New rules proposed by Michigan cannabis regulators could give the state significant new tools to incorporate clandestine hemp oil producers into regulation, but also put wholesale cannabis prices in the basement, operators say and industry observers.
“On the cultivator’s side, we hope it will affect them the most, because they will not be able to sell dry biomass for distillation for anything worthwhile. Because you can make synthetic distillates for a tenth of the price, “said Chase Marx, COO of Hype Cannabis, a Jackson, Michigan-based processing company.
In conjunction with a recent executive order issued by Gov. Gretchen Whitmer that shifts hemp oversight from the state Department of Agriculture to the newly named Michigan Cannabis Regulatory Agency (still the “Marijuana Regulatory Agency”). until April 13, 2022), the new rules would create a regulated route for industrial hemp with high levels of cannabinoid CBD to be processed into THC.
Much of the oral testimony at a hearing on Wednesday morning by the Marijuana Regulatory Agency (MRA) will soon be renamed in favor of the new rules because it took into account a practice that is already widely carried out underground. And according to MRA advisers themselves, CBD distillate is widely available and inexpensive.
“A significant amount of CBD isolate and CBD distillate has been produced, creating a surplus of CBD that can be easily obtained at a very low cost nationwide,” said Aaron Duckworth, a member of the MRA scientific advisory work and vice president of research and development for Fluresh. “More recently, the ability to synthesize or convert CBD to delta-9 or other minor cannabinoids has come to light.”
“You are buying CBD isolate without THC present and you are turning it into an acidic reaction to close the CBD carbon ring, effectively changing the CBD molecule to THC delta-9,” Marx explained. “It simply came to our notice then [expensive] because CBD is much cheaper. You can buy CBD at a much lower price system. You’re talking $ 200 for a pound of CBD isolated. You usually pay $ 7,000 per liter for THC distillate. “
While liters and kilograms are measurements of volume and weight, respectively, a liter of water weighs a kilo, which means that a processor that buys a $ 200 CBD isolate gets a 3500% profit at current prices. THC distillate.
“That’s the kind of thing that happens all the time,” with the clandestine market, Marx said.
THC cannabis growers, who have paid $ 40,000 for a Class C license in Michigan, are already facing huge costs, says Cannabis Counsel’s attorney Thomas Lavigne. “They could have a price off the hemp market for hemp growers, particularly outdoor growers,” he told Grown In after declaring Wednesday morning.
One person’s price crisis could be another’s boom, says Michigan NORML CEO Rick Thompson.
“Our market is in its infancy. Our pricing structure is in a downward spiral. We’re $ 187 a bushel [for wholesale flower], according to the MRA right now. This is a difficult business model to maintain when you do it wholesale. When you introduce a cheaper price, the only companies that could keep it up are MSOs, which can offset their losses in Michigan with profits elsewhere, ”Thompson said.
A constant concern among witnesses Wednesday was that the rules would allow processors to buy hemp produced out of state.
Nick Young, owner of a Michigan hemp and cannabis extraction business, asked the MRA to limit supply to only Michigan producers.
“I would love to see something out there promoting Michigan hemp growers. There are a lot of hemp growers still sitting in the 2019, 2020 and now 2021 harvests,” he said.
Thompson of NORML Michigan agreed.
“Michigan’s regulatory scheme is very different from what you see in other states. If you can grow hemp at half the price in Kentucky than in Michigan, Michigan growers have no chance,” he said.
In addition, accepting hemp grown outside the state would complicate law enforcement, Thompson said in his written statement to the MRA.
“A roadside police officer can’t tell the difference between a truck loaded with Kentucky compliant hemp and a truck loaded with wet stalks from Cali’s good stuff,” Thompson wrote.
Steven Linder, executive director of the Michigan Cannabis Manufacturers Association, which often opposes Michigan NORML on political issues, agreed with Thompson in his written testimony.
“The proposal … raises real concerns regarding the monitoring of the converted product from hemp and the identification of its origin before it goes on the market. This is compounded by the fact that industrial hemp can be legally transported across state lines and cannabis cannot, ”Linder wrote.
