Auscan Melaleuca Ltd. - January 2011

NEWSLETTER #11
JANUARY 2011

It has been some time since we have had occasion to send out a newsletter, but with the recent events of the past few weeks, including the reports of massive flooding in Queensland and New South Wales we thought it timely to contact you.

We have received a recent Tea Tree Oil Industry report explaining the situation occurring on the east side of Australia due to this devastating weather event. Given the severity we felt it would be helpful to pass this along. The report is as follows:

"As you will no doubt be aware, unusually high and sustained rainfall for the past few months has severely limited the ability of many producers to adequately manage their crops, resulting in high incidences of weed and grass burden in the plantations as well as extreme insect pressure on the plants.

Many plantations have been unable to complete harvest or in some instances even commence harvest restricting supply of tea tree oil in Australia.

This reduction in supply, combined with the lack of new planting which has also been severely hampered by wet weather could result in a significant downturn in production in Australia for 2011/2012."

Another reliable Australian source estimates that:

" Between 10 and 20 percent of plantation crops were not harvested in 2010 due to the adverse climatic conditions. In addition, it is estimated that 80% of plantations have been affected by the abnormal rainfall which affected total yield in 2010 and will continue to affect yield in 2011. It is their opinion that there could be a fall in production of between 25 to 30 percent in 2010 and down from a normal year by 30 to 35 in 2011. Since operating costs remain the same, it is expected that prices will increase to keep producers viable."

We do not know for certain the impact that these conditions will have on the availability or cost of oil but felt it important to advise you of this changing situation.

We will continue to monitor these events through our Australian contacts on the ground and keep you apprized of how these events may affect the tea tree oil industry going forward.

AUSCAN MELALEUCA LTD.
P.O. Box 874 – 151B Trillium Drive
Kitchener, ON N2G 4C5
Phone: 519-893-0969
Fax: 519-893-4384
info.auscan.net