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To tree or not to tree 01 Jun 2016

Many farmers look at the way tea trees pop-up randomly and abundantly in their paddocks and imagine themselves converting the entire expanse of scrub into oil.

“Obviously to make tea tree oil production work as a business requires far greater research and planning,” says Tony Larkman, CEO of the Australian Tea Tree Oil Industry Association (ATTIA).

“Like anyone planning to enter an industry, prospective growers need to understand the costs associated with establishing a plantation and have a plan for how they will manage harvesting and distilling.”

It begins with having the right land.

The bulk of Australian tea tree oil is produced in one of three major growing regions: Port Macquarie on the Mid North Coast of New South Wales, the Northern Rivers of New South Wales and the Atherton Tablelands in Far North Queensland (although many of the coastal areas in between may also be suitable). Prospective growers can visit the Rural Industry Research and Development Corporation’s (RIRDC) farmdiversity.com.au website to check whether their property is located within a recommended growing zone.

“A smaller plantation is viable if you have ready access to contract harvest and distillation services but for a stand-alone plantation with its own infrastructure, you’ll need at least 50 hectares of plantation, probably closer to 100 to have a truly viable operation.” says Mr. Larkman.

“Although trees have the potential to remain productive for up to 35 years, I’d recommend budgeting for a tree lifespan of between 15 and 20 years.”

Tea trees typically take between three and four years to reach full production.
According to figures provided on RIRDC’s farmdiversity.com.au, selective breeding programs have helped to lift potential productivity from 148 kilograms per hectare to about 250 kilograms per hectare over the past two decades.

Trees can be planted at a density of 33,000-35,000 trees per hectare and cost approximately $10,000 dollars per hectare to plant out.

The high start-up cost means that most tea tree oil producers start with a smaller area and use contract harvesters and distillers. Just over a dozen producers focus solely on tea tree oil production while the majority of producers adopt mixed farming systems, combining smaller-scale plantations with livestock production.

“If you want to produce the oil yourself, you are also going to need specialised harvesting equipment and your own distillery – which, depending on the model you use, could cost upwards of $1 million in addition to your planting and harvesting costs.”

Finally, one of the most challenging aspects of successfully establishing a new plantation is understanding the marketplace, which is carefully balanced.

Robert Dyason has been producing pure tea tree oil as part of a mixed farming operation that includes forestry and cattle-grazing on his property near Casino, NSW, since 1979. He has committed 144 hectares to tea tree oil production and says it represents one of the most profitable operations of his business.

“There is no single piece of advice I could offer for achieving success but you need to make sure you can secure a long-term and reliable market,” says Mr Dyason.

“Otherwise you will waste a lot of money establishing an expensive crop that can’t easily be removed.”

The industry has experienced some difficulties in the past with institutional investors oversupplying the market and driving the oil price below the cost of production.

“I’m confident that tea tree oil industry can continue to grow, but people have to do their homework to understand what they’re in for,” says Mr. Larkman.

RIRDC has developed www.farmdiversity.com.au to serve as a launching pad for farmers interested in pursuing a new farming enterprise, including tea tree oil production, by entering either their postcode or the name of the crop or livestock they are interested in.