Why Is High-Quality CBD So Expensive?
High-quality CBD is expensive due to several reasons, think of high farming costs, CBD extraction costs, legal costs, political issues, etc.
It all begins even before planting the seed. Like with every agricultural farming, the first costs will be for the land, farming and cultivation costs, for example: labor, seeds, equipment, state, city, and county licenses.
When it comes to farming hemp, there are many additional costs involved like reporting and testing costs.
It depends also per state because each state has its own requirements and costs.
In general, this are the prices for the moment:
- Hemp license:
$500 per acre
The general advice to be profitable is stating that you need at least 50 acres of land, so the total costs are at least $25,000.
For the best quality, it’s recommended to plant between 1,000 and 1,600 plants per acre.
With a minimum of 50 acres, you will have between the 50,000 and 80,000 hemp plants planted.
Seeds cost between $2 and $20 per seed (depending on the quality) so that means in case of so that would be a minimum of $2,000 per acre.
- Multiple Soil test:
$75 per test
$100 Water test
Hemp matures between 90 – 120 depending on the type, seed date, and summer temperatures. Like with any other crop the growing conditions affect the maturity date of the hemp flower.
Basically, industrial hemp is harvested when the seed begins to shatter. Standing hemp is harvested when approximately 70% – 80% of the seeds are ripe and the grain sample has a moisture range between 10% and 20%.
In general, the costs of harvesting per acre of land is between $400 and $600. When we talk about 50 acres of land the costs would be between $20,000 and $30,000.
That’s a lot of money! Don’t forget I talk in this post about general prices, so the prices can be different per county.
Drying Hemp After Harvesting
Once the harvest is complete the farmer should immediately the harvested hemp to the drying facility.
Most drying facilities are simple barns. It’s important that the barn is placed out of direct sunlight and is also very well ventilated. There are a lot of vans inside the barn because significant drying is crucial!
The perfect temperature in the barn should be between 60 and 70 degrees F t 60% humidity. Slow drying with high airflow will cure the hemp and as a result, gives a much higher quality hemp product.
A lot of growers use different techniques to dry the plant, the most recommended technique is to break off individual branches from the hemp plant and hang the branches on the drying wire, not the whole plant. This is more labor-intensive but will help minimize mold and mildew.
If the conditions are perfect it is possible to dry 1 acre of plants in around 3 days.
After drying the hemp the separation from components from the stem of the hemp plant begins.
To do this a machine is used that’s called a decorticator. This machine can run up to $2 million.
The next phase the process is the extraction. Within this process the cannabinoids, terpenes, flavonoids, etc. will be extracted from the plant. Extraction can be done in different ways so it depends on what the costs will be. The most popular extraction methods are through Supercritical CO2 extraction or ethanol extraction with CO2.
The costs of buying an extraction machine can be around $135,000 to $150,000 plus $20,000 to $35,000 for a rotary evaporator and centrifuge.
After the extraction process is completed the cannabis concentrate that is left is full of acids that need to be removed. The costs for removing these acids cost between $5,000 to $7,000 for ovens with a capacity of 10 cubic feet and can go up to 38 cubic feet.
When the cleaning process is finished what is left is full spectrum cannabinoid oil. This is the most complete form of CBD containing all the compounds of the plant. When it comes to the “entourage effect” this is the best option.
The problem is that not everybody wants the full-spectrum oil, so depending on the product the manufacture wants to deliver on the market they need to remove some compound to create a Broad-spectrum or Isolate CBD. This will even raise the costs further up.
Third-Party lab testing costs
Once the whole process is complete the product is almost ready to be shipped to the store… But, there is still something that needs to be done to prove the purity and concentration of the CBD product.
CBD manufacturers let their products tested by a third-party lab, of course, this will add to the total costs.
Testing in general costs around:
- 10 cannabinoids ($50/bottle)
- Mold and fungus screening ($25/bottle)
- 19 Residual Solvents ($35/bottle)
- 41 Terpenes ($40/bottle)
- Moisture Content ($15/bottle)
- 4 Microbial Analyses ($40/each count)
After testing, the CBD concentrates are bottled, packaged and prepared for delivery.
Every cannabis business needs at least a liability insurance, the costs can vary from $700 to $3,000 annually.
Credit Card processing
The problem with the Cannabis industry is that it’s still considered a high-risk industry due to the still many gray areas within the law.
Because of this, cannabis companies are very limited options available for banking and credit card. To accept credit cards the cannabis company needs to sign up with merchants specialized in “high” risk processing.
This means that the costs for in some cases can run up to hundreds of dollars per month.
Bank accounts and business loans are not available for cannabis companies so those companies need to be creative to find cash on other places which often result in opening costly offshore accounts.
Profit for the hemp farmer
Currently, the Canadian farmers seem to make profits ranging between $200 – 250$ per acre of hemp. That is an amazing result taking into consideration that traditional crop farmers don’t see this kind of profits per acre.
The American hemp farmers seem to do an even a little bit better with an average profit ranging between $250 – $300. This is quite an amazing result when you have a couple of hundreds of acres of land available for producing hemp.
You can see that starting and running a CBD farm is very costly, when you look at all the costs it’s not so strange that the prices for high-quality CBD are higher than you would expect. Even though the profits are quite amazing it’s still understandable why the price of good quality CBD is so high.
The good news is that in time the prices will go down because the whole CBD industry is relatively new and production costs will go down in time.
Besides the production costs also the laws will be much clearer in time, which could mean the cannabis industry is no longer considered a “high” risk industry making the banking costs also go down and will stop forcing cannabis industries to close offshore accounts.