Following an unseasonably warm winter that has been coupled with an extensive drought, the situation for many of Chinas crops is looking increasingly bleak.

China's Eucalyptus plantations are the second largest in the world amounting to approximately 460, 000 ha.  Typically fast growing, they are predominantly found in the normally hot and sub-tropical Yunan province.  Due to their high water consumption, Eucalypts are potentially susceptible to the effects of drought.

With the peak production period of oil from February to March and November to December each year, it was hoped that following the price recovery from November 2006, farmers would be encouraged to increase oil output.  Unfortunately, following the drought which undoubtedly has affected plant growth, it seems unlikely that there will be any noticeable improvement in the current supply. 

Additionally the Yunan local government has recently introduced a new regulation that limits sites of oil distillation in order to reduce the risk of forest fire. 

Consequently we anticipate continued firm prices in the region of USD5.80-5.90 per kilo CIF.

Yunan province is also the main producing area for Geranium oil in China and consequently this crop has also been severely affected by the drought that started at Chinese New Year.

It is anticipated that the total output this year will be approximately 30MT, down from typical annual production of 100-120MT.

Given the current situation with material in such short supply, unsurprisingly there is reluctance to sell material at source and thus prices are expected to continue to firm.

Current prices are in the region of USD80.00 per kilo CIF.

All information is intended as a guide only and should be treated as such.  The prices shown do not constitute a written offer by De Monchy Aromatics Ltd.