You jumped through your state’s licensing hoops. You tested and treated your soil. You planted and lovingly raised a quality hemp crop. Now, unless you have the industrial capacity to turn your biomass into marketable fiber or CBD oil (and if you do, stick out your chest and flex a bit – this isn’t the blog post for you), you’re going to need a buyer.
Let’s address something right away. Everything I’m going to cover will be made worlds easier if it’s handled with someone you trust, ideally someone who is invested in your success. Hemp is still the wild west, and with the explosion of 2019 still fresh in the air, you’re a seller in a buyer’s market.
We’ll begin with storage. Your crop can’t likely be shipped all in one shot, and unless a buyer is secured in advance of harvest, you can expect additional delays in getting your biomass off the farm, so adequate and appropriate storage is essential.
Hemp needs to be properly dried before storage, then wrapped tightly in bales of white plastic, or plastic containers. This helps reduce exposure to UV rays in sunlight, which can degrade the cannabinoid content. It also keeps out oxygen and humidity, which can introduce mold to your crop.
Keep all of this in a low-light, low-humidity environment, and a properly stored crop could last up to a year.
This one is crucial for even the most experienced broker or seller. An attorney skilled in high-dollar transactions will serve several overarching purposes.
First, they can signal to a serious buyer that you, in turn, are a serious seller with product to move and no time to waste. You don’t want to appear timid or inexperienced when confronted with someone who has the means to buy elsewhere. This is especially important when it’s time to establish escrow accounts and other necessary paperwork.
More broadly, the right attorney can protect your rights throughout a tedious and unfamiliar process. Don’t be scammed or intimidated by predators and pretenders. You literally can’t afford it.
Speaking of paperwork, there’s plenty. Off we go.
Certificate of Analysis (COA) – This is a document containing the results of the lab testing your biomass will go through. It details the content levels of CBD, among other things, and will be your primary evidence of a quality crop when dealing with buyers. You might also provide Proof of Life in the form of photos, videos, or other evidence that your product is real.
Non-Disclosure Agreement – Before you sally up to a buyer and their attorney, you’ll all want to sign an NDA, which will protect the information you’re all going to share and keep it confidential within the bounds of your particular negotiation. No need to tell the world about the specifics of your crop until you’re ready. It may also serve as a Non-Circumvention Agreement, which prevents buyer and seller from cutting out a broker, if any is involved.
Proof of Funds – The seller will likewise need to show that they belong at the table, and they’ll do that with a document provided by their attorney showing that they can, in fact, buy what you’re selling. Provided the buyer is forthcoming with this document as you will be with your COA, this saves everyone’s time and can get you down to business with someone who is qualified to talk to you.
Letter of Intent (LOI) – Your negotiations should be formalized and protected with a letter of intent. This will outline the issues most important to both sides and save time in case the deal breaks down before minute details are discussed.
Just getting qualified, legitimate buyers to the table requires more than a little due diligence and knowledge of the process. Again, you will inevitably come across people who are going to waste your time at best, or possibly even set you up for theft.
Be on the lookout for anyone who is unfamiliar with or unable to personally begin negotiations along the lines of what we’ve discussed above. Some of the so-called brokers out there are little more than paid scouts for larger organizations just doing market research. Don’t give them any information without appropriate protocols in place.
The contract you end up signing will need to cover the who-pays-what involved in the lengthy process of actually moving the biomass.
As I mentioned, a large crop – more than about 25,000 lbs. – won’t fit on one truck, so you can expect to have costs associated with storing your crop in incremental amounts as it is collected. Then there will be the shipping costs, insurance, etc. Avoid delays and confusion by hammering this all out on paper ahead of time.
Putting it All Together
With the right process, you can plant, harvest, and sell hemp at a nice profit. Many folks tried many different things in 2019 and paid a hefty price. We have the benefit of those experiences on which to build a better system, but going it alone is still tricky, and not recommended for the inexperienced seller. Your best bet is to partner at some level with a trusted advisor who has skin in the game. HempWave’s Buyback Program alleviates a great deal of the hassle in the sale of quality biomass. If you have any questions at all about prepping for the season, get in touch for a chat.