The Role of CBD Hemp Brokers
The consistent demand and steady rise of the CBD market has been a boom for many of those involved within the industry — from growers to harvesters and CBD hemp brokers. New markets across the globe are increasing on a seemingly daily basis with widespread legalization and public acceptance opening new doors from seed to sale. Increasing demand of any crop can lead farmers and growers towards skyrocketing profits when all of the right cards are in order. A few oversights or missed connections, however, can turn fields of green dreams into barren disappointment resulting in lost sales and wasted crops – disaster for any farmer.
Enter the CBD hemp broker. A good one can build connections and help a farmer turn crops into profits. A great one is a precious resource in the CBD and hemp biomass markets and will have plenty of experience, in depth knowledge of market trends and movements, and ensure deals are done with the best interest of each party in mind. A bad broker should be avoided at all costs and can cause much more harm than help to an unsuspecting and unseasoned hemp farmer.
The Role of a CBD Broker
One of the largest challenges a hemp farmer encounters is how to find buyers of their crop. A broker is essentially the middle man between a farmer and a buyer. Brokers utilize their (hopefully many) relationships and market experience to connect farmers and buyers into a situation that is mutually beneficial for both sides. A good broker is not only an expert salesperson but also a high-level communicator and connector who uses their expert knowledge to get certain hemp crops in front of interested buyers and vice versa. By utilizing their different relationships within the industry, an ideal CBD hemp broker will be able to sift through offers and generate interest between parties, taking that huge responsibility away from farmers and allowing them to focus on growing the best possible product. The job of the broker is to facilitate the best deal possible to maximize profit while also offering advice on when and who to sell to.
How does the Broker System Work?
In order for raw biomass hemp to enter the marketplace and be turned into any of the multitude of CBD products out there, growers must get their plants into the hands of processors, distributors, and manufactures. This is the basic starting point of any commodity trade and hemp is no different. The broker system operates through licensed brokers buying or selling commodities on contract for their clients and charging a commission for this service. The system takes away the difficult task of finding and securing buyers out of the hands of the farmers and ensures the sale of the crops at a high market value.
The commission a hemp broker charges can vary and is usually decided upon through negotiations with the seller (hemp farmer/grower) at the beginning of the potential deal. A common commission is 10% of the total sale but can fluctuate as high as 25% and everywhere in between. An industry standard for these commissions should develop with the growing market, new regulations, and need for compliance with the expansion of the hemp/CBD trade but current commission rates can vary greatly from broker to broker. Be sure to examine any brokers history of experience and reputation before agreeing to any deal. A large commission rate does not always command a better broker, though a great one can easily make an argument that their service and expertise is worth over the standard 10%.
What does a Broker do?
A hemp broker is the intermediary between seller and buyer and negotiates the contracts of sales and purchases between the two. A successful deal between these two parties is, more likely than not, made or messed up by the skills and capabilities of the broker. In the good old days before legalization, these brokers often turned up in the form of middle men who growers trusted with their crop out of the desire for large amounts of cash and a quick sale of their crop. Many deals were completed through word-of-mouth or even text message exchanges with the underground nature of the market making it hard to find up front information on a broker’s experience or reputation – trusted sources were passed on from grower to grower.
The current cannabis landscape lends more towards brokers with tangible professional experience and considerable contacts within the deal making world. There are still plenty of mediocre to all-out unscrupulous people out there claiming to be brokers while really only looking for a big deal to cash in quickly, without regard to the best interest of the others involved. As compliance becomes more and more common, this should eliminate the potential for bad brokers to stay involved but growers and farmers should do their best to vet out those they do choose to work with.
Check out how to spot a bad broker here.
Breakdown of a Broker Agreement
It is becoming common practice for all parties involved with a hemp biomass/CBD sale to formulate the necessary paperwork to facilitate the deal and stipulate the terms of the agreement. This is to make sure the sellers get the agreed upon price, the buyers get the product they are paying for, and the broker gets their commission for setting up and securing the deal. Some brokers still don’t operate with all of the below, but consider implementing this paperwork to provide assurances in the event of a worst case scenario. It’s always best to have things in writing, as any lawyer will instruct.
Non-disclosure/non-circumvention agreement – often the first piece of paperwork a broker will setup between themselves and the buyer and seller. This agreement usually needs to be signed before any real business is discussed as it protects the broker from being bypassed and allows them to begin negotiations without worry that the buyer and seller will work directly with each other.
Letter of intention – this is a basic outline to the terms of the deal. It should include the description of goods being sold, the price, and the names of all parties involved. This letter is non-binding but serves a purpose to show a record of good faith to commence a deal.
Full contract – after the basic terms to the deal have been agreed upon, it’s time to draft and sign a full contract outlining the many important conditions of a CBD/hemp biomass sale. Some important areas of focus to draw up include: delivery, form of payment, timing of payment, dispute resolution, confidentiality, and risk of loss – just to name a few.
This paperwork can go a long way towards providing confidence in the broker and the deal they are working up for your product or your cash. With large amounts of money at stake, proper contracts can ease worry and cover each side against any potential pitfalls along the way. A good broker will use these agreements and the full-blown contract, alongside their experience and network, to create value, quality, and confidence from the start of every deal and throughout every step along the way. It is more than worth the effort to find a trusted and experienced broker who is willing and capable to go the extra mile to make all parties feel comfortable and positive about the arrangement at hand.
For further insight into hemp brokers, how they operate and how to go about working with them check out these links:
Farm Products Industrial Hemp FAQs
Check out recent CBD/Hemp Biomass spot prices here