On-Farm Economics
Economics of oil mallees
In March/April 2000, Alan Herbert of AgWA analysed the profitability and economics of Oil Mallees and compiled a report.
The profitability of Oil Mallees was assessed for a number of sites where farmers might invest on their own land. A 15% planting density, widely adopted by Oil Mallee growers, and recommended throughout the industry, shapes up as being a profitable option.
Click here to download the full report in MS Word format. (573KB)
Example
To get an idea of the economics involved in Oil Mallees, let us look for example at a standard annual 10,000 mallee planting-
(Occupies equivalent of 4 ha fully planted, but is spread over 25 ha with plantings in hedge-rows at a 15% planting density of 400 trees/ha)
Expenses
| Cost of mallees (ordered before end of Nov) | $3,900 (cheaper with NHT) |
| Cost of site preparation and planting | $2,000 |
| Second year weed spray | $500 |
| Ongoing costs | - |
| Management costs | - |
| $6,400 |
Revenue
Assuming:
- 90% survival
- Harvest biomass 15-25 kg/harvest
- Harvest every 2 years
- Stumpage price $15/t biomass
| Harvest Year | Harvest Yield | |
|---|---|---|
| 15 kg | 25 kg | |
| 5 | $2,025 | $3,375 |
| 7 | $2,025 | $3,375 |
| 9 | $2,025 | $3,375 |
| $6,075 | $10,125 |
Hence:
- Trees effectively paid for in 10 years
- Annual revenue per year thereafter $1,000 pa off 4 ha
- Effective gross margin/ha = $250 per ha per year
On top of this there is the potential to earn more revenue from the below ground carbon stored in the lignotuber. This is likely to be brokered as a separate deal through the OMC once guidelines for carbon trading have been agreed upon internationally.
DISCLAIMER : These are economic predictions, estimated on current market prices. All due care has been taken in their calculation, but the Oil Mallee Company does not guarantee that these will be the actual rates of return.