Broker, Purchase, Toll Process or Split: What’s the Best Option?
Now that it is harvest time, cultivators are facing the question of how to sell their biomass and dealing with the unappealing notion of splitting their hard earned profits with a broker.
You have the following options:
- Direct purchase by customers
- Toll processing
- Split with processor
Broke the Broking Brokers
Brokers are a great option as they can deliver customers who are willing to purchase. However, you will notice that they are negotiating you down to get the greatest markup as possible. Current prices to cultivators are around $3-3.50/percentage point per pound and brokers sell it for $5-7/percentage point per pound.
For example: a thousand pounds of dry product at 10% CBD will give the cultivator $30/lb for a total of $30,000 and the broker will net $30,000 for making the sale.
Sell Your Junk
Direct sales is a great option for cultivators. Customers who are looking to purchase typically are trying to bypass the middle-man scenario described above. They are also going to be looking at $3-3.50/percentage point per pound but will also be looking to purchase large amounts, and even entire crops. In a similar example, a thousand pounds of dry product at 10% CBD will give the cultivator $30/lb for a total of $30,000.
You Know You Want To Pay for It
Toll processing is when a cultivator hires a processor to process their crop at a set price for any number of services, whether it is to obtain crude oil, winterized CBD oil, CBD distillate, CBD isolate, or full spectrum oils. Hiring Nemadji for toll processing is a great option for those businesses seeking to become involved at different levels of the supply chain, whether cultivating hemp or obtaining a final product for retail.
Split with processors is when a processor, and cultivator, split the oil that comes from a crop. This is a great option for cultivators looking to obtain 5-10 times more profit than the previous option.
For example: a thousand pounds of dry product at 10% CBD will give the cultivator 44kg of winterized CBD oil, valued at $6-9/gram, or 33 kg of CBD isolate valued at $7.50-10/gram.
The value to the cultivator is immediately appreciated, calculate it for yourself:
The numbers presented herein represent averages in costs, output, and results. The analysis is not a financial guarantee and shall not be used to create business plans, obtain funds, or make any kind of financial decision. There are inherent risks in any business. Some key risks for the three scenarios of brokering, splits and toll processing have to do with quality, transportation, yield, and labor. This guidance is intended to help the customer understand options and shall not be construed as an inducement for any kind of investment. Use the information presented below at your own risk.
Article about the best option for those looking to broker, purchase, toll process or split hemp raw material for the purpose of processing into end product.