TEBF, you are correct to question the likely impact on...

TEBF, you are correct to question the likely impact on sandalwood price of the 30-40 times growth in TFS's harvest within the next 8-9 years. It is one of the most important factors for the value of TFS, and I have thought about this long and hard before investing in TFS.

I am satisfied that the inherent demand for sandalwood will still far exceed the total world production in 2025 and 2030. Note that the report I mentioned was based on very significant work done in the Indian and Chinese markets, using over 1,000 surveys, around 30 interviews of value chain experts, and other data mining.

The Chinese market was previously huge. The Australian Agribusiness Group has found that: "After peaking in 1920 at almost 14,000 tonnes for the year, the Australian export market (for sandalwood) collapsed late in the same decade when civil war broke out in China". This is particularly interesting as it is only from Australia, and was when the world's population was very, very much smaller.

A Beyond Carbon independent report estimates implicit market demand for Indian sandalwood to be currently at 28,600 tonnes, rising to around 50,000 tonnes by 2030. This makes the latest report look quite conservative at only 20,000 tonnes by 2025, when TFS will be harvesting around 9,000 tonnes, and all others around 3,000 tonnes.

So it is quite clear that the market will continue to be undersupplied when TFS production is at its peak. In an undersupplied market prices do not drop. Indeed, TFS has experienced average annual price rises over the last 10 years (up to 1 year ago when I derived that figure) of 16% pa, amounting to an increase of over 4 times in that time. Prices have stabilised over the last year or so while TFS goes about expanding the market and signing up long-term customers, but there is no reason to believe that there will not be further price rises in the future. I am satisfied the price will not drop, and will at least keep up with inflation.