California cannabis company launches industry’s first commodity trading desk
Grupo Flor-developed platform enables buyers, sellers to connect for the purchase, sale of raw cannabis materials
SALINAS – One of the largest cannabis companies in California has launched the industry’s first commodity trading desk to connect buyers and sellers in the budding cannabis industry.
Grupo Flor, a multi-national vertical cannabis company headquartered in Salinas, is using a proprietary version of commodity trading software the company developed itself enabling its desk to connect buyers and sellers for the purchase and sale of raw cannabis materials. In its first week of operation, the new desk executed several million dollars worth of trades, according to a press release from the company.
“We created a more efficient exchange for buyers and sellers by solving two critical problems,” said Paul Henderson, Grupo Flor CEO. “Buyers are sourcing raw materials from an array of entities and many of the products are inconsistent and unreliable. On the flip side, these sellers don’t have the support and logistics infrastructure to efficiently sell and transport their product. We believe this trading platform is a win-win for the entire industry.”
According to Henderson, the Grupo Flor trading software “is not a platform to be used by other parties” but the company “will control the software and include verified partners.”
The raw cannabis materials the desk deals with include hemp biomass – the organic matter that can be converted into and used as fuel; THC (tetrahydrocannabinol) trim – the excess snipping of leaves from buds of marijuana plants that can still be used to make other products; CBD/THC crude and distillate oil – cannabidol and tetrahydrocannabinol extracts; and CBD isolate – one of the purest forms of cannabis containing around 80 percent CBD with the remaining 20 percent being cannabinoids, terpenes and other extracts.
According to Grupo Flor, the desk was initially introduced in the California THC market but has rapidly expanded into the national CBD market using an established network of farmers in states including Colorado, Kentucky, North Carolina, South Carolina, and West Virginia. The desk also plans to add Colombia as its first international sourcing pipeline in the near future.
“Grupo Flor is one of only a handful of companies that secured the whole suite of licenses in Colombia,” said Henderson. “These licenses allow for cultivation, manufacturing, R&D (research and development), and global export.”
The cannabis company CEO said his company is currently testing different genetics in the environment to prepare to scale up but was not ready to go into detail yet.
But as for the development of the cannabis industry’s first commodity trading desk, Grupo Flor co-founder Gavin Kogan said, “We’ve been working on this behind the scenes for some time. As California’s THC market continues to explode, the desk will be instrumental in facilitating trades and moving physical goods around the state via our licensed warehouses and transportation network.”
The development of the desk is important to the entire industry because:
- It allows buyers to come to one place to source consistent and reliable raw materials instead of consistently working through several suppliers
- It allows suppliers a one stop place to act as a sales arm for their business – cultivation or manufacturing
- This helps bring the cannabis industry closer to other industries like wheat, corn, and soy beans where trades occur and physical movement of commodities is critical
All suppliers and buyers listed on the desk are heavily vetted based on their growing sites, manufacturing processes, management, licensing, and compliance with only the most qualified partners being introduced into the network. Once a partner is approved, the desk works with buyers to find the appropriate supply they need or the desk works with sellers looking to move large quantities of raw materials through the buyer network, according to the release.
One caveat to the announcement of Grupo Flor’s commodity trading desk is that it “is not registered with nor regulated by the Commodity Futures Trading Commission nor the Securities Exchange Commission. The desk does not enter into futures or options contracts nor does it sell financial securities.”
Henderson said Grupo Flor’s commodity trading desk is not registered or regulated by the CFTC or SEC because “we don’t need to at the moment. If we move into setting up financial contracts like selling futures on cannabis products, we will register with the appropriate governing bodies.”
The desk has the ability to enter into contract growing arrangements on behalf of buyers or to simply fill spot-market orders. Traders host weekly conference calls with buyers and sellers to discuss pricing trends among products in different markets. Sales data is logged for the eventual creation of futures contracts.
“We don’t enter into futures contracts at the moment because the industry is too nascent and we need to develop supplier and buyer relationships to a point where trust is developed,” said Henderson.