Spring & Summer Are Gonna Be Wild Ride

Have you chosen your genetics for next season yet? Have you even decided if you are growing next season yet!? Where are the Delta 8 seeds!? (Hint: There is no such thing)

Dr. Jackson is concerned. He isn't quite sure what is going to happen here. The Delta 8 monster is being fed and its appetite grows larger with every passing day. Perhaps you caught the recent Fox News, New York Times, and Rolling Stone articles.

The stakes are high and reports are that the market is underperforming in regard to this time last year. Some businesses are saying that Delta 8 saved them, others won't go near the stuff. Labs are vying for position to get recognition as the "best lab to test Delta 8 with."

When does the madness end?

It doesn't.

As long as there are another 110+ cannabinoids to make claims on, you are looking at a scenario of chasing cannabinoids for years and years my friends, maybe for a lifetime. Of course that could all change with some simple tweaks to regulations. No one can say for sure when the roller coaster ends so for now strap in, huddle up, and start strategizing!

CBD Market Trajectory

When speaking to farmers across Oregon the sentiment seems to be, that compared to years prior, things are a bit more slow. Also, according to farmers, there has been less of a demand for anything aside of hand trimmed flower. I can attempt to speak to this. My feeling, as someone who attempted to purchase on the stick, bucked, or machine trimmed last year, is that many people who followed suit failed or didn't quite make what they thought they would. Machine trim gives the best opportunity, but farmers are not understanding that if someone is going to process themselves, they're looking for a discount that deflects risk.

To buy non processed product is to take on some of the unknown. You can't ever really know what your yields are going to be. Seeds, mold, smashed buds, over dried buds, under dried buds, poorly harvest product, and bugs are all things that lie beneath. Farmers can't take full blame, this plant is tough to cure and dry to perfection, but there is no doubt that many suffered the fate of the aforementioned variables.

As a processor I go by the 65-65-65 rule when purchasing anything that is unprocessed. 65% on the bucking, 65% on the machine, 65% on the A buds hand trimmed (this is with smalls being separated). That means every price I buy at is going to need to be divided by .65 to know what I may be getting myself into. Couple that with a market that has some bigger outfits selling as low as $150 hand trim finished and you get your market picture. Yes, its tight, but that $150 price point I am seeing is for mass production industrial farms. We are talking 50+ acres. This price is as recent as last week when we purchased 100 pounds from a California outfit for $140/lb.

At Amota we are working everyday on technique and strategy to boost yields for processing including the implementation of rehydration, sorting machines, scissor bucking, and more. We understand we need to work just as hard as the farmer to get as much of a yield as possible out of their product.

Hand trimmed or hand trim finished as you would say, is selling. We have the proof in the data, but boy is it competitive. One of the main drivers of the competition, as I have mentioned before in my articles, is strain diversity. We try to keep a diverse array of choices in our inventory, but it is clear that more rare strains and terpene profiles move faster. This makes the market tougher for farmers that went heavy on the standard strains you see in the market. CBG and Kush E1 were especially heavy this year along with the usual suspects.

As we are in the 6th year of the market, I'd say closer to year 3 for the heavy flower market, many brick & mortar shops and online retailers have either cozied up with farms, distributors, or grow for themselves.

Why wouldn't they?

It lowers costs, and lowering costs = survival. Here at Amota we partnered with a couple farms as well for splits on crops. It just makes sense when the prices stay around the $200/lb clip if you want to sell volume. On the flip side there is little loyalty from buyers, yes of course we have consistent long time clients, and we love them and their business, but we know full well that if they find a better deal they'll shop elsewhere. It is the nature of the unstandardized, under regulated beast.

I continue to bet on the companies that have chosen to consolidate their operations, form cooperatives, track data, and build brands from seed to shelf. When we work together to navigate this ever changing landscape, we will find success. Oh, and practice patience, maybe meditate or something (trust me it helps).

Below you will find our top 10 selling items of the last 90 days...

Delta Distillate is Delta 8 Distillate. Infused products are flower infused with Delta 8. Everything else is CBD flower. Legendary has been a top 10 seller since February of last year, having a seat at the table for longer than any other item.

Four out of the five top ten sellers and six out of ten are all Delta 8 related. Ninety days ago coincides with our entrance into the Delta 8 space after hearing the demand from our long time clients.

Reluctantly, we moved forward, with intention on doing it right. Full panels, multiple lab tests from 3 different labs including a DEA registered lab, and tests for acetic acid, a known harmful reagent when ingested or inhaled are all on our list for proper SOPs. Special thanks for Pixis Labs (Columbia Food Labs), KCA, ACS, and Green Leaf for working with us to tackle all these items.

The good news is that we are seeing an uptick in interest for CBD flower, CBD isolate, and minor cannabinoid distillates. Whether driven by the Delta 8 market or not I do feel that the trajectory of the market is on the up and up.

We need to remember as a community that cannabis markets are cyclical. Sure, maybe you didn't have a great first 3-4 months after harvest, but everyone reaps the rewards come April - July. The key is to sell at the right time and don't hold on too long, I can't stress that enough. The minute people start whispering about light deps, you need to get out! When the tide turns you better get your ass back to shore, otherwise you're gonna get left out there paddling with your extra pounds. Again, it is a cyclical market, capitalize on the hot period.

One last thing to address would be a question I was asked about the market at the Golden Grow Awards back in January. Do I believe the THC "free market" is the main driver of the CBD market for flower. My answer then is the same as now, I truly don't believe it is the main driver. Does it affect it? Absolutely, there is no doubt. We all know this. Certain sources of mine eluded to some events which occurred in the free market have trickled up the supply chain, thus, less activity.

All I can say, which I am sure many of you can relate to, is that we have built a network of well to do businesses across the globe that have a hunger high quality CBD products for their customers. We will proudly continue to serve them and be leaders in the space as it settles into a standardized market.

Delta 8 Market

We have been working with many brands on their Delta 8 market approach. I won't spend a ton of time on this as we have no idea where this is all headed from a legal and regulatory standpoint. The cliff notes are that there are some that argue synthetically derived Delta 8 is illegal, and others that say since it is created from isolate derived from the plant which tested at less than .3% THC, then its ok. You decide whats best for your company. I am not a lawyer and cannot give advice in either direction.

The question I get everyday is how do I know my products are compliant?

My answer?

Last I checked the labs are responsible for telling us whats in our flower, extracts, and concentrates.

Isn't that the way this system has been working since day 1?

So why all the questions then?

The COAs are what we as companies need to go by to know if we are following the set parameters on compliance. So that is what we do.

The sales side of CBD Vs. Delta 8 products are beginning to fold heavily in favor of Delta 8, but CBD isn't necessarily fading away, the Delta 8 market surge does indeed help the CBD flower market.

Amota jumped into the madness in December, the chart above is January through March (first 5 days). The blue shows Delta 8 sales, gray is CBD flower sales, and red is "other." January is on your far left and March on the right. As you can see Delta 8 surpassed CBD in just 1 month of "full involvement." March is on pace to do 5x Delta 8 to CBD. This trend will continue as many businesses get through their product & branding phase, cozy up with trustworthy supplies of distillate, and roll out their products. Madoma, Amota's Delta 8 subsidiary has proceeded with the aforementioned SOPs for our distillate.

Ultimately it's your company, your ethics, and your strategy. You do what is right for you. In terms of the economic impact of the D8 market on the CBD market, there are two ways to look at it.

One way is to look at it as a positive. There is no question that infused Delta 8 flower is not only causing 2020 flower to move, but 2019 flower too. This gives the opportunity for farms who properly stored their flower over the last year, to still get something for their flower from 2019. On the 2020 flower side, because of the costs of the infusion process, you are still going to get buyers who want to be in the $150 - $200 range. At least it creates another demand channel because we have been fighting hard for $250 - $300 a pound here at Amota just to be able to get our consignment clients $225 back on their flower.

The other way to look at it is in a bit more cynical way. Although Delta 8 is moving flower from place to place, is this why we got into the space? Has it really come to infusing CBD flower and CBG flower with Delta 8 to create a "THC light" product? It's confusing, maybe even a little sad... Furthermore, the businesses that have taken it upon themselves to incorporate an infusion process will certainly want to go through their flower first, then move on to the rest of the supply chain.

Just like everything else in this space we will see the pricing get squeezed. As D8 distillate prices drop, so will the price for the infused products, cartridges, and gummies, until alas, we are back to where we started.

Maybe you'll jump in or maybe you'll stay your course and continue building in the way you see fit for your business, who knows maybe its a way to take the lead ahead of some of those in this race. They're distracted, will it show in some of their other products? Only time will tell, and I'm hearing Delta 10 is getting ready to take her turn on the catwalk.... Hold on to your butts!