I’m curious if any of the growers on the network have had experience with grow contracts for b buds, trim or whole plant with manufacturers.
Would it make sense for part of your crop? All of your crop? What has been your experience? Do the numbers work out for you against the open market?
I’ve had this discussion with a couple of growers and manufacturers, we think it may be the up and coming trend in CA.
I’d love to hear your comments.
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We have some experience in this. Main difficulties are grade standards for future purchased product and pricing in a volatile market. One must think long and hard on how to reach mutually agreeable and independently verifiable standards for grading the product in order to avoid issues when variability occurs.
Price, of course, is always an issue and more so in a market with changing prices and costs.
We sell mostly through the flower market which gives us our best return but have decided that hedging with 25 to 30% of our crop with future contracts makes sense.
Pick good partners, there are many yayhoos about!
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Thank you @rswalser I appreciate your share! I’m relatively new to the industry, but am very good at putting people together. The goal obviously is to create win/wins for every one. Everyone makes money, creates safe medicine and we help a lot of people.
I’m in talks with one manufacturer and a couple of growers on the subject. I consistently get calls for trim and b buds clean / pesticide free & I consistently hear about supply issues. I’m hoping to help. 25-30% makes sense. I’ll use those numbers in my discussions.
Thank you. What state are you in?
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Washington State. Best of luck.
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Washington State. Good luck.
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Maybe someday we’ll have interstate commerce.
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On the other side of the equation as a manufacturer, I tried a contract system with a cultivator once. We were looking for a steady supply of cannabis sativa CBD. We didn’t want to supplement with hemp for quality issues and the price/availability of large quantities of CBD sativa were all across the map at the time. After a referral from an acquaintance, we decided to try a contract to secure a large quantity of CBD at below traditional market rates. The cultivator didn’t want to have to worry about selling his crop and was looking for more steady income. In return for our upfront risk, we secure a large discount price per pound. It also allowed us to focus on manufacturing & essentially achieve a price per pound between market rates and traditional COGS.
After entering into a a contract for a set price per pound, we essentially “brought” one of the cultivators facilities. At the end of the day, the cultivator was not able to achieve his targeted crop yield, which in turn increased our overall price per pound. The cultivator ended up making it right in the end after some friction, but we will never try one of these contracts again until it is more enforceable at the legal level.
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Thank you @dominick.volpini , this is good information. I’m wondering if you could write into the contract minimum yields or price per pound vs a whole crop contract. I agree it will be easier when contracts are enforceable, stipulations for below grad etc. I’m sure folks that have first hand experience in the agricultural industry get this done everyday.
Thank you again.
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Update on this topic. I’m in talks with two manufacturers to set up whole plant transactions. Hopefully it’ll lead to talks for grow contracts if successful. Here’s to creating good business!
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I have some interesting ideas, offers, input on a form of this which we are offering now and will be doing a lot of business on in the future…right now I am focused on getting this wonderful product of ours to the growers.
An organic sustainable solution to higher yields and higher quality product is something most farmers will need to see for themselves to believe…especially in the world which we live which is currently and unfortunately full of snake oils and magic potions.
But I guess this is a good place to bounce ideas off people and while this is too premature for most, It is still a good time to put it out there and get feedback and ideas as we roll this out in the upcoming months after we gain traction and notoriety in the industry and become publicly traded.
Contracting grows has many problems concerning pricing on a set amount of product at a certain, almost undefined, definitely not guaranteed, quality at some point in the future. The problem is there are a lot of variables in the market and in life which could pose hazard to the agreed terms of the deal and cause rifts between the farmer and buyer when trying to secure a deal based on future outcomes of production.
A win/win/win deal is something hard to come buy these days…they still happen and will continue to happen as long as the right players are involved. For those of us who have been in this industry from the outlaw days to now,we have all seen the impact this wonderful movement has had on the bottom dollar. I have seen the price per pound drop $1500 in the last 6 or 7 years in my region…waaay more if you say the last 10 or 15 years. I think the day is coming when the price per pound is going to be $500…still great compared to other agricultural crops…but the money for the grower may only come through contracted grows in the future…just as driscols or chiquita doesnt grow raspberries or bananas they just pay the contracted farmer and label it. However, you can also think of it this way, I think cannabis is a lot like wine…what strain, where and how it is grown, that seasons weather, how its cured… etc. how can giant corporations or in the case of the present…contract grows…mass produce or mass purchase something which has so many end product varibles… I think there will be many brands, and niches just like homebrews with beers or private wineries. There will also be standardization which comes to light to help giant corporate companies purchase, brand and distribute lines of cannabis that are similar and consistent enough to bunch into packaging and sell under a label.
SO where does URB fit in…
Well right now we are gearing up to be publicly traded. We are in the “friends and family round” until July 15th where we will be unveiled in front of a huge crowd of VC’s and Angel investors at the freedomfest in Las Vegas. The stock being issued right now is preferred, limited in time and money ( a total of500K is the ceiling on this round) with subscription agreements and 6 1/2% quarterly dividend payouts. That will close and then be open to all the VC’s and Angels for about another month. Then we have a couple crowdfunding raises, one with seedinvest and we are still undecided on the others.
But our vision is to have a majority of our ownership be growers. We want to be represented by the grower. I am after the network effect and the more growers who have used and see the benefits of the product and have ownership in the company, the more they will continue to use the product which in a crazy revolving door, the more value they add to their own equity in the company. As word spreads, pictures come in, the more people see that we have a sustainable, organic solution to cannabis farming, producing great increases in higher quality medicine to the people and reducing fertilizer input costs to the farmer the picture of a win/win/win situation starts to paint itself…This is why I say that this post may be a bit premature for most to envision and buy into…this has to develop and the only way for it to develop is to get the product out there and let the people speak for it.
HOW DOES ALL OF THIS FIT INTO CONTRACT GROWS??
Well here is my idea…pitch…whatever…
I have offered this to one person I did not know. They would like to work with the product before making any considerations to what I am about to talk about here. I understand and respect this approach completely…
Right now we are offering the preferred stock to any legal farmer who is game. We just need one to include as someone who can see the value in what we are trying to do and has jumped on board…basically so we can present this idea at freedomfest as something that people will do in the future…
We are offering a 7x multiplier on issued equity to the first true “early adopter” of URB. The best thing is we are asking for zero dollars up front… The amount invested is whatever the grower is comfortable with…at a set rate…multplied 7 times and “payed” for in once yearly installments over 5 years.
Let me lay it out…
Lets say a farmer calculates and feels comfortable with his/her ability to pay $5K a year so he/she agrees on 25K in equity. Right off the bat we give her 175K worth of shares in URB preferred stock…
This 175K goes down in the books as equity issued for "Advertising" just as NBC would pay someone… it is equity for advertising…you did not purchase this stock.
In the future, we would request that you actually did advertising for URB, but it is not required right now. Advertising for us would simply include placing a little sticker on your P’s or somewhere on your label that said “URB certified” meaning your end product was grown with URB (organically or not) Organically would be preferred but there is no standardization or ability to check or verify this currently…but at least you are using a sustainable product which is friendly to the environment and fighting to reduce chemical fertilizers…It help us to further the fact that our product produces a flower which is better in all testable preferred qualities and healthier overall
Anyways…where were we…Grower agrees to 25K multiplied by 7 so his/her 25K deal is at 175K of stock in URB for advertising.
What do we want in return…
dunt dunt dunnnnnnnn
Don’t worry, its not a bad deal… its a great deal.
We want the grower to pay us a royalty once a year on his/her saleable product…
This is why it is important that the number agreed upon for the “advertising” is something the grower is comfortable saying he or she can cover regardless of circumstance.
So whatever sales are we take a royalty on a percentage which is equivalent to paying the “advertising” set price stock issue back over a 5 year term… you could have a really good year and decide to pay off your installment all at once.
On paper, these two agreements have nothing to do with each other…
We paid you 25K (this case is unique with the multiplier so 175K) in equity for “advertising” and you are paying us a “royalty” on your end product for using urb and the increase in quantity and quality it provided you…which just happens to equal out to 25K over 5 years.
What this does for everyone involved is balance the books further increasing the value of your shares of the company.
Our expenditures are minimal on the production side…we dont spend a lot in marketing and advertising…the “advertising” we do spend is not an actual expenditure…it is issued to the grower in the form of equity…
Our revenue comes in the form of URB sales both online and in retail storefronts …and by “royalties” paid to us by the farmers who use URB formulas and are getting a higher price per pound of all saleable material.
This really solves a lot of problems. One is the bank account issue. Let me paint the picture of what will happen to your equity when we go public and for this purpose,wherever you get in at…with each following round of fundraising and as the “network effect”…as the wallstreet cronies call it…grows…
Let’s assume URB goes public and has a (P/E) ratio of 30. Whether there is one grower owning 10% of URB, or 100 growers each owning 1/10 of 1% paying equally, or some combination in between, for every $1 paid by growers for URB product, after expenses and taxes, URB should net at least $0.50, and therefore, the value of the stock will theoretically increase by $15 (30 x $0.50)… This is just on product sales… this doesn’t include royalty payments which spike our income an thus the value of our stock tremendously because there is no “cost” to us…it is pure income… our cost’s are spent in equity advertising…
If the growers own only 10%, the value of their stock would increase by $1.50. I want 30% 40% 50% grower ownership of URB… Of course, if growers wanted to cash out prior to the expiration of their five-year holding period, they would be able to borrow 50% of the value of the stock, or $0.75 for every $1.00 paid for the URB product at very favorable interest rates. This is where the bank account problem comes in, Where im from we were taught to buy gold with all our cash from farming…this is better than gold. Imagine getting revenue from investments made for “advertising” in legitimate checks from wall street. You aren’t getting checks from royalties paid on harvest of federally illegal material. There is no tie between the two so it is literally a way to utilize the stock market to get a stream of income which has no “incriminating” tie.
These numbers become even more impressive if the growers end up owning 20% as every dollar paid by the growers is then doubled. $1 paid by the growers increases the value of their stock by $3.00 and they would then be able to borrow $1.50.
So that is the general idea…it is a form of contracting grows that is a win/win/win for everyone involved. A win for the farmer, a win for the end user, a win for URB and its shareholders, and a circle that keeps coming around and increasing in value as time and word spreads.
As I said though, until you try the product… I understand that it is a roadblock in the vision. I have the pleasure of using this product so I can have confidence in this proposal. I am looking for one legitimate farm to hop on board right now, I have a good friend of mine who operates on the dark side who is in but we need a legitimate tax paying farm and I dont have those contacts. This idea and offering will be around for a long time and everyone on here has the jump on the public. The multipliers will go down but either way the deal is really good. Issued equity at a set rate payed for in a 5 year installment. Try to find that anywhere else with any other publicly traded company. I am working with our CEO to finalize an actual proposal document and if interested let me know and I will send it to you when complete. There is a long game vision with URB and I want everyone who has evolved and made adaptations within this industry from outlaw to legitimate to be along for the ride.
Thank you for your time, and if you took the time to read this enormous post, I am welcome to all questions, suggestions and criticism concerning all of this. I just wanted to get the idea out there and get feedback on the whole thing. Thank god for Nick and his creation of this forum of professionals to do so…
All the Best,
Cody
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Personally, I wouldn’t sign on for a contract grow (as a grower) unless:
The price per pound was higher than market
If a specific strain was requested, either they pay up front for 2/3rds of it, or leave substantial collateral in case they back out.
If I screw up the crop and it’s un-saleable then it’s on me, but if it’s due to the buyers genetics or timetable, then too bad. I certainly wouldn’t commit to “I’ll grow x pounds per light of your unknown genetics per run” under any circumstances. You take what I grow, at the contracted price per pound. Lab test it for mold and pesticides, the cannabinoid percentages are genetic.
Too many variables and chances for people to screw over the grower (just don’t answer the phone, right?)
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