Distillate Economics: Crunching Numbers on Biomass, Prerolls, and Production Costs

Special Contribution by: Dean St. Peter, Founder at 3 Lefts Cannabis, Trap House and Arcanna

Distillate prices are driven by availability, and yes it is not as readily available as it was at this time in years past.

This is due to several contributing factors. One is that farmers have successfully transitioned their biomass into an in demand preroll item. Some prerolls on the marketplace are from flower and shake that is appropriately trimmed and tested. However, another large portion is from biomass that is broken off of the same package as tested flower and manipulated through METRC to display the same results. These bio-trim packages are typically ground and sold as tested preroll material at a much higher price than what the raw biomass would sell for. This drives the scarcity of the material for distillate production up, which in turn drives the price up for the biomass that is available for distillate production.

Biomass is available on the marketplace for 70-150/lb that tests in the 6-10% range (prerolls are being made from this). If you do the simple math, the cost of production is not equitable for the price of distillate liters right now based solely on the available THC% in most of the available biomass strictly from a material input cost standpoint, let alone overhead. There are still large players in the market purchasing off-METRC D9 liters or CBD to convert, and the methods are easy enough to disguise and the price of these liters are good enough to offset the cost of the overpriced biomass. Most processors won’t engage in this avenue, however enough do that farmers know that they can currently sell limited amounts to these processors worry free.

Further driving the scarcity of biomass and raw material is that farmers are also flat out not selling it. Currently it is being drip fed to processors or hoarded in order to time the market at its peak from last year. I have spoken with many farmers and been to many farms where it is all sitting in bags waiting for the right time to move, and nothing else. They are waiting for the mass market to adopt pricing for 100/lb to be profitable, at which time the market will be at a choke point until the gates flood open and prices fall again, leaving companies holding extremely large bags from a monetary standpoint.

All in all, the farmers have to do what’s best for them financially. Can’t blame them at all. However, as is tradition, lots of guys do the same thing – intentionally or not – and it causes big swings in the market. That all being said, traditionally we do begin to see a rise in prices beginning some time in January.  

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