Warm Or Cold Winter For Hemp Flower Market?

While wrapping up my business trip to Southern California I sit here brainstorming about the hemp flower market. My meetings were with distributors, suppliers, cultivators, and manufacturers. All of which are movers and shakers of the supply chain here on the west coast. Here are some of my takeaways

Quality Continues To Take Front And Center

It was a relief that much of the conversations were centered around quality and diversity. This season, more than any season previous, there has been a major push by farmers and distributors alike to represent the highest quality they can. Some farms have taken the task on themselves like in previous years, and others have decided to leave the processing in the hands of professionals like Amota Processing. We've spent months building out our inventory systems and SOPs for the purpose of providing our buyers exactly what they are looking for. We listen to every critique and recommendation given to us by those who purchase high volumes of hemp flower in our industry.

Many of the suggestions and comments from buyers are fairly obvious:

• Seedless, or nearly.

• Density, good structure

• B-buds & smalls separated and offered at a different price rate (we use a nickel as our measuring stick)

• No mold, no brown, no long stems

• Tight trim (as close to dispensary style as possible)

Notice that CBD content is not listed, I'll let you make what you will of that... Much of the conversation around these needs from buyers leads to questions as to where the price lands when all this criteria are met. So without further ado here is what Amota has been seeing as far as sales trends go for the tail end of 2020.

Slow End Of Summer

Month By Month Sales Graph

After a strong summer July became the first month of a downward trend in sales, it continued through fall. It makes sense as many buyers at this point begin to make decisions on less aggressive buying patterns due to the oncoming new supply. The blue represents sales revenue whereas the orange line represents sales volume. General sentiment across the industry would agree with these trends.

The sudden "Delta 8 Phenomenon" as many like to call it, seemed to be at its peak right around end of July and early August. We clearly saw a shift in buyer behavior as Delta 8 became a new and exciting market, with some of our buyers starting entire new companies to take advantage of the window. This died down after the DEA released a statement addressing regulations around hemp derivatives. Naturally, everyone interpreted the language in the release as they saw fit.

This slowed down the market for Delta 8 distillate for about a month, then we saw it revive.

It is clear that Delta 8 cartridges, infused flower, and edibles are here to stay until there is a serious engagement by authorities to enforce. To date, we are not aware of any major interruptions in the Delta 8 market by officials aside from the release. Make no mistake Delta 8 is a very real factor in flower sales and infused flowers have become a major driving force behind sales.

After the downward slope from June to September we have seen a very slight increase in buying activity as of late. Prices that encourage larger volume buys have been holding steady at $175 - $250 per pound. This is for a hand trimmed or hand finished product that fits the above parameters. Sun grown flower has sold for as high as $350 per pound in some instances this fall. Anything above that price point has been lower volume purchases.

Distributors and retailers are open to taking on pounds at $300+, but the processing quality has to be near perfect. Diversity in strains is also a big advantage this year. We have noticed a gravitation towards strains that are not your run of the mill Oregon CBD genetics.

Although I believe that Oregon CBD genetics are amongst the most superior in the market, this year the buyers are looking for something "fresh and new" with alternative terpene profiles. The "Sour" genetics from Oregon CBD are getting mixed reviews overall. The Sour Suver Haze and Sour Special Sauce are standouts in terpene profile along with the Super Sour Space Candy, but there was a lot of variation in bud integrity throughout the state of Oregon.

Final Quarter of 2020 Stats and Predictions

Week By Week Sales Graph

Fall is a busy time for movement of inventory in the cannabis space, but pricing has to be ultra competitive as many farms are trying to earn back capital spent on harvesting, drying, and processing. As the competition heats up, revenue (the blue), tends to dip as price per pound is low. Volume (the orange line), tends to stay steady as there is a live market, but again at this point in the season, it's a price war. The noticeable increase at the end of November is from series of holiday sales Amota ran on www.amotashop.com, it was also around the time we started to really wrap up the processing a many of our newer strains like Harley Tsu #72, Cherry #4, Hempress, Grape Goliath, and Camas Valley Kush.

As Christmas approaches there is likelihood of holiday sales being the driving force behind sales. Buyers are still seeking their pounds to be in the 200s Vs. the 300s and this will continue throughout winter into spring. On the stick, bucked, and machine trimmed products are less desirable, as many brave souls who have gone the route of processing the material themselves to drive down COGS have not been successful. Purchasing hand trimmed at a lower rate is more attractive.

Large scale farms are priced sub $200, but the challenge they face is keeping a tight QC regimen and providing a truly boutique experience, because after all, their product is truly industrial scale hemp flower. The market is starting to divide into large scale industrial hemp and boutique small batch. This is something we all expected and should be exciting for smaller farms in the market.

The market is also starting to show the first glimpses of consolidation and comfort in working together to achieve success. Years prior we found a reluctance of farmers to either consign, process, or broker their hemp to professionals. Much of the conversations we are having are showing a realization that processing is a task that can completely take over a farmers life (we know this all too well). Farmers want to grow, they didn't necessarily sign up for the labor crews at their properties day in and day out. This year we have seen a much higher rate of inquiries and engagement from our farmer friends with our processing services. Amota Processing will continue to offer our processing services on fee schedule and no money down split scenarios. We pride ourselves in pushing out a finished product that will compete in the market at the highest level.

Please feel free to reach out to me directly on LinkedIn with any questions or email me at Damian@amotagroup.com

Stay Safe And Healthy, Happy Holidays And The Wish Of A Wonderful New Year In 2021!