Toll Processing Blunders: Critical Steps to Ensure Success
Over the last few years, we have seen the hemp industry take on an impressive evolution as we all hold on for guidelines and regulations. From the rapid expansion in 2019 to the market contraction in 2020 many people in the industry were left scrambling to keep up with sensible choices for their business. As we enter the 2021 season a little wiser and more experienced, we wanted to share with you some helpful insights and what to watch out for when it comes to toll processing.
Toll processing is when a grower goes to an extraction company and pays them to extract their biomass using the processors facilities for a price per pound. A common toll exchange is known as a split. Splits are when the grower gives up a percentage or portion of their finished extract in order to pay for some or all of the extraction. In theory, split tolling could be viewed as a mutually beneficial opportunity. In reality, there are issues which can compromise the integrity and profit of your crop. Understanding these common pitfalls can help guide growers towards sustainable solutions in how to make the most out of their hemp.
3 Common Pitfalls of Splits
1. Creating a Competitor
New companies often want to do splits because they have a demand for oil and don’t yet have the capital to produce it independently. One popular claim that comes with splits is that the extraction company will help secure a path to market. The reality is that the processors will always sell the oil they have acquired from the split first. There is rarely an incentive for them to promote your extract. You have now created a competitor.
2. Compromised Quality
Choose a company who can manufacture a marketable oil. In addition to showing third party certifications, it is important that they are able to deliver a finished oil. There are industrial scale processors who are offering extremely low pricing for extraction, but they are delivering an unfinished product known as ‘crude’. This means more investment is necessary in order to further process the crude before it is a usable ingredient or market ready product. This diminishes what appears to be an efficiency and increases your cost exponentially by requiring you to take extra steps to create a sellable product from an unfinished extract.
3. Lack of Sustainability
These low-cost companies tend to be startups or businesses who are new to hemp extraction. For the client, this means they are not using practices that have been tailored to hemp, leading to inefficiencies and learning on your material. It is common that they will use you for their short-term benefit and not develop a long-standing relationship. These one-time exchanges give you the promise of a quick fix while your investment is left in limbo. If the company is new, there is the risk that they will go out of business which results in agreements that are not honored, and you may not get your oil. Time and time again, we have seen these players over promise and under deliver.
Developing a Feasible Plan and Sustainable Solutions
1. Transparency and Quality
Find a company you can trust. This can be recognized through third party certifications such as cGMP and USDA Certified Organic, where you get to see and verify the process. These qualifications create a marketable oil that open pathways of trust between farmer and extractor. Check your integrity databases to see which trusted partners are recommended for quality product delivery. History, experience, and reputation in the community can back these certifications with integrity.
2. Rolling Pay Outs
Extracting everything you have right away isn’t the only option. Phases of extraction can be folded into your plan as you establish your budget. Collaborative planning allows you to wade in, as opposed to diving, while spacing out your quarterly needs. Finding a company that will work with you is important in finding a sustainable system for your company’s needs. This gives you freedom to understand the evolving market trends and develop your path to market. Rolling pay outs allow you to strategically plan without compromising the integrity of your oil.
3. Take Action
Do your research and call around. Consulting is part of what FSOil offers for free in order to help you find an array of solutions. Since we emerged in the hemp industry in 2016, we have tolled for operations spanning large retail to small boutique farms. We customize our processes to your needs. We can help you find an extraction solution that falls within the multitude of hemp growing and processing methods based on our experience.
The important thing is to find an extraction company that will help support your unique needs while supplying you with a reliable and quality finished oil. Transparency and experience should be the common thread that helps build the foundation of trust from the field to finished product. Click below to visit integrity certifications prove that we are a company that you can trust.