AGARWOOD EMERGES AS LANKA’S NEXT EXPORT CROP
Sri Lanka’s forestry investment management company is currently in the process of promoting mass scale plantation of Agarwood in the country as the next potential export crop in the country, as traditionally-dominant tea and rubber are losing glamour as top foreign exchange earners.
To this end, the Colombo-based Sadaharitha Plantations Limited is building up the value chain from the point of acquiring seeds to the point of signing up forward agreements with world’s largest buyers to establish a sustainable export-oriented crop industry surrounding agarwood.
Sadaharitha is planning to set up a joint venture factory in Sri Lanka with Wescorp to extract agarwood oil
Agarwood is one of the most expensive and a rare commodity and the ‘resin’ produced by the tree fetches prices between US $ 10,000 to US $ 40,000 per kilogram in the global market, according to Sadaharitha Group Chairman, Sathis Nawarathna.
“By now we have taken measures to sell agarwood at the highest possible price in the world market”, he said. The company has already entered in to forward agreements with the world’s largest Sandalwood and agarwood trader, Wescorp in Australia in order to ensure continuity of demand for Lankan-grown agarwood.
Four Regional Plantation Companies have already established relationship with Sadaharitha and are buying plants from the company for mass scale cultivation considering its legality, technology and high commercial viability.
Further, Sadaharitha is planning to set up a joint venture factory in Sri Lanka with Wescorp to extract agarwood oil.
“These are still at very early stages as it has been still a year since we started planting agarwood. However, our intention is to set this up as a Board of Investment venture within a period of 3-years,” Sadaharitha CEO H.K Rohana said.
According to reported statistics, currently the global market for agarwood is estimated to be in the range of US $ 6-8 billion annually but Nawarathna believes the industry could be larger than what it is as lot of trade is happening in the illegal form.
Even at the existing levels, there is a huge under-supply in the market as only 40 percent of the demand is met.
Singapore and Thailand function as leading centre points from where re-exportation occurs in mass-scale.
Though Sri Lanka has still not yielded legally cultivated agarwood, Nawarathna said they find a lot of agarwood in Singapore sent illegally from Sri Lanka which are extracted from ‘Wallapatta’, a tree which is banned from cutting for any form of agarwood harvesting or other purposes.
According to Nawarathna, Singapore trade statistics show US $ 1.3 billion worth of agarwood re-exports annually.
Middle Eastern buyers account for the largest buyers of agarwood in ‘chip’ form as they use them as a distinctive household fragrance while United States, Europe are among the leading buyers for manufacturing premium branded perfumes.
The company has already established the supply chain as they import seeds from Vietnam, Laos and Cambodia which are also the largest agarwood growers in the world.
The company too has one of the world’s largest nurseries which was set up with an investment of Rs.60 million.
Further, National Research Council of Sri Lanka in conjunction with the University of Sri Jayewardenepura and Sadaharitha are currently conducting research in order to verify whether the naturally grown ‘Wallapatta’ could produce the same ‘resin’ that is marketable.
The company operates with two business models where the investor has the option to either buy only the plant to cultivate at his backyard or with a plot of land of which the title deed is transferred.
According to reported statistics, currently the global market for agarwood is estimated to be in the range of US $ 6-8 billion annually
Either models, the investor can opt to enter in to an agreement with the company to sell the tree between 6-8 years back to the company with a guaranteed buy-back price.
Sadaharitha is the only patent rights holder to harvest agarwood in Sri Lanka as they have the right technology to ensure yields between 60-70 percent from a tree ,whereas natural tree produces only 1-2 percent yield.
Sadaharitha has a land bank of over 1,500 acres which grows sandalwood, mahogany, teak and agarwood.
“Currently we are planting agarwood in two locations – Neboda and Dehiowita – which has a total extent of 220 acres. Besides, we have also sold over 300,000 plants last year for individual investors,” Rohana added.