• LinkedIn
  • Facebook
  • Twitter

CPAs & Advisors to the Cannabis Industry Since 2009 Schedule An Appointment

Bridge West LLC
  • About Us
    • Firm Overview
    • Leadership
    • Our Companies
    • Industry Affiliates
    • International Affiliations
  • Services
    • 280E Mitigation
    • IRS and State Audit Assistance
    • Advisory Services
    • License Application Advisory Services
    • Business Valuation
    • Financial Statement Audit and Other Attest Services
    • Tax Compliance
    • Outsourced Accounting Services
    • Investment Advisory
    • Technology Services
  • Industries
    • Cultivator
    • Processor
    • Dispensary
    • Vertical
    • Hemp
    • CBD Retail and E-commerce Operators
  • Events
  • Cannabis News
    • CannaBlog
    • Podcast
    • Webinar
    • Videos
  • Client Access
  • Careers
  • Contact
  • Menu Menu

Hemp Processing into Finished Products CannaBlog

By Jim Marty, CEO & CPA

Extraction Machine in N. Colorado

There is an old saying in the accounting world that goes, “If you don’t know what your costs are, you will pretty soon.”  That is what is going on with the biomass from the 2019 hemp harvest.  Many hemp farmers in Colorado are still trying to sell their biomass seven months later. Up to now, the bottleneck, has been the lack of extraction processing. Within the last month, we have seen large extraction machines come on-line. The questions currently being debated between those extraction companies and hemp farmers are:

  • Who pays for the extraction process? and
  • Are there buyers for the extracted CBD oil?

Hemp farmers have significant costs from 2019 that they have not yet recovered.  For example, a crop of 100,000 pounds of biomass can have carry over business expenses of $600,000 or more for planting, labor, farm machinery, storage costs, and constant drying and turning, to prevent mold.  Stored biomass is in a very unstable state since it can develop moisture and get moldy. If that happens, the entire crop is useless and needs to be thrown away.  Converting the biomass to CBD oil prevents this from happening because CBD oil is very stable and can be stored indefinitely without fear of contamination.

Extracted Biomass

However, the cost to process that 100,000 pounds into CBD oil can be another million dollars or more. Farmers are not able to come up with this kind of money. They are looking at the cost of planting their 2020 hemp fields and debating if they should plant at all.  In response, the new extraction companies are offering to defer part of the processing cost until the oil is sold.  Still, they are asking for half of the processing fee up front.  Another $500,000 for processing on top of their $600,000 of 2019 costs and the deferred processing fee of $500,000 puts the total cost to the farmer at $1,600,000.  What can it be sold for?  In the CBD oil business, this is called “the offtake.”

Bulk CBD oils in jars

With processing losses and the reduction of biomass to oil, 100,000 lbs. can yield about 1,800 kilos of CBD distillate.  The average March 2020 selling price for a kilo of distillate was $1,500.  Thus, 1,800 kilos of distillate are worth $2.7 million, so it is still possible to turn a profit from the 2019 crop.  The next question is how likely is the offtake?

Finished good processors have an abundance of CBD isolate and distillate from which to choose. Prices vary greatly depending on the quality of the products. Farmers and extraction companies are still facing considerable expenses and risks to turn their biomass into a profit.

Finished Product: nuhumun micromist

Stay tuned for more CannaBlogs from Bridge West CPAs and Advisors to the Cannabis Industry. Contact Jim Marty, CEO of Bridge West, at 303-651-0304 and jmarty@bridgewestcpas.com with any questions related to hemp processing. Bridge West has solely focused on the cannabis and hemp industries for more than ten years and to learn more about our wide range of accounting, tax, and advisory services, please visit: www.bridgewestcpas.com.

This blog is a followup to a previous blog:

“Hemp, Hemp and More Hemp CannaBlog”

by Jim Marty, CPA and CEO

Click here for Hemp Blog part 1

Newsletter Registration

Recent Posts

  • 2023 Farm Bill
  • Cannabis C-Corps: Filing Requirements & Penalties for Not Extending
  • Minnesota Cannabis Updates 2023: Current License Holders
  • Why You Should Outsource Accounting for Your Cannabis Business
  • Updated Cannabis Industry Events

Services

280E Mitigation

IRS and State Audit Assistance

Cannabis and Hemp Advisory Services

Cannabis License Application Advisory

Business Valuation

Audit and Assurance

Tax

Outsourced Accounting Services

Investment Advisory

Technology Services

Resources

Contact

Events

CannaBlog

Leadership

Client Access

Serving all cannabis legal states

Headquarters:
7900 International Drive, Suite 800
Bloomington, MN 55425
(303) 651-0304
View Map >

© Bridge West LLC™ 2023 Privacy Policy
  • LinkedIn
  • Facebook
  • Twitter
Western States Cannabis Roundup in the Middle of the Coronavirus PandemicMissouri License Holders: Congratulations from Bridge West
Scroll to top

This site uses cookies. By continuing to browse the site, you are agreeing to our use of cookies.

OKLearn more

Cookie and Privacy Settings



How we use cookies

We may request cookies to be set on your device. We use cookies to let us know when you visit our websites, how you interact with us, to enrich your user experience, and to customize your relationship with our website.

Click on the different category headings to find out more. You can also change some of your preferences. Note that blocking some types of cookies may impact your experience on our websites and the services we are able to offer.

Essential Website Cookies

These cookies are strictly necessary to provide you with services available through our website and to use some of its features.

Because these cookies are strictly necessary to deliver the website, refusing them will have impact how our site functions. You always can block or delete cookies by changing your browser settings and force blocking all cookies on this website. But this will always prompt you to accept/refuse cookies when revisiting our site.

We fully respect if you want to refuse cookies but to avoid asking you again and again kindly allow us to store a cookie for that. You are free to opt out any time or opt in for other cookies to get a better experience. If you refuse cookies we will remove all set cookies in our domain.

We provide you with a list of stored cookies on your computer in our domain so you can check what we stored. Due to security reasons we are not able to show or modify cookies from other domains. You can check these in your browser security settings.

Other external services

We also use different external services like Google Webfonts, Google Maps, and external Video providers. Since these providers may collect personal data like your IP address we allow you to block them here. Please be aware that this might heavily reduce the functionality and appearance of our site. Changes will take effect once you reload the page.

Google Webfont Settings:

Google Map Settings:

Google reCaptcha Settings:

Vimeo and Youtube video embeds:

Privacy Policy

You can read about our cookies and privacy settings in detail on our Privacy Policy Page.

Privacy Policy
Accept settingsHide notification only