Grower beware. That, in essence, was the warning attorney Veronica Darling issued during her presentation on processor contracts during the recent Hemp and CBD Connex Conference in Portland.
Growing hemp is difficult. Because it’s a new crop, most farmers don’t have much experience growing it. Finding the correct seed to maximize yield is key, but finding a reputable processor for the crop is even more important.
Cannabidiol, or CBD, is the chemical in hemp that is making farmers and processors the most money. With reported profits in the tens of thousands of dollars per acre of hemp, a lot is at stake.
That’s why farmers need to be careful, said Darling, who is with the Portland law firm Cultiva Law.
Most farmers these days have given up on handshake agreements as a way of doing business. That’s just common sense—and a reflection of modern times. Without a written contract, a farmer may only be looking for problems.
However, Darling said, all contracts are not created equal. Some contracts can be a problem, with clauses tucked into them that are unfair to one party or the other.
In one instance, Darling said she ran across a contract in which the processor assumed no liability after taking possession of a farmer’s hemp crop. Even if the facility were to burn down with the crop inside it, the processor would have owed the farmer nothing for the crop.
Darling also warned that even a contract that appears to be iron-clad isn’t any good if a processor can’t, or won’t, live up to it.
One contract Darling saw was as good as anyone could write. All possible loopholes had been closed, and the farmer and the processor had reached what appeared to be a fair deal.
Except for one thing: The processor skipped town—and took the farmer’s hemp with him.
What’s a farmer to do?
First of all, Darling suggests finding a processor well before the crunch of harvest time. Waiting until the last minute to sign an agreement with a processor is a recipe for desperation — and potential disaster, she said.
Farmers should also ask lots questions when negotiating with processors. There are different ways to extract CBD. Which one will the processor use? How does the farmer know if the amount of CBD from his crop is maximized?
“It’s all negotiable,” Darling told the audience. “Your product is your product. It’s important to you. You worked really hard on getting it to where it’s at. You can negotiate those terms.”
She is correct. Now, more than ever, farmers need to be careful out there.