Personally I think you are wrong, when inferring massive increases in supply will affect the price. TFS is planning to be a monopolist. Monopolists are price setters rather than price takers. They set supply at where marginal revenue is netural.
"How will they set the price?"
I've invested in radiata pine in NZ, as the boys in NZ state, if the price is lousy, you just let the tree keep growing. And TFS is planning to manage supply to market just like a monopolist. Just ask Saudi Arabia (oil) or De Beers (diamonds) or microsoft (desk top software) how to set supply and infuence world prices
TFS doesn't think like most companies they think as monopolists do - long term. Rockerfeller did with Standard Oil - he created demand for oil
If you want to see real power and the outcomes of near monopoly power, look at what Google and Facebook are doing. They are money machines, and their reach is increasing. I think TFS is going to be some sort of agri Saudi Arabia, they won't have total control and their constant manipulation (excess returns above the cost of capital) will eventually encourage new entrants to the market. Either that, or TFS will cut deals with all the big boys on both sides of the equation (supply, think big entities, with lots of capital like harvard endowment, and demand, think hindu priests and key sandalwood manufacturers) to entrench their market power. What's that, Coke is the real thing. Sure is. How the hell does sugared water cost so much! Surely with a canning line someone would have destroyed TCCC money making machine by now? But it's amazing how monopolists excel at protecting their underlying businesses, decade, after decade
"But people will just move to substitutes"
There is a tree called Wenge, named after the Earl of Wenge in Scotland. Wenge is Equatorial hardwood and the tropical rainforests of the world have nearly been cleared of all the best hardwoods. The driving forces are growing local populations and an insatiable demand for hardwoods, which ignore the negative externality (cost), of growing the tree. Prices of hardwoods are going to rise strongly over the next 2 decades. There is no supply. It either has to now come from plantations, or people use alternative building materials
What's this got to do with sandalwood? People already have substituated from Santalum Album, due to over harvesting, poaching (hey if you have time, watch datelines, "gambling on extinction", screened on feb 24th. All I could think of was poor Indians, stalking a poor little Sandalwood tree with a chainsaw, and selling it's body parts to a rich Chinese middle man) and land clearing for rising populations. People have substituted into Santalum Spicatum (WA sandalwood) and a host of other scented woods which are not true sandalwoods. The result, in places like East Africa, is a gold rush mentality to chop down, virtually every tree they can get their hands on. Substitutes are in dire straits. There is no readably available alternatives. It has to come from plantations
"What about synthetic sandalwood?"
When America brought in Prohibition, they made an exemption for the Roman Catholic church, to continue to use wine for communion. If there was a shortage of red wine in the world, do you think the RC's would convert to using grape juice, due to price? No. And so too wouldn't Indian priests and worshippers, chinese traditional artisans or fragrance producers start using sythetics. It's not the real thing (Coke). Hey just ask chicks about diamonds. No one wants a synthetic (you go De Beers).
The fact remains when there is a viable supply of the real thing, people will opt for the real thing. People will substitute back to the orginal product.
"But the high price will put people off"
It's amazing how one of the oldest human traits is for the rich to show off their wealth. 'I have it and you don't. More kale infused quionoa toast with avocado, little Brittany!". Sorry the rich don't call their children Brittany anymore, the poor started naming their daughters Brittany, while wearing Burberry caps, and that made the product and the hat - downmarket. And the reason? Low cost outlay to acquire. Names are free, Burberry caps, the cheapest item. So the rich move on to other names and more obscure things. Preperably with high barriers to entry, like high prices. (I myself think nothing of the barriers of Toorak real estate prices to stop bogans going upmarket, hi Eddy)
Thus we get to Sandalwood. Handcrafted (everything, technically has been handled) by a master craftsman living in blah blah. I have it, you don't. I'm better. Nah nah.
"But there are other plantations"
Nope. There is a couple of small ones (50 hectares or so), in India or Indoenesia (those pesky people want the land for more immediate returns - like food), but apart from that there is only the 2,200 hectare estate, which was formerly Elders MIS (in the Ord river district), which they sold to KKR.
Conclusion - the probability to sustain higher prices on higher output, I think is underestimated. I think many people just assume economics 101, is going to kick in. Well, tough luck. Monopolists are different beasts and we love them, and their rivers of gold (Fairfax anyone!), I propose we change the company name to Avaricus
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