Hemp Industry Opportunities: CBD Extraction
Cannabidiol (CBD) Defined
Cannabidiol, more commonly known as CBD, is one of the two primary active ingredients in the cannabis plant. The other is tetrahydrocannabinol, or THC, which is responsible for the psychoactive effects most often thought of when one thinks of cannabis. CBD, however, has no known psychoactive effects but, is known for a wide range of claimed health and wellness benefits. Interestingly, CBD and THC have the exact same chemical structure. However, there are slight variations in how the atoms are arranged, which explains the different effects on the body.
Over time, evolving public opinion and understanding of hemp, have led to changes in laws both nationally and at the state level that has given rise to bustling new industries and market opportunities. Overall, the total legal cannabis market is expected to be worth an estimated 23 billion dollars by 2025. CBD specifically is expected to be a 1.8-billion-dollar industry by 2022. It is clear the demand for CBD is prevalent and growing.
Under current law, CBD derived from hemp is legal nationwide. This is a recent change made under the 2018 Farm Bill where, until the 2018 bill, hemp was not differentiated from other types of cannabis and was classified as a controlled substance. Hemp, as defined in the bill, is cannabis that contains less than 0.3% THC. This legalization of hemp and hemp-derived CBD has paved the way for several products. You can now purchase CBD in various forms such as oils, tinctures, infused edibles, creams and lotions, skin patches, vaping products, and more.
The vast and varied products containing CBD on the market all require one thing: CBD. Rarely do the hemp cultivators who grow and harvest the crops own the extraction equipment required to elicit the CBD from the plant. The need for the extraction of CBD is paramount to the existence of this market. This allows the extractors to take a substantial portion of hemp harvest profits, making extraction a very viable industry in the booming hemp sector.
Extraction methods themselves are as varied as the uses of CBD. There are multiple extraction methods, all with their own unique costs, equipment, outputs, and pros and cons. The three most common are CO2 extraction, ethanol solvent extraction, and olive oil extraction. CO2 extraction yields extremely pure CBD and is considered fully safe for human consumption. However, the equipment for this method is currently very expensive. Ethanol solvent extraction is more cost-effective and has a greater yield. However, this method is not as pure and can also be highly dangerous as the solvents used in the process are highly flammable and combustible.
While the first two methods are suitable for large commercial production, the olive oil method is only feasible for a smaller scale. The results are not as pure and therefore limit the finished products in which the CBD can be used. However, given the affordability, it is a common choice for at-home or small-scale extraction.
CBD Extraction Opportunity
The opportunities lie not only in the process of extraction but, in the extraction technology itself. As companies continue to grow and scale in this industry, they are eventually going to want to own more, if not all, parts of the process from hemp growing to the finished CBD product. This has paved the way for manufacturers of extraction equipment.
Currently, demand far outweighs supply, and as a result quality CBD oil, one of the most common forms of CBD, is priced between $0.09 to $0.17/ mg on average. The average price varies depending on potency with higher potencies costing less per mg. A bottle containing 300mg could cost up to $120 and a bottle containing 1500mg could cost up to $250. The potency desired would depend on the intended use of the oil. Thankfully, these prices are expected to decrease over time as more players enter the market.
CBD extraction is just one of the many industries flourishing as a result of the national legalization of hemp and the legalization of other forms of cannabis in various states. Many opportunities have emerged, and we will continue to explore them in this series on hemp.