CBD oil processor, hemp farmers splitting profits in emerging market – Agweek

FARGO, North Dakota – A North Dakota company is growing to become one of the first hemp processors in the state for the cannabidiol or CBD market, which is becoming increasingly popular with consumers because of its supposed health benefits.

Prairie Products LLC, a company in southern Fargo, uses ethanol to extract hemp oil, which is associated with marijuana but has many industrial applications.

He does not buy hemp, but processes it for small producers in a split-profit marketing deal that does not match the large-scale agricultural commodities typical of farms in the Upper Midwest.

The company began acquiring processing equipment about a year ago. Its rented area of ​​6,000 square meters includes an office, biomass processing and refueling facilities.

Initially, Prairie Products purchased hemp biomass from Oregon to launch the plant in June 2019. Last fall, they began looking for hemp locally and brought their first batches in January.


Vaughn Priewe, Production Assistant at Prairie Products in Fargo, removes CBD hemp oil using an ethanol process. The photo was taken on February 3 in the southern part of Fargo. Mikkel Pates / News Forum

All said, the company has gone through about 10,000 pounds of hemp biomass – the equivalent of about 10 acres.

Tom Cadding, the company’s chief financial officer and chief operating officer, says most hemp growers for CBD oil grow less than 5 acres from the crop.

The company does not buy hemp for food or fiber markets, but retains most of its fiber by-products and is looking for feed or other market applications.


CBD’s Colorado Winter Crude Oil, manufactured by Fargo’s Prairie Products, is like sticky molasses. Enters retail products advertised for various health benefits. The photo was taken on February 3 in the southern part of Fargo. Mikkel Pates / News Forum

Veronica Michael, the company’s chief executive and director of sales and marketing, and Kading say the hemp market initially gained viability after a 2014 farm bill that allowed hemp to grow for the seed market.

Things opened further in December 2018, when a new bill on federal farms was passed that allowed all 50 states to enter hemp cultivation and CBD processing if they choose to allow it.

In August 2019, the price of CBD oil fell sharply, in part due to the influx of new processors coming online, says Michael.


Mackenzie Kouba removes ethanol from the collection tank to circulate through the process at Prairie Products, a new player in North Dakota’s CBD oil refining business. The photo was taken on February 3 in the southern part of Fargo. Mikkel Pates / News Forum

Another company, 1881 Extracting, built a plant near Hillsboro, ND, using a carbon dioxide treatment method. Farmers say a third company processed the 2019 harvest at a plant in Fergus Falls, Minnesota. Prairie Products officials say there may be a dozen processors in the Minneapolis area.

There is a process even before farmers start harvesting hemp.

Fifteen days before the harvest – around mid-September – state inspectors go to the farm to check that it meets the efficiency limits. Hemp must contain less than 0.3% THC – a small part of the highly inducing agent found in marijuana.


Riley Eser of Perham, Minnesota, cut his CBD hemp crop with a chainsaw and then hung the branches in a shed. It sells much of its 2019 harvest to Prairie Products LLC, in Fargo, on a “split contract”, meaning it receives a share of the crude oil the company offers on the market. Photo taken in October 2019, near Perham, Minnesota. Photo courtesy of Riley Esser

Before importing raw biomass into the plant, Prairie Products requires farmers to send tests to a third party for testing. Once qualified and imported, Prairie Products sends samples to Fargo’s Adams Independent Testing to check for CBD and THC potency testing, as well as testing for unwanted metals, pesticides, moisture and mold.

Large acre farmers are known to use harvesters, but most harvest by hand for CBD oil, with chainsaws, machetes or weed whips. Farmers often transport the cut stalks to the barn, hang them and air dry them to about 10% moisture, sometimes with the help of a dryer. The 2019 harvest was difficult, including after the harvest.

Once dry, farmers “throw it away” – cut small branches and put it in a “super bag”, a breathable bag of about 500 pounds. Finally, farmers are responsible for delivering the plants to the factory where they are processed.

Then the farmer has two options.


Riley Esser, a residential plumber and hobby farmer from Perham, Minnesota, grows 2 acres of hemp in 2019. He started the plant in a greenhouse. It stands among plants in July and the plants grew to about 7 feet tall when he harvested them in October. Photo courtesy of Riley Esser

“We just either give (farmers) that opportunity to either get their oil back, or when we put our material on the market, we sell it (to them),” says Kading. “I’d say nine out of 10, that’s how it’s going to be.”

Under a “split” contract, Prairie Products is looking for hemp with a CBD content of 10% or more. after being collected and dried. The processor and the farmer divide the crude oil product into CBD on the basis of biomass efficiency – often a 50-50 ratio, with a higher share for the farmer if the CBD efficiency is higher.

“We don’t promise an inspection at the end of the season,” said Kading. “We say, ‘We don’t know what the market will be like. We will process it and deliver it to the raw raw market.

When Prairie Products sells CBD oil to the farmer, their commitment is simply to “sell it as soon as possible,” Cadding said.

The company sold some to local retailers, but they were largely waiting for prices to rise.

The company’s raw CBD is sent to other processors to become retail products.


Farmers supply raw hemp biomass, dried to 10% moisture, to Prairie Products in Fargo. The company uses 190-proof denatured ethanol to remove CBD oil. The photo was taken on February 3 in the southern part of Fargo. Mikkel Pates / News Forum

The industry can benefit from a better assessment of quality as it moves forward, says Michael. Michael finds hemp prices on the physical goods exchange or the PanExchange website, among others.

Michael says the industry expects the US Food and Drug Administration to come up with clearer regulations, which are expected to be published between March and July. Then Michael believes that prices may rise in the third quarter of 2020.

One of the farmers Prairie Products sells to is Riley Esser, a plumber and hobby farmer from Perham, Minnesota, who grew 2 acres of hemp in 2019. He says he is happy with the split contract and has high hopes for Prairie Products and his competitors.

“I think it’s really exciting, and I think the United States has been out of the game of hemp for too long,” he said.

At Prairie Products, workers place hemp biomass in an 8-gallon container of 190 denatured denatured alcohol. Soak it for 15 to 25 minutes. This dissolves the oils. (The processing plant usually has less than 120 gallons of ethanol on hand.)

Later, they evaporate the ethanol for reuse, the first stage of distillation, which leaves the final vegetable oil separate. They use a “decarboxylation” process to convert it to the CBD form and squeeze the last CBD with a screw press.

The ethanol product is recycled in the process about nine times before depletion.

About 35% of the CBD market is in tinctures – a mixture of CBD with another base oil, such as coconut oil. The user can use a small bottle and apply drops in the mouth.

The second market is for spray-dried products or gelatin capsules. A third product is topical remedies, which are lotions or products for rubbing the neck for some healing effect.

Prairie Products was established under another name in 2013 and reorganized in October 2017 and focused its energy on CBD hemp oil.

The company’s employees come from the Red River Valley area, but with different experiences:

David Holland, The company’s registered agent is Lisbon, a North Korean native, and Fargo Real Estate and an agricultural businessman. In 2013, Holland began to organize investors.

Veronica Michael, 47, is the CEO of the company and director of sales and marketing. She is from Climax, Minnesota, and holds an English degree from Moors State University of Minnesota. After studying couple and family therapy at North Dakota State University, she spent 15 years managing enrollment at NDSU and MSUM.

Tom Cadding, 32, is Chief Financial Officer and Chief Operating Officer. A native of Parkers Prairie, Minnesota, Cadding received a degree in civil engineering from NDSU in 2010, then a master’s degree in business administration and a degree in law from the University of North Dakota in 2013. In 2012, he co-founded Precision Angels, a company that bought and renovated residences in Arizona, Florida and North Dakota. Kading later worked as CFO for Precision Venture, a company that raises capital for real estate and technology companies.

In 2013, Kading became an investor in Prairie Products, and in November 2018 he was appointed CFO.

Kevin Soisset, 56, Fargo is a quality director and also an investor. Soiseth has a bachelor’s and master’s degree in microbiology and has worked in the pharmaceutical and food industries for 35 years and maintains a full-time quality director at Swanson Health Products, a Fargo company that makes vitamins and supplements. Soiseth says one of the problems with quality control is that CBD oil is largely “unregulated.”

Shareholders: Michael says he has more than 20 shareholders – half farmers in the Red River Valley area and the rest medical professionals.

Due to the risk of an emerging market, the company raises funds from “qualified” investors, which means that they must have a net worth of more than $ 1 million and an annual income of over $ 250,000.

The company sold about half of its 10,000 shares. Investors had to invest a minimum of $ 32,000 per share. Michael says the company no longer actively advertises equity stakes, but has applied to the North Dakota Development Fund through the North Dakota Sales Department. They are also applying for a grant from the Commission for Agricultural Products and Use in order to convert part of their crude oil into a distillate product.

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