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Opportunities for the smallholder sandalwood industry in ... - ACIAR

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140,000<br />

Sandalwood oil production (tonnes)<br />

120,000<br />

100,000<br />

80,000<br />

60,000<br />

40,000<br />

20,000<br />

0<br />

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023<br />

Year<br />

Figure 2.<br />

Anticipated yields of <strong>sandalwood</strong> oil from Indian <strong>sandalwood</strong> (S. album) plantations <strong>in</strong> Australia,<br />

2014–23 (Source: Clarke 2006)<br />

Australian <strong>sandalwood</strong> (Santalum spicatum)<br />

Six species of Santalum grow naturally throughout<br />

Australia, but only S. spicatum (Australian <strong>sandalwood</strong>),<br />

which is native to Western Australia, and,<br />

to a m<strong>in</strong>or degree, S. lanceolatum (bush plum) <strong>in</strong><br />

Queensland are harvested <strong>for</strong> commercial use. The<br />

current estimated total area of distribution of S. spicatum<br />

is 161 million ha, of which 49% is protected<br />

from harvest<strong>in</strong>g (AAG 2006).<br />

Australian <strong>sandalwood</strong> accounts <strong>for</strong> <strong>the</strong> majority<br />

of <strong>the</strong> <strong>sandalwood</strong> currently harvested <strong>in</strong> Australia.<br />

The harvest of native stands is regulated by <strong>the</strong><br />

Western Australian Government through <strong>the</strong> Western<br />

Australian Forest Products Commission, which<br />

coord<strong>in</strong>ates harvest<strong>in</strong>g and replant<strong>in</strong>g of native<br />

<strong>sandalwood</strong> species (Adviser Edge 2008).<br />

The agarbatti <strong><strong>in</strong>dustry</strong> represents an important<br />

market <strong>for</strong> Australian <strong>sandalwood</strong>. Australian<br />

<strong>sandalwood</strong> is exported to South-East Asia <strong>for</strong> <strong>the</strong><br />

manufacture of <strong>in</strong>cense and to India <strong>for</strong> <strong>the</strong> production<br />

of oil. Taiwan and Hong Kong are <strong>the</strong> largest<br />

importers of Australian <strong>sandalwood</strong>, account<strong>in</strong>g <strong>for</strong><br />

upwards of 60% of Australia’s annual production,<br />

while Ch<strong>in</strong>a represents a significant and grow<strong>in</strong>g<br />

market (AAG 2006).<br />

In addition to <strong>the</strong> natural resource, a significant<br />

planted estate of Australian <strong>sandalwood</strong> has been<br />

established over <strong>the</strong> past decade <strong>in</strong> corporate-,<br />

government- and farmer-owned plantations <strong>in</strong><br />

Western Australia.<br />

Current and future production <strong>in</strong> Australia<br />

Just over 2,100 tonnes of S. spicatum heartwood<br />

from Crown land and approximately 200 tonnes<br />

from private landholders <strong>in</strong> Western Australia are<br />

harvested annually. Government legislation dictates<br />

that at least half this quota must be deadwood that is<br />

unsuitable <strong>for</strong> oil extraction (Clarke 2006).<br />

With decl<strong>in</strong><strong>in</strong>g global supplies of <strong>sandalwood</strong>, <strong>the</strong><br />

market outlook <strong>for</strong> Australian <strong>sandalwood</strong> is positive.<br />

To capitalise on this opportunity, <strong>the</strong> total area<br />

planted over <strong>the</strong> past 10 years has <strong>in</strong>creased from<br />

approximately 650 ha <strong>in</strong> 1999 to 15,627 ha <strong>in</strong> 2012<br />

(Figure 3). Rates of <strong>sandalwood</strong> plant<strong>in</strong>g <strong>in</strong> Australia,<br />

however, are likely to slow, as <strong>in</strong>vestor confidence<br />

has cooled s<strong>in</strong>ce <strong>the</strong> recent <strong>in</strong>solvency of a number<br />

of managed <strong>for</strong>estry <strong>in</strong>vestment schemes across<br />

<strong>the</strong> country.<br />

Although <strong>the</strong> level of santalol <strong>in</strong> S. spicatum is typically<br />

lower than that <strong>in</strong> S. album, <strong>the</strong>re is still strong<br />

demand <strong>for</strong> its oil (Clarke 2006). The estimated<br />

supply of marketable oil from recently established<br />

16

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