Sandalwood plantations a disaster for the Ord River

April 29, 2013

The fertile plains of the Ord River Irrigation Area around Kununurra in Western Australia are being transformed by plantations of Indian sandalwood, Santalum album

It is the largest commercial production of Indian sandalwood in the world. In more than 60% of the total farming area around Kununurra, about 3500 hectares, sandalwood has supplanted food crops such as melons, pumpkins, legumes, chick peas, bananas, and many other crops.

Thankfully, the plantations of mango trees still exist. However even these weren't totally spared and many were ripped out to make way for more sandalwood. Many farmers thought they could make a substantial profit out of this non-food crop, but they may have been fooled.

The transformation has had some unintended consequences for the township of Kununurra. First, the huge seasonal influx of backpackers has fallen as sandalwood plantation maintanence needs less manual labour.

Backpackers bring in a substantial economic activity by spending most of the money they earn on accommodation, food, drink and tourist activities. Second, Australia has lost some of its ability to maintain food sustainability. Third, it is not clear if the land can return to food production after the 20-year crop of sandalwood is harvested.

There are two main commercial plantations, Integrated Tree Cropping, (ITC), a subsidiary of Elders Forestry Ltd, and Tropical Forestry Services (TFS), as well a small number of privately owned commercial plants.

In 2009, TFS was heralding sandalwood as a plantation crop that would benefit the whole community and the environment, claiming best practice in climate, community and biodiversity and offering to protect the company’s long-term returns while protecting the planet.

In a tense meeting of growers last month, Elders sold all of its sandalwood managed investment schemes to an unknown company called Santanol. The firesale of $70 million was passed by the growers in a vote, due to the lack of any alternative.

One industry spokesperson said: "Unfortunately for growers, the deal is grossly unfair and plantation assets are being offloaded by Elders at a firesale price."

Elders refused to disclose the identity of the financial backers of Santanol saying instead it was "a significant global investment house".

The growers have 1700 hectares planted in comparison to only 40 hectares belonging to Elders Forestry. Only four years ago Elders Agribusiness bought into the collapsed management schemes Timbercorp and Great Southern, claiming that Elders had a future in timber and plantation industry.

Elders is now in the process of selling all its assets and is unlikely to have any business activity in forestry after this year.

TFS, a Western Australian public company, was founded in the late 1990s to establish the first Indian sandalwood plantation in Australia. It began with a 1200-hectare crop in 1999 and now has 700 individual growers in 12 different projects. Its first harvest is due this year but growers and investors have taken an enormous gamble as no one can predict how much the crop will earn.

TFS bought Mt Romance Ltd, Australia's largest distillery of WA sandalwood in 2008. Investors in the sandalwood plantation have been promised 100% upfront tax deduction for any outlaying costs.

This year, TFS is telling current and prospective investors the price will grow 16.7% over a 20-year period. The current value of Indian sandalwood is $112,000 a tonne. Many superannuation schemes have invested because of the generosity of tax concessions due to its so-called carbon-capture status.

Sandalwood has a poorly developed root system and is classified as a hemi-parasite, due to its inability to fix nitrogen in the soil. It needs other trees and legumes to grow and survive.

It takes about 12-15 years for the Indian sandalwood tree to mature, although this figure may have to be adjusted in WA conditions, depending on soil and climate. Some experts suggest it may take up to 40 years before it is ready for harvest. The oil from sandalwood is contained in the heartwood and the entire tree is removed at harvest including the roots which also contain some heartwood.

Oil content is estimated at about 3.5% of the weight of the tree. The wood will be sold to make small furniture items, joss sticks, wood carving, soaps and to the perfume industry including the giant Chanel.

Each tree is expected to bring in about $3000, but this is sheer speculation. It is thought sales will mainly go to India and China.

Australian native sandalwood Santalum spicatum, has been grown successfully in the southern wheatbelt of WA since the 1840s. It also needs to be co-planted with about 45 different native hosts found naturally around the tree. It is currently being grown in south-west WA where the soil has been heavily salinated and is no longer useful for food crop production.

Indigenous Australians have used the native sandalwood bark as a cough remedy and the oil to rub on aching joints for hundreds of years. The oil from the sandalwood nuts, which are produced all year can also be used.

The Ord River Irrigation Scheme has had a number of spectacular failures, pushed by successive governments. First was the cotton crop from 1963 to 1974. The high number of pests meant the cotton had to be sprayed every two to four days, a massive use of millions of litres of pesticides, which made it unviable. Cotton was eventually abandoned.

Next peanuts and rice crops were grown. The rice crop attracted 8000 to 10,000 magpie geese an hour which meant the airport became unmanageable and eventually rice was abandoned. The growth of vegetables has been successful and is still grown today, subject to massive irrigation from the Ord River.

In 2009, Management Investment Scheme (MIS) pulled the pin on a proposed 300 hectares of African mahogany trees after it failed to raise $12 million. A pilot plantation of mahogany has been left to rot due to lack of maintenance and the high cost of harvesting.

Now a large section of fertile land has been sold or leased to a private Chinese company to grow sugar cane for biofuel, another loss of arable land that should be used for food crops.

The Aboriginal communities are further troubled by the loss of native lands. If the sandalwood production is unsuccessful and the crops discarded, the leased land may be returned to the original owners for them to dispose of the unwanted trees, including all the host plants.

This could be very expensive and the remnants of sandalwood oil in the soil may prevent its future use for food crops. All of this is a big unknown.

The present exploitation of the Ord River, an incredible resource of 320 kilometre river in the Kimberley, is another example of badly managed schemes by governments. A decent price for food commodities should be paid to the farmers to prevent the misuse of such important arable land in Australia, the driest continent on Earth.

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