The Valens Company (VGW) announced today that they are blowing out inventory of crude at ‘market clearance prices’. That’s going to have impact on other extractors, whether they like it or not.
Immediately, it’ll work to dislodge sales for other extractors over the next quarter. In the longer run, it could be a foreshadow of the ultimate value/pricing of lower value bulk crude extract that exists in the marketplace. Much like lower grade flower has accumulating in warehouses over the past year. It’s happened in extracts as well – at least in Valens eyes.
CEO Tyler Robson says as much:
If this bears out to be true, lookout for a realignment of crude pricing, as particular cultivars or specific biomass pricing for extraction realigns. The specific mention of ‘outdoor production’ in the press release suggests a hard shift in the cost curve of bulk extract. Anyoneo sitting on inventory from only 6 months ago just took a steep haircut on net realizable prices.
TheCannalysts surfaced some concerns about existing extraction capacity and inventories in the sector a little over a year ago, and predicted price compression in the absence of product differentiation. Many parallels exist with bud producers.
The flower folks have discovered that their product values hold when THC levels are at 20% or higher.
One might speculate that extractors have had the same moment when it comes to bulk crude: without particular characteristics or specific chemical profiles attached……it’s much less desirable in market, and worth much less to potential buyers. If this is a real thing, the economics from which many extractors were built upon could be severely challenged.
The preceding is the opinion of the author, and is in no way intended to be a recommendation to buy or sell any security or derivative. The author holds no position in $VGW
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