Eucalyptus industry blooms with new investment and 'super' trees

The air is awash with the distinctive aroma of eucalyptus. There is no smell so evocative of Australia. Its vapour creates the blue haze of our native forests and it is said to be the first major export from Australia of an Indigenous product.

"It's the fragrance of the Australian bush," Annabelle Davis says.

Ms Davis is at a gleaming new oil distillery at West Wyalong in south-central New South Wales. The distillery is the centrepiece of her family's eucalyptus oil business and its smokestack is emitting steam vapour drawn from giant vats of eucalyptus leaves.

At the end of the process a light golden oil of the finest grade trickles out and is shipped to more than 20 countries for a diverse range of uses.

"Into pharmaceutical products, disinfectant products, confectionary products — in fact, a lot of the big brands and big names that you'll know, our products are in, right around the world," Ms Davis says.

But Australia only produces about five per cent of the world's eucalyptus oil.

Competing with cheaper imports

Australian eucalypts are widely grown across the globe, including in China, where fast-growing blue gum (Eucalyptus globulus) is grown, primarily for timber. The leaves are also harvested for their oil, but it is an inferior, more pungent product than the oil distilled in Australia from the blue mallee (Eucalyptus polybractea).

Lower-grade imported eucalyptus oil is cheaper and sometimes fraudulently substituted with camphor oil.

A blue mallee leaf showing the vesicles of oil.

This has led to Australia's two major producers of blue mallee oil investing millions to futureproof the industry.

"To me the best thing is to make sure we can get oil on the market in competition with that at a better price, or at least at a price that doesn't make it worthwhile buying a synthetic product," Richard Davis says.

Oil producer GR Davis recently spent more than $6 million on its new, ultra-efficient distillery and harvesting equipment.

In central Victoria, where the blue mallee eucalypt naturally thrives, FGB Natural Products has recently invested $10 million on a similar upgrade.

The brand dates back to the 1850s, but in recent decades consumers have become accustomed to the cheaper imported oil.

"China is the leading producer of eucalyptus oil in the world, so part of what we're doing is futureproofing for Australian supply so we can make sure that as much oil as we can produce here is produced here and keep it a really local, sustainable industry," managing director Tegan Abbott said.

Breeding 'super' trees

The Davis family's new distillery has led to a threefold increase in production and efficiency compared to the previous plant and its output will soon increase as new, super high-yielding blue mallee trees become mature enough to harvest for oil.

The family has planted five million elite trees on more than 7,000 hectares.

The Abbott family has planted a similar number in its plantations near Wedderburn.

In both companies' cases the trees are the result of decades of careful genetic selection and propagation.

"To offset the cost of purchasing land and establishing plantations they needed much more oil in their trees," Jason Goodger said.

The plant scientist from the University of Melbourne played a key role in developing these trees for the Abbotts.

"The average blue mallee tree has less than one per cent oil and they calculated that they needed at least four per cent," Dr Goodger said.

The latest improved trees are yielding closer to seven per cent oil content and the aim is to keep breeding better ones.

"Geoff was really the father of the modern eucalyptus industry in Australia," his daughter-in-law Ms Davis said.

"He designed the very first mobile harvester in the world for eucalyptus harvesting."

"Geoff just said, 'Well we won't be competitive in the world if we don't mechanise it,'" the 92-year-old Sybil said.

"I think the business is well positioned for the next generation," Annabelle Davis said.

"It's the most extraordinary product and Australia should be very proud of what Australian producers have achieved."