, what’s one you want to get us teed up on?

Kevin Nowell:
Well, I mean, maybe it’s more self-fulfilling at this point. I’m staring here at our list and I’m like, “Oh, this is everything I want to talk about,” is start talking about the Miners. Obviously, those are emerging markets, there’s no guarantees in any emerging markets but Miners are always fun to discuss and we know that in the long run, CBD we’re just scratching the surface, it’s just the tip of the iceberg with… So as we go down the roads of CBG, CBDV, CBC, CBN, so on and so forth, who knows what the market’s going to be for those. I think the medicinal potential for those emerging minor cannabinoids, I think in the long run, it’s huge. The research needs to catch up to the genetics.

So we have that human clinical trials and whatnot to really back it up.

But I’m excited about that. Obviously, I’m also very much so about soil health and soil health is plant health is human health, or is livestock health. It’s all tied together and very circular. But then fiber and grain. I mean, I can’t wait for that discussion too, because I think the direction we’re headed with the market right now, probably sooner than later is looking at dual and triple purpose crops.

Christian Gray:
Yeah, dual and tri-crop for sure. And especially if you have the equipment to process it right, and to Bert’s point, the markets haven’t matured enough to actually have a supply chain that can take the various outputs and monetize them.

Kevin Nowell:
Yeah. With margins going the direction they’re going, you’re going to need multiple revenue streams to make ends meet eventually.

Bert James:
Just as an example for people I’ll leave this point to ponder and this is where the future, I think of agriculture is going to go. Everybody got bombarded with COVID-19 do’s, don’ts, where’s, won’ts, right? So one of the most interesting things that I saw, articles I’ve read and there’s going to be more to follow, but it was regarding Selenium in the soil, and how much that affects personal immune systems in society. And so what better crop to put Selenium on the soil and then plant hemp and harvest the crop to then capture that Selenium in your food source, to immediately, I mean, I don’t say we’re going to mandate milk and hemp hearts, but what a fantastic fall? To be able to, maybe next fall, get the word out, I mean, I’m thinking about it, Kevin and I, we should do a Selenium industrial hemp test plot and see how much we can capture with that crop and then have consumers test it and then see who gets the flu and who doesn’t.

I mean, I just think that, to me is fascinating. And you’re getting ready to see gobs and gobs of money be thrown at those ideas. And that’s what we have to look forward to. So this is much like the Wesley Rae story of the hail battered hemp crop we all watched get destroyed, and sure enough, it had a really nice root system, and had already gotten established, much like our industry. And what happened to that crop, as soon as the sun came back out? It recovered. And in many ways, he would say that it was a better crop than it would have been otherwise.

And so I feel that way about the industry right now. So I’m going to leave everybody with that bright spot, that this is not going away. It’s just going to continue to evolve. So that’s my comments on that.

Christian Gray:
I think we’re just getting started. So bringing it home, if you want to find out about future webinars, please get up to a website, you can bookmark the events page, see what else is coming down the pike. People like Bert are priceless, your time is super valuable. We appreciate you sharing it with all the folks who signed on today. And let’s see if we can get some new conversation started. And I think your point is right on, I think all farmers are entrepreneurs, the ones that I’ve met, they’re all gambling every year and they got a thing worry about the most…real time basis and where is their crop going to be in nine months or four months. We’re just getting started. There’s a lot going on out there. Folks need to get informed and make smart decisions. And it’s good to have folks like you sharing, I really appreciate.

Bert James:
Thank you, man.

Christian Gray:
Everybody, have a great day. Thank you.