🎙️ Samson Extracts, CEO, Kyle Neathery
🎙️ Samson Extracts, CEO, Kyle Neathery
Kyle Neathery has leveraged his experience from Cannabis, Aviation, and Oil & Gas into quickly building Samson Extracts into a top 10 hemp processor.
Background. Kyle Neathery is the CEO of Samson Extracts, an Alabama-owned and operated manufacturer of high-scale CBD extracts. Previously, Kyle served as the Director of Operations and General Manager for High Life Farms, a privately-held, family-owned cannabis company operating 150,000 square feet that includes a portfolio of cultivation, manufacturing, distribution, in-house brands, brand partnerships with Wana Brands and Kiva Confections, white labeling solutions, and ownership stakes in retail dispensaries. High Life Farms has won multiple High Times Cannabis Cup awards for manufactured products and was featured on “Cannacribs” in late 2021.
Kyle has extensive experience in manufacturing, process design and development, organization design and development, business turnarounds, process technology, supply chain, and metric development for businesses. Kyle also held previous positions as Senior Business Consultant at Southwest Airlines, a Senior Consultant for Oil & Gas and Aviation at PricewaterhouseCoopers, and a Program Founder of the Fraud, Waste, and Abuse Operation at the Deepwater Horizon Economic Class Action Settlement (BP Oil Spill).
Samson Extracts. Samson Extracts is an Alabama-owned and operated manufacturer of bulk CBD products. The company processed over one million pounds of hemp biomass in 2023. This milestone achievement places Samson within the top ten hemp processors by biomass extraction volume in the United States, with the company’s full spectrum CBD distillate (FSD) distributed nationally to many of the country’s top hemp and cannabis operators and wholesalers.
Samson Extracts utilizes a GMP-certified, complex industrial-scale extraction system to produce winterized and decarbed crude FSD for a diverse range of products. With this year poised to be crucial for the hemp industry as the framework established by the 2018 Farm Bill is updated, Samson Extracts is scaling its operations to meet the demand that is expected to come with further fair regulation of the hemp-derived cannabinoid market. In 2024, Samson Extracts anticipates to nearly triple its biomass production while remaining one of the lowest-cost hemp processors in the country.
Resources. Additional information that we discussed during the podcast.
California produced 56% of all U.S. hemp flower, which is used to extract CBD and other cannabinoids, including intoxicating hemp-derived THC
Kentucky produced 1.8 million pounds of hemp flower in 2022, more than Colorado and Oregon combined.
Overview
Samson Extracts' Operations and History. Samson Extracts processes over a million pounds of hemp biomass annually using large-scale equipment at an 85,000 square foot facility. Kyle improved yields by engineering existing equipment to proper specifications
Lessons from Previous Industries and Regulations. Kyle applied experience from highly regulated industries like Aviation and Oil & Gas to the Hemp industry. While hemp requires balancing business and plant knowledge, his experience within large-scale operations helped him bring disciplined standardization to the industry.
The Hemp Processing Industry and Samson Extracts' Role. As a major hemp processor, Samson Extracts focuses on extracting CBD from biomass at large volumes and scales far beyond standard labs. It supplies distillate primarily to other processors who further refine it, unlike most who only process extracts.
Revenue Streams and Growth Plans. Samson Extracts plans to get into topicals, CBD isolate production, and selling spent biomass as an agricultural fertilizer. It aims to process three million pounds of biomass annually through capacity expansion and strong customer demand outpacing current supply.
Ownership Structure and Financials. Samson Extracts is solely funded by a local individual, operating debt-free on over 20,000 acres of farmland. It aims for decades of extraction operations while exploring fiber and seeing hemp as a crop diversifier like other agricultural commodities.
The Future Outlook for the Hemp Industry. Demand has recently been driving by the strong interest in hemp-derived Delta-9 Beverage sales.
Transcript (lighlty edited)
@0:00 - Kyle Neathery (Samson Extracts)
My name is Kyle. I'm the CEO at Samson extract currently. We are a large manufacturer in the state of Alabama, more specifically in South East Alabama.
And we focus really on large scale production of tent manufacturing. And really, we focus on CBD out of store, not at what you do in a standard extraction lab and regulated cannabis, but really large scale, large equipment and large output.
Prior to coming here, it's an instant to help run this operation and get things moving, operated as the GM and director of operations that highlight farms and Chesapeake, Michigan.
The first licensed marijuana licensee in that state. And we did a lot of good there. We did cultivation, massive amounts of production, upwards of 400,000 packages a month of edibles: gummies, chocolates, mint, pre-rolls, concentrates, flower, kind of the whole nine yards there. Focused on just being a massive manufacturer there in the state of Michigan.
We did have the opportunity to be featured on Canna Cribs when we were at Highlight Farm. So that was nice. Some people got to see, you know, what we did from a production perspective there. But that was really my first role in cannabis.
prior to that, I was the chief of staff of a large department at Southwest Airlines, where I focused a lot on departmental operations, technology projects, typical organizational structure and factors there.
So I did a number of things at Southwest. And prior to that, I had my nerdy career at PwC, where I was in advisory consulting and people & operations, with most of that oil and gas and aviation.
And then prior to that, I worked on the Deepwater Horizon economic class action settlement, which is also known as the Deep Water Oil Spill as an intermediary between the claimants and council working through the federal government to make sure that claims are being paid properly and also performing fraud investigations on any suspect claims.
My career has been a little all over the place but since 2019 I've been heavily operating here in the cannabis space today.
@2:21 - Dai Truong (Arlington Capital Advisors)
Yeah, I was going to comment on that, going from kind of fraud waste and abuse management program, managing that, then going to an accounting firm and really focusing on the advisory side of aviation airlines and then really jumping into cannabis. And then from there now CBD which pretty much are similar to each other but still a very different kind of four industries you've had and very different roles you've had at these companies.
So with that background that's so diverse, what has really helped you and where you're at today with Samson and sort of what lessons you take from some of your previous stops.
@3:00 - Kyle Neathery (Samson Extracts)
The big one is I, you know, I sometimes get, if you look at my resume, some people would see that I may have had a history of job hopping or things like that. But that wasn't really the case. As I started my professional career, I was always willing to take professional risk.
You know, I never had a mentality of I need to stay close to home. I only want to do this thing. And kind of the way it went is, I always love new opportunities. And when I felt like I wasn't being challenged or my knowledge gain or level of experience gained was being capped.
Always got a little squirrely, because I, especially younger in my career, I was like, I need to keep learning more, need to keep learning more.
So I always took a few more risks to move to a different option or a different industry and that was certainly the case with Cannabis. I had a good resume with the high position at Southwest Airlines.
And I definitely was thinking 10 or 15 times, because cannabis is very cool here now and you see a lot of people coming into the industry. But in 2019, it felt very risky at that time, but I decided to do it and it's worked out really well.
But the big one, when I go through and [think about] how some of the previous experiences I have prior to cannabis, and I actually have a presentation that I would do at conferences about this, and I don't know if people like it or not.
But the biggest one is that cannabis isn't really so different from other industries. And I think if you're in the industry or you're a watcher of the industry, it's always this mastercraft, mystery like things are done differently.
But it's really, it's way more similar to normal industry than I would say that it's different. It certainly has a weird mystique because of what it is.
But much like all the other industries, there's inputs and outputs. There's a process that converts that process, and you have to look at it the same way you do other industries.
There is a balance there that you have to have business disciplines that you have in the other ones. And I would say the other piece that's hugely translated, whether it's that the oil spill, PwC or even at Southwest, I've generally worked in fairly highly regulated industries for the most part. And everyone thinks cannabis is super regulated. There's this heavy level of regulation. Well, go work at airliner for two or three years and tell me if you think cannabis is super regulated.
So I've gotten a lot of experience in highly regulated industries. So for me, I was really used to the regulation that I think so many people bark about or complain about.
I think it's an appropriate level of regulation. Some states do things differently than others, certainly. But it's there for a reason because you have to create consumer confidence and it's especially important to have a decent amount of regulation at the beginning so that you can set standards and have it moving forward.
But really, when it all boils down, it's really not so different. There's definitely different knowledge that you have to understand.
But here's one thing I will say that is different for cannabis between the two is that, you can't be all business, that's one lesson I've learned in cannabis is, you can't be robotic, you have to have a healthy blend of those that understand the discipline and the principles of business.
But you also have to have a blend of those that are lovers of the plant. And they understand the plant and what it does that other things don't do.
I think when you can really have a healthy balance between those two worlds. I think that's where you really create the magic solution.
There's companies that are overly heavy on the business side, and they probably do things or make decisions that customers don't really appreciate that usually would be over-SKUing or maybe expensive products, maybe they decide to remediate flower because it creates a better unit and people, you know, customers and end users don't necessarily like those things.
But if you're overly [heavy] on the cannabis fan or lover side, they may not be necessarily worried about costs or why do you need to create revenue and some of those decisions, so you really need a healthy balance between the two.
@7:07 - Dai Truong (Arlington Capital Advisors)
And help us understand more about Samson Extracts, tell us who your customers are, why do they come to you, how are you differentiated from other hemp processors?
@7:16 - Kyle Neathery (Samson Extracts)
Yeah, the big differentiation, when you look across the scale of hemp processors, is you have a large portion of the hemp processors take in extracts and then they do other things with them, so they might be taking CBD and then making CBD products with them for end user use.
They might be taking our CBD and making it into isolate. They may be taking CBD and then converting it into other cannabinoids, that's very popular right now.
So what we do and what our goal is, we want to extract as much CBD as we can. And why it's differentiated, a large proportion of the processors in the industry, they just take the extract and do their thing with it. There's very few of us at high scale that are actually interacting with the plant of hemp itself, processing that, extracting it so that those downstream processors can be a beneficiary of it.
So that's really what our big focus is on. It's extracting as much CBD out of the plant as we can.
And then I want to say almost 100% of our business is B2B transactions. So we really see ourselves in the position we're currently in as an ingredient supplier to other hemp processors.
We do the dirty work so that they can do a little bit of the easier work. So the differentiating factor is how large of equipment we use, how big of a scale we have.
If you go into a typical licensed marijuana extraction lab, you're probably talking 1,500 to 2,500 square feet and all of the equipment fits into that one area, and they're able to do all of their processing. Well, for us, just our main facility, we’re close to 85,000 square feet. And we do extraction outside with large equipment that for those that aren't familiar with the industry, it would look much more like you would see in oil and gas, midstream crude processing facility with very large towers, a lot of stainless steel, a lot of major motors, big pumps, things like that that you wouldn't see in traditional cannabis extraction, if you've been in those facilities.
So that's fun. It's very challenging and it creates other issues, because when you're in typical extraction, a lot of the equipment is plug and play. You plug it in, there's usually an instruction guide, a manual that goes with it, and you turn it on and it does its thing.
Well, for us, because of our large scale, it's just not quite that easy. You know, a lot of the equipment that we're using here on site, whenever it was created or designed, extracting for cannabis was nowhere on the radar for that piece of equipment. So we're trying to take old equipment, not old equipment, but older designed equipment that was intended for cannabis and then actually using that to actually create our process at a much larger and higher scale.
@10:19 - Dai Truong (Arlington Capital Advisors)
Got it. So if I understand correctly what you said, there are very few that sort of take the plant and then process it, which is what you guys do.
There are many more that will take what you've done, add other materials to it and then sell it to potentially, retailers or maybe make products out of that for brands.
@10:39 - Kyle Neathery (Samson Extracts)
Yes. Yeah, that would be it. Yeah, they may even take our product and then they turn it into another ingredient for another product stream.
So exactly, you’re spot on. We are really working with the plan at high scale, but the large majority of processors actually use our input to further their processing.
@10:57 - Dai Truong (Arlington Capital Advisors)
And you guys recently came out with an announcement, end of February saying that you process over a million pounds of hemp biomass in 2023.
Help us understand, when you go from hemp flower pounds down to biomass, like what's that ratio? So i'm referring to a MJBizDaily article that also recently came out saying california for example as a top producer of U.S hemp flowers and in 2022, they processed 6.3M pounds.
@12:00 - Kyle Neathery (Samson Extracts)
So for us, a lot of times we're getting it as it's biomass and depending on when the States are collecting that data when they collect in their process. A lot of times whenever the farmer is finished with their harvesting those are the pounds they're reporting. So it is likely that data that's being reported is probably post-harvest biomass. Now the one big factor that you'll see is as hemp is growing and people are growing on acreage that starts to expand, meaning there's hemp operations we had known of that grow beyond 1,500 acres of hemp, which is crazy.
Where you would see loss from what you would see true pounds depending on the level of mechanized harvesting that they're integrating with. So there are farms that are using much like traditional farming, large combines, large harvesters to actually pull their hemp out of the field so that they can control their harvest costs.
That is a big piece to the equation but typically when we get it it's in its biomass form. And for those that are growing CBD flower, if they're truly intending it to be extracted, every bit of their flower is going to be utilized within the biomass. And sometimes it's even more than that. We have to be disciplined when we're specing out our farm, what they're growing. Because sometimes you can get biomass where a farmer integrating a lot of stem into it, some stalk into it and things like that that of course harm our yields from our production perspective but those numbers probably are truly biomass and where the next piece goes into is how that farmer has a preference of processing that biomass to be sent out.
We do see there isn't quite a great standard across the nation. You have some farmers that will have it fully butted maybe even still have it on stem. There's some farmers that might use a chop on it so that you can get your biomass to a more finer state, but it's not quite fine enough, and then you have some farmers that will completely mill the product into a small, not necessarily a powder, but a very small particle, and typically the reason you would want to do that is because you have more storage capability and super stacked bag so you can put more pounds on a truck than you could if it was butted because we know buds have air and other forms of mats in them.
If you asked what our preference was, we're probably somewhere in the middle of that. But yeah, when you say biomass in the hemp industry, that kind of reflects the flower and everything that would be sent to us.
@14:21 - Dai Truong (Arlington Capital Advisors)
So that would make you guys probably the market leader, in terms of processing, especially with your stated goal of doing about three times that amount this year, so processing three million pounds of biomass?
@14:35 - Kyle Neathery (Samson Extracts)
Yeah, we certainly see ourselves in the top 10. I think there's an argument to be made that we're in the top five.
It's an industry that's tough because there isn't a lot of data on how many companies are processing what poundage and things like that.
A lot of our data collection is word of mouth, networking, know, type of stuff because there are some benchmarkers in the industry but they're only as good as the information they receive. so we definitely are in the top 10. I believe that we're probably in the top 5, it's tough to fully confirm those numbers.
But, if you were to talk to people in the industry, they know that Samson Extracts is a serious mover when it comes to the processing of hemp.
@15:20 - Dai Truong (Arlington Capital Advisors)
And when you're competing with some of your top 10 [competitors], how do you guys, you kind of mentioned to me, your equipment and your process really helps you stand out. But from a consumer or I guess, a customer standpoint, is it coming down to price or what other considerations for customers are there?
@15:40 - Kyle Neathery (Samson Extracts)
What's different about this is there, it kind of depends on what product you're putting out to the market.
You know, there's major producers that focus on just processing crude and selling that out. There are major producers that want to make distillate and they'll send that out and there's other producers that want to take it. So sometimes you have a differentiator based on what kind of target product that you're putting out on the ingredients side because when you're looking at who we see as our customers, they have different processes or different intentions for what that product are.
So we definitely see that. I will say that we at Samson play a volume game. We make a good product, a good quality product, but we definitely don't reference at this time not pounding the pavement that we're a high premium provider.
And so you see some differentiation on that side with folks who will make a super high potency CBD distillate.
That's just not really in our game plan right now. For us, we make a good product, in massive volume that a lot of people can use in very flexible ways.
And that I think that's really where we kind of see from the differentiation side is this high volume and high scale.
I think a lot of times in this industry, especially when you look at brands on the retail side, there's a lot of claims about high premium and things like that.And if you're going to say high premium, high quality, you better be there or people will get frustrated. But we really are trying to, don't want to downgrade what our product is, but I think we really see ourselves as Costco, or Walmart, Costco, Walmart, when it comes to the products that we're putting out.
And I think that's appropriate for us because we are shooting for high volume and it's hard to track the super high quality and super high volume at the same time.
@17:38 - Dai Truong (Arlington Capital Advisors)
And what are you attributing to that growth? Is it customers wanting more hemp to be processed this year? Or is it new customers?
What's kind of that mix going from a million, to three million pounds of hemp biomass at the yield processed this year?
@17:54 - Kyle Neathery (Samson Extracts)
Yeah, well, the big one, if you ask me why we're continuing to increase is because we can't, we cannot fill our customer demands right now. We are manufacturing what we are at our capacity and we could sell more. So when you look at it, at it's core, that's the main reason why we are continuing to chase capacity.
The other big one is that when I started at Samson in ‘22, there's a lot of equipment here and it just wasn't working correctly, it wasn't working appropriately.
And so what we've really spent the last few years doing was reengineering existing equipment, changing out some equipment that wasn't hitting spec. And really, we've taken a lot of the equipment that's here on site and actually engineered it properly, rebuilt it.
And we got scale just by making sure that the equipment could operate appropriately. So I wouldn't say that, really, we've been changing all this equipment now and changing all these things out and doing all these crazy projects. We’ve certainly have been a lot of projects, but a lot of our projects have been to take the existing equipment and just making it work. And that scale was created to where we got this million pound mark, you know when I started when I started in ‘22, I think we were hitting 16,000 pounds a month And we're we're a far cry away from that now just by making sure that the equipment was engineered and built properly
@19:27 - Dai Truong (Arlington Capital Advisors)
And then after your customers buy your products, what are they turning into like give me an idea? Is it the majority? CPG products are some of it for building materials where are most of the inputs going?
@19:35 - Kyle Neathery (Samson Extracts)
Yeah, the CPG side is definitely the minimum right now. There isn't a tremendous amount of activity on that front.
There was at one time But I think that the CBD and user product especially when it comes to ingestibles and edibles I think has been hit very hard by the introduction of psychoactive cannabinoids So there isn't a large market for CBD and user products, in comparison to the other ones. Let's say that's very low in our revenue percentage of what we're currently doing.
I would say the vast majority of people currently are taking our CBD distillate and they're turning it into CBD isolate. And that CBD isolate is being used for creating ratio products. If you want to do 1:1 THC:CBD, those things.
But where we're here in a lot of the activity right now is there's a large push for CBD isolate to go internationally. So there's a lot of international activity that's picking up for states that have newly, or sorry for countries that have gotten more newly engaged with cannabis style products. So there's a lot of international CBD isolate activity that's currently going on. We're hearing more about it every day, which is great. It's always great when US products are being exported and used in other countries. Everyone wins in those scenarios, but that's where I say, CBD isolates the vast majority that's doing that.
There's certainly a few customers that will take our products and they will use them for Delta-8 and some things like that, but I would say isolates the vast majority.
@21:16 - Dai Truong (Arlington Capital Advisors)
And Samson's going into Isolate in the summer, right?
@21:21 - Kyle Neathery (Samson Extracts)
Yes.
@21:36 - Dai Truong (Arlington Capital Advisors)
Currently, you're selling your distillate to customers who are venturing into isolate. If you are doing it yourself at Samson extracts, does that mean you're competing with your customers? Or is there not demand that you're not really competing with customers?
@21:51 - Kyle Neathery (Samson Extracts)
No, I don't think we will. I think if you, when we start isolate, I think that'll be a product mix. Ithink we would see a product. tech mix occurring, where we certainly would make some isolates, we would want to keep satisfying our previous distillate customers. So I think we will certainly make an isolate. But the other thing too, is when we start our isolate process, there's going to be a, there's going to be some adoption that happens internally, where we're going to have to dial things and it's probably not going to be perfect. It's probably not going to be the best scale. So in that moment, you know, we may not have that capacity, because we do have a large amount of capacity on distillate.
And to be able to get product out, we'll probably over capacitated on our distillation system. So we will still sell a distillate and things like that.
But we'll certainly want to grow that isolate capability. I think we certainly want to keep this split in the factors that we can satisfy existing special bases.
@22:52 - Dai Truong (Arlington Capital Advisors)
And can you help us understand unit economics on that? Like, what are you selling, you know, whether it's in a thousand pound increment? From a pricing perspective, what are you guys selling it for?
@23:04 - Kyle Neathery (Samson Extracts)
Well, we usually aren't we sell our distillate in 55 gallon metal drums. A typical 55 gallon metal drum would make up about 200 kilos So that that's kind of what our unit size would be for the vast majority is that we we push it out in massive steel drums. That's loaded and then they would receive it in steel drums and most of our most of the businesses we work with have abilities to heat the metal drums up and then have the just little it moves throughout
@23:12 - Dai Truong (Arlington Capital Advisors)
And what happens with those deal drums they just keep it or do you guys take it and bring it back after your next delivery?
@23:15 - Kyle Neathery (Samson Extracts)
We bake them into our cost We bake them into our cost and they keep on and then we get and they they use it for whatever purpose they have We did fiddler it kind of worked similar on the hand side You know when we buy hemp from farmers it comes in massive super sacks and those are super sacks, we repurpose. So it's just a factor in the cost basis.
@24:04 - Dai Truong (Arlington Capital Advisors)
Got it. And then if, you know, 200,000 pounds is the equivalent of about 4,500 kilograms of distillate a month. You don't have to tell me the exact number, but what price range are you selling, you know, a kilogram at, like, and I guess the bigger question, if you can reveal it, you know, whether it's a range or a number, is, what sort of the scale of Samson from revenue standpoint.
@24:29 - Kyle Neathery (Samson Extracts)
Yeah, so we've really been, you know, the markets changed really here these last two months, but we've sold distillate everything from $120/ kilo to upwards of $160/kg. So we've kind of floated in that realm. I'd say over time at pricing, I would say here over the last month and a half, two months has really been floating more in the $145–160/kg area, at least from what we've seen in the market.
@24:57 - Dai Truong (Arlington Capital Advisors)
Right. And there's an industry benchmark that you guys use to track, so it's a bit more consistent than let's say cannabis in a certain state that has a lot more volatility, right?
@25:08 - Kyle Neathery (Samson Extracts)
Yeah, it is. And some of that too, too, is that a lot of times the hemp extracts are sold at volume as well. If you look at flower pricing from a grower to a dispensary and things like that, those are usually smaller volumes, so that pricing can be very erratic based on whether it's THC quality level or this is the true quality of the buds. You can see a lot of volatility and flower pricing in the marijuana space because it's more small transactions. But we usually can hone in pretty good on the hemp side because there's a lot of volume moving, a lot of bulk deals, and so it can, it seems to validate itself a little better.
@25:50 - Dai Truong (Arlington Capital Advisors)
Any other revenue streams for the company?
@25:54 - Kyle Neathery (Samson Extracts)
We are going to be here, in the next two months, we are going to be launching a topical space retail line.
We are strictly topical. It's hard to have just CBD products, as I mentioned earlier, the Edibles and just foods space.We will be looking at making some topical lines that are focused on after sun care, lotion, things like that. We think that we have a good angle that we can make that work. So that would certainly be one that we'll be studying here over the next six months as we see that launch occur.
I'd say one of the cooler ones, from an innovation perspective, is as part of our sister companies. We have a large farming network where we grow cotton, peanuts, corn, soybeans, things like that from the true agricultural perspective. And one thing we've seen is that our spent biomass actually works as a great free plant fertilizer.
So we are taking, right now we've probably got upwards of two. two million pounds of spent biomass and next week we will be receiving a large industrial pelletizer. So after we've used our hemp from the extraction perspective, we're going to take our spent hemp and put that through a massive pelletizer and actually start creating a pre-plant fertilizer product for agricultural farms.
Some of our testing showed that we were competing with, if not better, than some commercial pre-plant fertilizers. So that's certainly an attractive revenue stream to an operator like me, because it's the old trash to treasure mentality.
And for some reason, we've kept it forever and now we have an opportunity to utilize it. So we'll sell that on a per pound basis to farms so that they actually use it. And I think that's great. I think when you're in the hemp industry, a big focus is sustainability and not just creating more biomass trash, as you've seen articles about that in the industry.
So we will actually be finding a way to take the hemp once we're done with it and send it back back to mother if you will.
@28:00 - Dai Truong (Arlington Capital Advisors)
And what else is in the future for Samson Extracts? I know you guys are very bullish on the industry. How do you view the next five to 10 years in the hemp industry?
@28:13 - Kyle Neathery (Samson Extracts)
Yeah, I mean, I think specifically, I think our goal for Samson extracts is that we're running a large scale extraction business for decades to come.
Yeah, I think that is totally in our flight plan. I don't I don't think this is an operation we're running to be purchased or to sell off.
I think we want this operation to run for a long time and that's certainly the foundation we're building right now.
But I would say we do have a sister entity. We're kind of within our ownership scope where we are beginning the R&D on hemp fiber. We've tested out growing this past year and we are looking at the hemp fiber piece very hard too.
That would necessarily be an extra extra scope but it'd certainly be a neighbor of ours where we're we're growing our own from hemp fiber, we're buying hemp fiber. And then we're turning that into things such as hexiles or other usable products.
But that's something we are also very serious about. You're starting to see a lot of very serious activity start to come through on that.
@29:18 - Dai Truong (Arlington Capital Advisors)
And help us understand Samson Extracts from an ownership perspective. It seems like you came on as the CEO, to sort of help improve what was there.
But what was the original thesis for starting a hemp processor, who [are] the investor(s) in the business and sort of are you guys profitable, soon to be profitable?
@29:38 - Kyle Neathery (Samson Extracts)
Yeah, we're solely funded. We're solely funded by one individual. We are debt-free enterprise. We are in the small county that that entity is from.
And really, I think there's a story about a few years back where we are in Alabama but where there wasn't a Farm Bill before 2019. There wasn't a huge attractiveness to start growing him just because, you know, a lot of people didn't know what it was and there's certainly more than taboos associated with it.
But the way we see him, I would say from our side and why we're in it is we grow.
We farm a number of crops. We have cattle. We are very, very hardcore in the agricultural space here in south Alabama and the panhandle.
We have upwards of over 20,000 acres of productive land for those purposes. And for us, which is going to be a little different in the industry but hemp for us as we see as a great crop diversifier. And especially hemp extraction, it helps diversify our agricultural capability. anytime you can bolster other crops into each other and diversify that mix. That certainly protects you from an agricultural perspective. Corn has a down year, or cotton has an up year, you know, types of variables. We see hemp as a very nice fit. into that, so if hemp is doing well, it actually can help protect other crop types and so forth.
@31:05 - Dai Truong (Arlington Capital Advisors)
Do you see a lot of other farms having that same perspective, whether up to this point, or you think in the next few years, will also start growing hemp, in terms of diversifying, like you mentioned?
@31:17 - Kyle Neathery (Samson Extracts)
Yeah, I've seen some. I've definitely seen, we work like, for instance, we work with growers that also grow other products or other types of crops and so forth.
I think it's hard to have an increased adoption in it. Because with farmers, a lot of times, generations before they grew a crop type and then their parents grew a crop type and they're growing that same crop type, so it's the only thing they ever knew.
It's the only thing they ever really knew about. So sometimes growing a new crop when you've been doing something for 60 or 70 years, I think it's a tough hill to climb because it's very predictable to grow their existing crop bases,
but you know, I don't know. I think 2019 and 2020 did a lot of damage from the farmers perspective, you know, that's when that market was really climbing. There's a lot of farmers all throughout the nation. I mean, if you took a survey of hemp farmers during that time, you would have a very negative downward sentiment on growing hemp. So that certainly creates a lot of issues and we encounter that sentiment weekly. As we're looking for farmers to grow for us, they always talk about ‘19 and ‘20, because a lot of these farmers thought they were going to be overnight millionaires from growing hemp.
And as you saw, what happened is thousands and thousands and thousands of people started growing hemp, created a massive supply that outpaced the demand for the market. And a lot of people lost their shirt. A lot of people lost their shirt. Kind of a modern day gold rush.
But there’s a lot of burn for a new adoption into growing hemp because when people tried it before, it just didn't go well for them.
And it may not even be a market factor that created that. That certainly is the large part of it, but a lot of people went into growing hemp thinking it was going to be very similar to growing corn or growing cotton, and they weren't prepared for one, the infrastructural need that there was for growing hemp when you're talking about drying and storage, irrigation, those things.
But they also weren't prepared for how cumbersome the harvest is. The people that are doing mechanized harvesting really well, that's very few of them.
So a lot of hemp is actually harvested very manually, people cut the plant down, dragging the plants to the barn, and hanging drying it.
So I think that really caught a lot of people off guard with how high maintenance is would be to grow and harvest hemp.
@33:56 - Dai Truong (Arlington Capital Advisors)
Yeah, I kind of imagine that it wouldn't be that easy to just pick it up and say, yeah, this looks good. we'll start doing it, right? You need to bring in people like yourself with the background and doing it somewhere else, whether that's on the cannabis or hemp side. And yeah, it's harder for them to start themselves if they've never done it or don't have someone in the house that knows how.
@34:16 - Kyle Neathery (Samson Extracts)
Yeah, no, it's certainly that. I mean, you saw a lot of people do it. Now, you've had some integration you've seen that's been a little smoother, right?
Is folks that are familiar with throwing tobacco and stuff like that a much easier integration. It's a very similar plant.
It needs very similar infrastructure. So if people were doing agriculture that was similar, that was a lot easier for them.
But I will say there's a lot of people that thought it was going to be a one-to-one match with existing crop size.
@34:41 - Dai Truong (Arlington Capital Advisors)
Yeah, because I've definitely seen more in the cannabis side, people who've grown peppers or tomatoes that now just say, hey, we can grow cannabis too. We just have to get the licenses to do so.
But you're saying from a hemp perspective, cotton's probably the easier thing to convert to hemp from?
@34:58 - Kyle Neathery (Samson Extracts)
Yeah, I think especially if you. you've been doing something similar to it. If you've been doing something similar to it, I think it transfers very nicely.
And some of it too, as well, is like there's other easier ways to grow hemp where a lot of people went out and blew out a ton of acreage doing it, but you can have a lot of success in existing greenhouses as well. So it's way more manageable. It's usually lower amounts, but you see a lot of people really starting off in greenhouses before they push out the heavy acreage.
But if you're used to a crop type that has heavy maintenance, it's definitely an easier transfer of skills.
@35:37 - Dai Truong (Arlington Capital Advisors)
And so would you then imagine more folks in like North Carolina potentially doing hemp or. And I actually don't even know if, you know, tobacco and whatnot is still very lucrative for them, so would you see some of those states convert more and compete with Alabama and yourself?
@35:55 - Kyle Neathery (Samson Extracts)
Yeah, yeah. I think that you see that there's really not there's not a ton of tobacco growing in Alabama. It's actually pretty hard to grow hemp in where we're at in Alabama, because we deal with a sandier soil. And for a famous plant to care, it needs a very good, strong root system.
And that can be difficult in sandy soil. But I think you see, you see a lot of existing tobacco farmers growing hemp in Kentucky, because as you said, the tobacco industry isn't as great as it used to be for a number of reasons. And I think you see that North Carolina, there are a lot of them. North Carolina is known to have a good amount of hemp grown there.
And there's a lot of very good hemp process in North Carolina as well. So I do think that you see that transfer, transfer really well.
@36:43 - Dai Truong (Arlington Capital Advisors)
I know tobacco usage is always going but, but certainly the prices always seem to, to increase in, you know, while there may be less consumers, revenue may be there just because of pricing. But yeah, if you're a worth looking farm you may be switching over to hemp to sort of get a earlier start on the decline.
@37:06 - Kyle Neathery (Samson Extracts)
Yeah, no, for sure. I think you're seeing that transfer. I think there's a lot of people that are really kind of are a bit over the tobacco industry and they're looking for new ways to do it.
And what there's certainly people that need hemp grown. And as long as the biggest thing there to get the farmers to move over is that the industry has to create confidence again, that, if farmers grow something and you contract with those farmers that they will be paid for their crop.
And that's the biggest concern by far, 100% that those farmers have is that when they grew all that hemp in ‘19 and ‘20, they had commitments from large companies, they had contracts from large companies. And when time came and the plant was harvested, those companies faded into the myth. And so then they're sitting on large amounts of hemp and trying to figure out what they're going to do with this.
We've seen that over the last two years is a lot of the hemp that was out The market in the last two years has grown in 2019, grown in 2020, grown in 2021. And a lot of that time, so that's the sitting there, it was due to contracts being executed and they weren't. They just didn't come through the way that the farmer had intended to from an expectations management perspective.
@38:19 - Dai Truong (Arlington Capital Advisors)
And on that point, are forward contracts becoming a thing in the industry?
@38:25 - Kyle Neathery (Samson Extracts)
They are. I would say it's a large core now. We've seen that a lot of the supplies of hemp that were grown that was in surplus, a lot of that has been purchased in the last two years, and there just isn't a lot of that hemp still sitting around for spot buys.
That market has gotten far smaller. If there is still a heavy market for spot buying, the prices are usually pretty high and doesn't necessarily match up with quality and what the farmer is looking for.
And now, I would say from our perspective is the we are a majority looking at forward contracting versus spot buying.
And it was the complete opposite the last two years. were more spot buying than we were farming, but this year we've booked a ratio to more farming and less spot buying.
@39:13 - Dai Truong (Arlington Capital Advisors)
And over those four contracts more like one year, so you still have to be a believer in the long term and the longevity of the hemp industry.
@39:21 - Kyle Neathery (Samson Extracts)
think so. I think one of it is the one piece is we have a number of farmers this year that are growing for us for the first time.
And they want to make sure the whole thing's real. So, you know, there's a lot of one year contracts we have this year.
We have farmers that we would have confidence in having potentially multi-year contracts with, but I think not only is it that what the hemp industry is going to do, but it is difficult to do multi-year contracts right now strictly from the price basis.
The price basis on a price per point of hemp per pound. It's kind of rapidly changing, you know, if we go back to 2022, you would have been a good deal would have been probably 14 to 15 cents per point of hemp.
You go back to last year, the market 18 to 21 cents per point I think it's really far too high.
I think for most operators to play ball with. So, but for this year, I say you're really looking at a market that's probably more 24 to 28 cents per point on a pound of pimp.
what I mean by price per point is you take. You essentially multiply, let's say that 24 cents by what the potency would be so 10% hemp and 24 cents a point would be 240 a pound.
Kind of in that example. so, I still, we still fill in what we've seen from benchmarks is the markets really at that 20.
people sent the point for hemp, but there are certainly people that are trying to get far more than that, and I just don't think the market's quite there yet.
@41:11 - Dai Truong (Arlington Capital Advisors)
Yeah, so given that there's some, I think for me at least from my viewpoint, that's a major infrastructure improvement that along with sort of just more demand now for hemp and, you know, distillate and for isolate and internationally, it seems like hemp is born the up and up, and there's a long-term structural value in it, know, being a real lucrative industry, is there anything else that we may have missed that points to sort of, you know, hemp just being on the up to the right trajectory at this point in time?
@41:41 - Kyle Neathery (Samson Extracts)
Yeah, I mean, really, I think the thing that I've surprised a lot of people, and you've seen it a lot in the news, the really, I'd say the explosion of hemp-derived delta-9 drinks, you know, those, they have a, they're spec to a certain delta-9 CHG level, and that stuff is getting real.
really major market that wasn't really around a year ago, the drinks are getting very popular, so popular that, you know, there's been a lot of talk and articles about total wine and wines and spirits, the large multi liquor mart chain that across the country is a red article the other day that they have 228 locations with 20 in 26 states that are now displaying hemp derived delta nine drinks just as they would display bourbon whiskey.
Those types of moves create massive massive market waves because then if you have a large company at that size and scale that sort of wines and spirits is, people are going to start moving into the market more, right?
creates legitimacy, it creates, it will begin to create competition and people will begin to enter and you've seen that.
Now, there are a lot of drinks being sold, a lot of times derived the nitrogen-screen manufacturer. You're even seeing a transfer, you know, if you went back a year ago when the hemp derived, well, two years ago, when you saw the hemp derived delta-9 stuff really coming, a lot of more marijuana-focused brands were against it because that was harming their ability to sell their products inside of their regulated state lines.
But now you're saying that they have now said if you can't beat them, join them. you see massive marijuana brands now making hemp-derived delta-9 products so that they can compete in the space.
I think this is a large piece of what's driving a lot of the activity in hemp currently because I think there are major market movers and major market players starting to, or that are now embracing hemp rather than being mad about hemp.
that's creating an absolute crazy amount of demand that we're currently seeing right now.
@43:53 - Dai Truong (Arlington Capital Advisors)
Yeah, and I think recently even specs in Texas which has, you know, 100 plus stores they've also taken on hemp beverages and, of course, you've seen anhydrobushes, distributors now adding in certain states, especially where there's maybe not an adult-use program and maybe even not a medical program.
You're seeing a lot of these distributors legitimize it. So yeah, I think that happening in some of these states where you're also seeing a lot of hemp farmers come from that alignment sort of makes sense to have this be more of a long-term play, rather than what we saw with the Farm Bill initially in 2018.
@44:30 - Kyle Neathery (Samson Extracts)
Yeah, no, I used to go to the specs in Dallas all the time. So I am from a respect, so that is funny that they're starting to do it.
But what I'll say, though, is I think from my perspective, the hemp-derived Delta 9 drink companies, the really serious players, are doing it very smartly.
They are creating products that are low dose, 5–10 milligrams, some are two, even two and a half milligrams of Delta 9 THC. And I think, I think they're being very responsible, and my guess is the large brands like Total Wine & Spirits are working with folks that are being responsible with that. So I think that's a good trend when you're looking at new products, [looking] into adoption and you're creating a new customer base, is that they're creating products that are low dose and they're very predictable.
I think if it was the other way around where people were making drinks that were 100 milligrams or 200 milligrams, I think it's a much different conversation. But I think they're going about a very smart way, I think they're using a heavy degree of product responsibility by doing that.
@45:37 - Dai Truong (Arlington Capital Advisors)
Yeah, I think that sort of conversion of low dose is more similar to folks drinking alcohol, right? A 100 milligrams can is not similar to drinking a can of beer, so if you're low dose to 2 milligrams, that's more comparable. Last question for you, since you're in Alabama and we're talking about D9 beverages, what's or the landscape there in Alabama? Are you seeing a lot of sea stores and shops carry it?
@46:00 - Kyle Neathery (Samson Extracts)
Yeah, you are. You do see CBD stores carry it. You do see the sea stores, gas stations. You know, they do have some of those products. So they are here. The state of Alabama did put in regulation the past year for over 21 sales and to have responsible packaging. And that's that's really what you need, right? I think having access to the product is huge, because I think it creates an avenue for people to access the product.
I think that's great, but it does need to be done responsibly. I think that's responsible regulation, to make sure that it's being intended for users over the age of 21 and also that packaging and things like that aren't appealing to the minors or children in those cases.
And so I think those are responsible, I think that's very responsible regulation.