If you listen to a recent podcast by Uptick Newswire you get the staggering numbers in CBD extract where the annual demand will be 1 million kilos, and the market produced 30,000 kilos, and companies are lining up to capture the demand curve payout.
The farm bill (in effect) changed everything, and now the Mom and Pop extraction supply cannot meet this growing demand. Enter professionals, who begin the process of standardizing production as Hemp production enters the world of demand of natural solutions to replace synthetics. It has been looming on the horizon, but the simple math of supply and demand tell the story of how public companies can capture acreage and execute with simple metrics, and the Cannabis markets will reward positive metrics with a glowing industry multiple.
Upper Street (OTC:UPPR) is launching various ventures as it executes its plans to cultivate 360 acres of industrial hemp in Colorado this year, and to more specifically to extract CBD raw crude and to produce CBD isolates and distillates. Upper Street plans on expanding its cultivation to as many as 2,000 acres for crop year 2020.
“This production is a significant milestone for us, as it shows that we can produce significant amounts of CBD raw crude with various partners, although our business model of vertical integration will ultimately see us extracting large quantities of our own bio-mass,” said Joseph Earle, Upper Street Marketing President and CEO.
Earle adds that, “Upper Street Marketing will provide cGMP pharmaceutical grade standards with its CBD manufacturing partner, PrimaPharm, Inc. of San Diego, CA., and UPPR will bring these standards to a very fragmented marketplace that frequently lacks FDA focused standards.”
CBD Crude Oil is like Soybean Oil, and if you know anything about trading commodities and the crack spread, you get that the extraction of this biomass will be processed (now post farm bill) on a large scale, and will drive out smaller growers and processors as they extract the valuable CBD isolates and distillates in huge demand. CBD raw Crude prices are trading around $3000- $3500 and rising fast +45% year over year, and pricing for this commodity may experience the price volatility of Soybeans in a drought period. Prices are not going lower anytime soon, and many experts believe prices can reach $10,000 CBD Raw Crude. Analysts like the simplicity of the metric, and as Michael Gordon of Kush Marketplace clearly states below.
This is the first major sign of industrialization and a glimpse of the future of this agricultural industry. Because the supply of high quality plant material is dwindling, production costs for many labs who produce CBD isolate are rising. To create the same volume of raw crude CBD oil, you have to process four times as much 3% CBD material as 9% material! Many labs are not designed to the scale necessary to accommodate for the low quality hemp on the market. We are finding that purchasing raw crude CBD oil is now a viable alternative for labs to produce CBD distillate and Isolate.
The reason CBD Crude has become price competitive is the scale of the processors making this raw extract. When a processor can run 10,000 lbs of material of day, this saves money on labor and costly machine time. These businesses operate on a completely different scale than many labs producing higher level extractions. Ultimately this means that crude has become a more effective starting material than doing in house crude extraction from biomass.
A look at supply and demand shows that smaller listed companies can leverage public shares and capture revenue multiples in an industry that has a looming federal mandate. These are rare situations where OTC companies can leverage shares where the multiples exceed Technology Stocks, we are seeing 150+ multiples on cash flow finding its way to the valuations of these listed shares. This makes Upper Street (OTC:UPPR) one to put on your list as the industry unfolds.