Economic Evaluation of Investment in the Essential Oils and Plant Extracts R&D Program

OCTOBER 2013 RIRDC Publication No. 13/083

By Peter Chudleigh, Buyani Thomy and Andrea Bath

October 2013

RIRDC Publication No. 13/083 RIRDC Project No. PRJ-008807

ISBN 978-1-74254-576-9 ISSN 1440-6845

Economic Evaluation of Investment in the Essential Oil and Plant Extracts R&D Program Publication No. 13/083 Project No. PRJ-008807

The information contained in this publication is intended for general use to assist public knowledge and discussion and to help improve the development of sustainable regions. You must not rely on any information contained in this publication without taking specialist advice relevant to your particular circumstances.

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Researcher Contact Details

Peter Chudleigh, Buyani Thomy and Andrea Bath Agtrans Research PO Box 385 Toowong Queensland 4066

Email: [email protected]

In submitting this report, the researcher has agreed to RIRDC publishing this material in its edited form.

RIRDC Contact Details

Rural Industries Research and Development Corporation Level 2, 15 National Circuit BARTON ACT 2600

PO Box 4776 KINGSTON ACT 2604

Phone: 02 6271 4100 Fax: 02 6271 4199 Email: [email protected] Web: http://www.rirdc.gov.au

Electronically published by RIRDC in October 2013 Print-on-demand by Union Offset Printing, Canberra at www.rirdc.gov.au or phone 1300 634 313

Foreword

The Essential Oils and Plant Extracts R&D Program supports the continued development of productive and profitable Australian essential oils and plant extracts industries. The Program is funded by voluntary contributions paid by industry participants and core funding provided by the Australian Government. The investments made by the Program follow the Five Year R&D Plan for

Essential Oils and Plant Extracts 2008-2013.

In May 2008 an Evaluation Framework for RIRDC was finalised. This framework, among other things, sets out a process for reviewing each of RIRDC’s programs in the final year of its five year plan. One of the two programs selected for assessment in 2012-13 was the Essential Oils and Plant Extracts Program.

Up until and including 2011, a part of each specific program review was to select randomly three independent investments within a program for an impact evaluation through cost benefit analysis. The three economic analyses provided specific case studies that demonstrated the extent and distribution of benefits that have been, are being, or will be captured. Such information was valuable to not only RIRDC management, but also to the members of the industry (or industries) at which the investment has been targeted.

Another purpose of the economic analyses was to contribute to a process being undertaken for the Council of Rural Research & Development Corporations (CRRDC) that aims to demonstrate through examples the outcomes and benefits that have emerged or are likely to emerge from the 15 Rural Research and Development Corporations (RDCs). Valuation of these benefits, along with identification of investment expenditure, is required in order to demonstrate the RDCs’ contribution to Australian rural industry as well as environmental and social benefits to Australia.

As of early calendar year 2013, RIRDC is considering making some modifications to both its evaluation framework and its economic evaluation component. Likewise, the CRRDC evaluation process is likely to undergo some changes in calendar year 2013. Economic impact assessments are likely to maintain a strong presence in both the RIRDC and CRRDC frameworks. Impact assessments serve the main purpose of providing accountability to government and industry/community stakeholders that research funds have been managed appropriately and are producing positive impacts and benefits to Australia.

The economic evaluation of investment in the Essential Oils and Plant Extracts Program undertaken in 2012-2013 differs from the previous “three random project” approach to the evaluation of RIRDC’s programs. The current evaluation process scans all of the Program projects that have been completed in the past five years, as well as some projects that may be still current.

The 26 projects scanned demonstrated a wide range of predominantly economic benefits, a number of which were quantified in value terms. Total funding from all sources for all 26 projects totalled $6.2 million (present value terms) and 13 of these projects produced aggregate total benefits of $22.4 million (present value terms). The investment in the 13 projects of $3.9m produced a benefit cost ratio of 5.8 to 1. If the benefits from the 13 projects were compared to the total investment in the 26 projects, the benefit cost ratio was 3.6 to 1.

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This report is an addition to RIRDC’s diverse range of over 2000 research publications and it forms part of our Essential Oils and Plant Extracts R&D program, which aims to support the development of sustainable and profitable production systems.

Most of RIRDC’s publications are available for viewing, free downloading or purchasing online at www.rirdc.gov.au. Purchases can also be made by phoning 1300 634 313

Craig Burns Managing Director Rural Industries Research and Development Corporation

Acknowledgements

Liz Barbour, Forest Products Commission, Western Australia Michael Basile, Australian Lavender Growers Association Rodney Burn, AgriSolutions Australia P/L Brian Chung, Botanical Resources Australia P/L Larry Cooper, Department of Agriculture, Fisheries and Forestry, Queensland John Doran, Canberra Peter Entwistle, North East Agricultural Services Kent Fanning, Department of Agriculture, Fisheries and Forestry, Queensland Georgina Hickey, Australian Centre for International Agricultural Research John Hood, Du Cane Kunzea Farm, Tasmania Mohan Jacob, James Cook University Glenn Jacobson, University of Tasmania Erich Lassak Elena Lazar-Baker, Department of Primary Industries, NSW Krisha Marr, Rural Industries Research and Development Corporation Hazel MacTavish-West, MacTavish P/L Sally McArthur, Swinburne University of Technology Robert McEldowney, Essential Oils of Tasmania Gary Mazzorana, Lemon myrtle tree grower Robert Menary, University of Tasmania Suzie Perry, Biosecurity Australia Alison Robb, Rural Industries Research and Development Corporation Alison Saunders, Rural Industries Research and Development Corporation Sam Smee, Essential Oils of Tasmania Robert Spooner-Hart, University of Western Sydney Ian Southwell Greg Travena, Essentially Australia

Contents

Foreword ...... iii Acknowledgements ...... v Executive Summary ...... viii 1. Introduction ...... 1 Background to Evaluation ...... 1 Background to Essential Oils and Plant Extracts R&D Program ...... 1 2. Methods ...... 3 3. Description of Projects ...... 5 4. Project Investment ...... 47 5. Benefits ...... 50 6. Quantification of Benefits ...... 55 7. Results ...... 60 8. Conclusion ...... 64 References ...... 65

Tables

Table 1: Number and Value of Projects in the Population by R&D Plan Objective………………………...4 Table 2: Projects Included in Population of Essential Oils and Plant Extracts Program ...... 5 Table 3: Description of Each of the 26 Projects ...... 6 Table 4: Investment by RIRDC by Project for Years Ending 2004 to 2014 (nominal $) ...... 47 Table 5: Investment by Researchers, Industry and Others by Project for Years Ending 2004 to 2014 (nominal $) ...... 48 Table 6: Total Annual Investment by Year (nominal $) ...... 49 Table 7: Summary of Benefits/Impacts from Individual Projects ...... 50 Table 8: Project Impact by 2008-2013 Essential Oils and Plant Extracts R&D Plan Objectives ...... 51 Table 9: Triple Bottom Line Categories of Benefits from the Investment ...... 52 Table 10: Potential Response to Reduced Public Funding to RIRDC ...... 54 Table 11: National and Rural R&D Priorities 2007-08 ...... 54 Table 12: Summary of Assumptions ...... 57 Table 13: Investment Criteria for Total Investment in the 26 Projects ...... 60 Table 14: Investment Criteria for RIRDC Investment in the 26 Projects ...... 60 Table 15: Investment Criteria for Total Investment in Quantified Projects ...... 61 Table 16: Investment Criteria for RIRDC Investment in Quantified Projects ...... 61 Table 17: Contribution to PVB from Each Project ...... 62 Table 18: Sensitivity to Discount Rate (Lower Bound Analysis) ...... 62 Table 19: Sensitivity to Probability of Success of Myrtle Rust Investments (Lower Bound Analysis) ...... 63 Table 20: Confidence in Analysis of Cluster ...... 63

Figure

Figure 1: Annual Cash Flow of Benefits from the Projects Where Benefits Were Valued ...... 61

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Executive Summary

What the report is about This report presents the results of economic analyses of completed (and some current projects) within RIRDC’s Essential Oils and Plant Extracts R&D Program.

Who is the report targeted at? The information contained in the report is targeted at Program and RIRDC management, those within the essential oils and plant extracts industries, and the wider community. Other target audiences are the Australian Government and the Council of Rural Research and Development Corporations (CRRDC).

Background As of early calendar year 2013, a new Evaluation Framework for RIRDC was being developed. This framework, among other things, sets out a process for reviewing each of RIRDC’s programs in the final year of its five year plan. The previous RIRDC Evaluation Framework contained two major components, a performance review and an impact assessment.

This current report focuses on the impact assessment component but differs from previous years in that it does not randomly select three projects from the program for detailed economic analysis. The current report also addresses the current reporting requirements for RIRDC under the joint initiative of the CRRDC. Revised CRRDC evaluation guidelines are expected to be finalised in calendar 2013.

Aims/objectives The primary purpose of this report is to ascertain if, and to what extent, benefits have accrued from program investment. This will inform RIRDC management regarding program performance. Another purpose of the economic analyses is to contribute to the process being undertaken by the CRRDC that aims to demonstrate through examples the outcomes and benefits that have emerged or are likely to emerge from the 15 Rural Research and Development Corporations. Valuation of these benefits, along with identification of investment expenditure, is required in order to demonstrate the RDCs’ contribution to Australian rural industry as well as environmental and social benefits to Australia. The Australian Government is particularly interested in such contributions in order to be assured that public funding of R&D is justified.

Beneficiaries The beneficiaries of the report will be RIRDC management, the Australian Government, the CRRDC, the wider Australian community, and those specifically involved with the Australian essential oils and plant extracts industries.

Methods used The methods used in the economic analyses differ from the current instructions in the RIRDC Evaluation Framework, both in terms of project selection and in terms of the analysis process and reporting. The selection process used in 2012/13 should satisfy any random selection process of the CRRDC as well as the evaluation requirements of RIRDC. This process entailed the definition of the population of projects in the program, a scanning process to identify projects with significant impact, and an economic evaluation of the significant benefits against not only the costs of those projects but also the costs of all projects in the population.

Information was assembled for the population of projects in the Essential Oils and Plant Extracts Program, with most projects completed in the past five years but with a few ongoing projects included. Information on each project was assembled from original project proposals, final reports,

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and any progress reports or other relevant publications. Assistance was rendered by Program personnel, project principal investigators, industry personnel and others. The potential benefits from each investment were identified and described in a triple bottom line context. Some of the benefits that were considered the most significant were then valued.

The Present Value of Benefits (PVB) and Present Value of Costs (PVC) were used to estimate investment criteria of Net Present Value and Benefit-Cost Ratio at a discount rate of 5%. The Internal Rate of Return was also estimated from the annual net cash flows. The PVB and PVC are the sums of the discounted streams of benefits and costs. All dollar costs and benefits were expressed in 2011/12 dollar terms and discounted to 2011/12. A 30 year benefit time frame was used in all analyses, with benefits estimated for 30 years from the year of last investment in the 26 R&D projects. Costs for the R&D project included the cash contributions of the Program (includes both RIRDC and industry investment), as well as any other resources contributed by third parties (e.g. researchers or additional industry funds).

Analyses were undertaken for total benefits that included future expected benefits. A degree of conservatism was used when finalising assumptions. Sensitivity analyses were undertaken in most cases for those variables where there was greatest uncertainty or for those that were thought to be key drivers of the investment criteria.

Two sets of analyses and corresponding investment criteria were reported, both at a program level. The first analysis refers to projects where significant benefits were identified and valued. In this analysis, the present value of the benefits was compared to the investment in the particular projects generating the benefits. This process is likely to estimate a maximum value set of investment criteria.

The second analysis refers to the same set of valued benefits but compares them to the total investment in the program population. As there are likely to be some positive benefits from the projects where benefits were not explicitly valued, the results from the second analysis are likely to represent a minimum value set of investment criteria for the Program.

Results/key findings There was a wide range of expected benefits, predominantly economic in nature, identified in the 26 projects, and a number of these benefits were valued. Funding for the projects where benefits were valued totalled $3.9 million (present value terms) and produced aggregate total expected benefits of $22.45 million (present value terms). This gave a net present value of $18.6 million, a benefit cost ratio of 5.8 to 1 and an internal rate of return of 21.5%.

When the benefits for the significant impact projects were compared to the total investment in all projects in the population, this lowered the investment criteria. Funding for all projects in the population totalled $6.2 million (present value terms). When compared to the same value of benefits as for the first analysis, this investment produced a net present value of $16.3 million (present value terms), a benefit cost ratio of 3.6 to 1 and an internal rate of return of 15.4%.

Implications for relevant stakeholders The positive results in terms of both the number and range of benefits identified and valued demonstrate that the Program is delivering significant impacts and is providing a healthy return on investment. The overall result should be heartening for RIRDC, the industry, and policy personnel responsible for allocation of public funds.

Recommendations There were no recommendations made.

1. Introduction

Background to Evaluation

The RIRDC Essential Oils and Plant Extracts Five Year R&D Plan 2008-2013 (RIRDC, 2008) is nearing completion and a new plan for the Essential Oils and Plant Extracts Program is being developed in 2013. As part of its review process and planning for the new program, RIRDC required an economic evaluation of its past investment in the Program. Such information is valuable to not only RIRDC management, but also to the members of the industry (or industries) at which the investment has been targeted.

As of early calendar year 2013, a new Evaluation Framework for RIRDC was being developed. This framework, among other things, will set out a process for reviewing each of RIRDC’s programs in the final year of its five year plan. The previous RIRDC Evaluation Framework contained two major components, a performance review and an economic impact assessment.

This current report focuses on the impact assessment component but differs from previous years in that it does not randomly select three projects from the Program for detailed economic analysis.

This report also addresses the reporting requirements for RIRDC under the joint initiative of the CRRDC. The CRRDC objective is to demonstrate through examples the outcomes and benefits that have emerged or are likely to emerge from the 15 Rural Research and Development Corporations. Valuation of these benefits, along with identification of investment expenditure, is required in order to demonstrate the RDCs’ contribution to Australian rural industry as well as environmental and social benefits to Australia. The Australian Government is particularly interested in such contributions in order to be assured that public funding of R&D is justified. Revised CRRDC evaluation guidelines are expected also to be finalised in calendar 2013.

Background to Essential Oils and Plant Extracts R&D Program

The Essential Oils and Plant Extracts R&D Program is targeted at a wide range of different, predominantly small, industries producing oils and extracts that have a wide range of end uses sold into perfume, flavouring, medicinal and industrial markets, both domestic and export.

Essential oil production in Australia is from both native plants such as eucalyptus, lemon myrtle and tea tree as well as from introduced species such as peppermint, boronia and fennel. The investments in the current economic evaluation address a wide range of plants and products, many of which are exported.

The four objectives of the current R&D Plan (2008-2013) are:

1. To improve production systems to raise productivity and control over product qualities.

2. To support the demonstration of safety and effectiveness of Australian products and facilitate the satisfaction of regulatory requirements to enhance market access.

3. To support new ideas that provide potential for growing the market for Australian product.

4. To improve the industry and research capacity.

The industry peak body is the Essential Oil Producers Association of Australia (http://eopaa.com.au). Membership is open to producers and distributors of essential oils and plant extracts and to producers of plant material for the production of essential oils or plant extracts. Some specific products, regions and states have their own industry associations such as the Australian Lavender Growers’ Association (http://talga.com.au/lavendertrail.html).

2. Methods

The evaluation approach follows general evaluation guidelines that are now well entrenched within the Australian primary industry research sector including RDCs, Cooperative Research Centres (CRCs) and some Universities. The impact assessment uses cost benefit analysis (CBA). This entails both qualitative and quantitative approaches. These approaches are in accord with the current guidelines of the Council of Rural Research and Development Corporations.

There are 26 projects defined in the project population for the Essential Oils and Plant Extracts Program. To be included in the population, projects had to be completed within the period July 2007 to March 2013 or, if not completed, had to have reached a significant milestone. The population therefore included some projects that started earlier than July 2007. Four of the 26 projects were incomplete as at March 2013.

The general approach was to identify and briefly describe objectives, outputs, outcomes/impacts and benefits from each project investment. Outputs include both ‘use’ and ‘process’ outputs. Economic, environmental and social benefits associated with the outcomes are identified and described.

One of the characteristics of most RIRDC Programs is a wide diversity of outcomes as projects address a wide range of subprogram areas and issues. For example, with Essential Oils and Plant Extracts, there are projects associated with various plant species varying across issues such as production and quality, processing, new product development, regulation and market access, communication and capacity building. This can make valuations of benefits from projects within the Program difficult and time consuming.

The diversity of projects is addressed in the following way. Based on the extent of “impact” associated with each project in the above process, selected projects were chosen for quantification of their benefits. Benefits from 13 projects from the population are valued and these reflect the major benefits derived from the program investment.

This allows two set of aggregate investment criteria to be produced:

The costs and benefits for the 13 projects were aggregated to form a set of investment criteria for this subset of projects. The results represent an upper limit for the program’s economic impact when the benefits are compared with only the costs of those 13 projects.

The benefits for the 13 projects are aggregated and compared with the costs of the 26 projects in the population, to provide a lower limit for the program’s economic impact.

The cost benefit analyses focuses on economic benefits. Environmental and social benefits are described in qualitative terms. A lack of evidence to link projects to environmental and social benefits was evident. This created difficulties in making reasonable assumptions for valuing these benefits. This was the primary reason for not valuing such benefits.

The size and value of the final population included in the analysis is shown in Table 1, along with the classification of projects according to the objectives of the Essential Oils and Plant Extracts R&D Plan.

Table 1: Number and Value of Projects in the Population by R&D Plan Objective

Objectives of the Essential Oils No. of Total Value of Percentage of and Plant Extracts R&D Plan Projects Projects ($ Total Value Nominal) (a) (%) Improve production systems to raise 11 1,943,970 39.3 productivity and control over product qualities

Support the demonstration of safety 7 1,775,840 35.9 and effectiveness of Australian products and facilitate the satisfaction of regulatory requirements to enhance market access

Support new ideas that provide 5 1,109,609 22.4 potential for growing the market for Australian Product

Improve the industry and research 3 121,950 2.4 capacity

Total 26 4,951,369 100.0 (a) RIRDC and Other funding

3. Description of Projects

Table 2 provides a list of the codes and titles of all projects defined in the population.

Table 2: Projects Included in Population of Essential Oils and Plant Extracts Program Project Code Project Title PRJ-000773 Growing the essential oils industry PRJ-000017 Aroma and flavour products from plant waste PRJ-006257 Bioactive extracts from Australian native plants for the personal care industry PRJ-004905 Agronomic and extraction parameters for Centipeda cunninghamii production PRJ-005404 Revision of Backhousia citriodora Essential Oil Standard PRJ-007240 Investigating control options for Myrtle rust in native foods PRJ-007285 Determination of residues in riberries, lemon and anise myrtle and satin ash PRJ-008303 Monitoring Myrtle rust in a lemon Myrtle Provenance Trial PRJ-000467 Quality assurance protocols to minimise pesticide residues in essential oils PRJ-000018 Management of post-harvest diseases using Australian essential oils PRJ-000021 Develop Australian standards for oil of Australian Lavandin cultivars PRJ-000598 Commercial production of milkweed in a plant with anti-cancer properties PRJ-000703 Analysis of Dodonea viscosa as a potential remedy for anti-inflammatory and anti-bacterial applications PRJ-000020 Production of TALGA lavender industry newsletter Production of Newsletter of the Essential Oil Producer's Association of PRJ-000462 Australia PRJ-000464 Clinical trial of kunzea oil for onychomycoses treatment commercial potential PRJ-000763 Using frontier technologies for the quality assurance of medicinal herbs PRJ-000778 Development and economic assessment of Artemisia for production of anti- Malarial extract PRJ-000841 Growing Xi Shu and extracting an anti-cancer drug (Camptothecin) PRJ-002676 Flood irrigated tropical timber trials in the North of Western Australia PRJ-004677 Heartwood rot identification and impact in Sandalwood (Santalum album). PRJ-004698 The Melaleuca Book PRJ-005148 Development of antimicrobial coatings from pure Australian essential oils Increased yields from peppermint crops through improved micronutrient PRJ-000468 nutrition PRJ-000019 Analysis of plant-host relationships in tropical sandalwood (Santalum album) PRJ-000795 Fabrication of electronic materials from the Australian essential oils

A description of each of the 26 projects in a logical framework is provided in Table 3.

Table 3: Description of Each of the 26 Projects PRJ-000773: Growing the essential oils industry Project Organisation: Essential Oils of Tasmania Pty Ltd details Period: September 2006 to May 2009 Principal investigator: Sam Smee

Rationale Essential Oils of Tasmania Pty Ltd had been growing essential oil crops for the past 20 years and was experiencing excellent growth opportunities. To realise this growth, the industry needed to develop more effective communication and management systems, as well as improve the returns to growers by improving the germplasm available and extending past research outcomes.

Objectives To support the expansion and international competitiveness of the Tasmanian essential oils industry, by: - establishing an industry development team to ensure full implementation of past research knowledge on a range of crops, including peppermint, fennel, parsley, boronia and lavender; - developing and fine-tuning best practice procedures for commercial production of essential oil crops through detailed crop manuals; - developing a readily accessible crop advisory system; - conducting ongoing field trial work, where necessary, to refine data from previous research, and incorporate it into the commercial management systems; assessing and securing genetic resources to provide producers with germplasm with the highest potential available.

Activities Assessed and secured superior genetic material for lavender, fennel and and peppermint for its agronomic traits and oil quality and quantity. Outputs The major management practices addressed in field trials were weed and disease control, and plant growth regulation. Developed a series of crop production manuals for peppermint, fennel, parsley, lavender and boronia, capturing all research and knowledge that had accumulated with growing these crops. Conducted field trials and incorporated the results into the manuals where gaps in knowledge existed. The manuals produced cover all aspects of production (e.g. site selection, crop establishment, management of weeds/pests/diseases, nutritional management, harvesting, and crop economics (Sam Smee, pers. comm., 2013). Created an online crop management database to improve the communication between growers and field officers; the database is part of the company website but is not publicly available at this stage. (http://essentialoilsoftasmania.com.au/grower/welcome) The crop management database is still functional (Sam Smee, pers. comm., 2013).

Outcomes Enhanced utilisation and extension of past and future research outcomes through use manuals. Potential improvements in the efficiency of production of peppermint, fennel, parsley, lavender and boronia from use of manuals. Availed an online record of crop husbandry actions through the online crop management database. Potentially more efficient communication between field service personnel and growers through the online crop management database.

However, the online capability of the database has, unfortunately, had poor uptake by growers. One reason for this was the widespread shift to smart phone usage soon after the database was launched, and growers switching to crop management applications. This was an unforseen technological advancement when the project was being conducted and the company is currently working to either reconfigure their database for use on smart phones, or adapt a commercial crop management mobile application for the situation (Sam Smee, pers. comm., 2013).

Benefits Cost reductions for all five plants (peppermint, fennel, parsley, boronia and lavender) from better agronomic practices as informed by the manuals. For example (Sam Smee, pers. comm., 2013): Achieved a 10% improvement in average yield of parsley crops due to improved crop establishment and weed control. Achieved a 20% improvement in average yield of peppermint crops due to better nutritional and disease management, plus moving to double cut harvests. Achieved a 25% improvement in yield in fennel crops due to improved disease management during years when disease pressure is high. Potential yield increases from improved genetic material of lavender and peppermint; these advances have not been as prominent as yet compared to those from changes in management practices. Potential contribution to a more sustainable and competitive essential oil industry to exploit existing expansion opportunities.

PRJ-000017: Aroma and flavour products from plant waste Project Organisation: University of Tasmania details Period: June 2007 to May 2010 Principal investigator: Robert Menary

Rationale Research had indicated that boronia marc (waste) contained un-extracted volatiles that were present as both free volatiles in the marc and as volatiles bound to sugars (glycosides). Boronia megastigma (Nees) was commercially grown in Tasmania to produce an absolute; this absolute was used internationally in the food industry. The absolute has excellent potential for perfumery because of the unique combination of beta-ione and methyl jasmonates and other potent aroma compounds. This perfumery purpose had not been widely pursued because of pigments and high cost of the extract in comparison to synthetic material.

Prior research had indicated that there was potential for recovery of the glycosidically bound volatiles through hydrolysis with endogenous fungi that had been isolated from boronia marc and this concept was extensively supported by reports in the scientific literature.

Objectives The primary objective of this project was to develop commercial-scale processes involving the natural modification of existing plant components leading to increased yields of flavour and aroma compounds from boronia marc.

Specific objectives were:

- To assess optimum growth conditions of endogenous fungi previously isolated from boronia flowers. - To further develop post-harvest technologies relating to precursor transformation, leading to a commercial-scale process for the re-extraction of further product from boronia marc. - To undertake an organoleptic and economic comparison between the newly developed microbiological technology and other commonly used processes, including the use of commercially available enzyme products. - To optimise use of commercially available pectinases, particularly AR 2000 as a process for recovery of glycosidically bound flavour and aroma volatiles. - To fractionate flavour and fragrance glycosides from boronia marc. - To isolate and identify glycosidic conjugates.

Activities Gas chromatography/flame ionisation detector (GC /FID) and gas and chromatography/mass spectrometry (GC/MS) analytical techniques were used Outputs for detection and measurement of volatiles. High performance liquid chromatography/mass spectrometry (HPLC/MS) methods were used for detection and measurement of the relative levels of glycosidic precursors. Preparative chromatography and nuclear magnetic resonance (NMR) spectroscopy were used for isolation and identification of the glycosides. Processes were developed initially through laboratory-scale experiments and these were further developed using pilot and commercial-scale processes for verification of the capacity for the method to have industry application. Free volatiles were extracted using solvent extraction methodology involving a two-stage extraction process where initial extraction of the steamed marc with ethyl acetate was followed by a second extraction of new extract with an ethanol/iso-hexane mixture. The study found that glycosidically bound volatiles could be hydrolysed using commercially available pectinases. An AR 2000 pectinase preparation was extensively trialled; however, it was found that other commercially available pectinases may produce higher yields with an increased concentration of floral volatiles. Both processes allowed extraction of increased yields of extract, but data indicated that the process was only partially efficient and further development was recommended. A review of literature indicated that there were several reports of glycosidic conjugates of flavour and aroma compounds in fruits and application of the technology to the fruit industry may be beneficial.

Outcomes Increased recovery of volatiles from boronia flowers and other raw materials for flavour and aroma purposes. Further commercial modification has proceeded and complete adoption of the extraction process for boronia is now practiced (Bob Menary, pers. comm., 2013). The technology has been applied also to fruit industries such as blackcurrants, raspberry and apples (Bob Menary, pers. comm., 2013).

Benefits The boronia industry has benefited from increased recovery of valuable products from boronia marc. Other fruit industries have benefitted from improvements to apple products and blackcurrant juice. Enhanced scientific and technical knowledge and understanding.

PRJ-006257: Bioactive extracts from Australian native plants for the personal care industry Project Organisation: MacTavish Pty Ltd details Period: May 2011 to May 2012 Principal investigator: Hazel MacTavish-West

Rationale The global skin-care industry represented a largely untapped market opportunity for natural, plant derived extracts with anti-ageing bioactivity from Australia. Earlier unrelated RIRDC projects had shown that many of the plants grown in Australia as Native Bush Foods or other extractive industries were largely unheard of in Europe and there was good evidence that relevant bioactivity could be present. Many skin-care companies are global and require almost pharmaceutical standards in terms of proof of safety and efficacy. Therefore there was a need to investigate this significant opportunity. This project sought to illustrate the potential skin-relevant anti-aging bioactivity of 11 water soluble extracts made from Australian-grown and native plants and extraction marc from the plant extract industry.

Objectives - To make new extracts from known plant biomass sources from the natural plant extracts industry. - To illustrate bioactivity and to prepare larger scale extracts for commercial evaluation and market purposes. - To prepare economic costings for production of the extracts (output not made public at this stage due to confidentiality reasons). - To survey and identify potential industry interest and identify the next steps.

Activities Produced semi-purified laboratory-scale freeze-dried hydrophilic plant extracts and from four Australian plants grown/harvested for Native Bush Foods and seven Outputs plant by-products from other extraction activities within Tasmania. Undertook laboratory in vitro assays of tyrosinase, elastase and collagenase inhibition, and also analysed phenolic content. The five most promising extracts were identified as: blackcurrant cane (Ribes nigrum), Tanacetum marc, Tasmannia leaf and marc, Eucalyptus olida leaf and Backhousia citriodora leaf. Tasmania produced the bulk of Ribes nigrum, Tasmannia lanceolata and Tanacetum cinerariifolium crops, and also had an extraction base which could be suitable for water-soluble extracts. The other two crops were grown in Northern NSW (Backhousia citriodora, Eucalyptus olida) and South Gippsland, Victoria (Eucalyptus olida). The project confirmed the potential merit of developing these five extracts further, in terms of establishing sufficient safety data for transfer of extracts for commercial evaluation, and in improving the extraction efficiency and reducing extraction costs if possible. Market interest was surveyed by sending initial information out to around 30 companies and 18 of these received detailed (but non confidential) results on unnamed plants. Project personnel met with 10 of these companies at In-Cosmetics 2012, the European trade showcase for the personal care industry. A total of 12 companies expressed relatively serious levels of interest and provided insight into requirements for working with them going forward. The unique ‘stories’ these plants have in terms of botany, phytochemistry, history of use, provenance and bioactivity were highly valued and sought after by the personal care industry. An economic analysis was undertaken to ascertain commercial production, the results of the analysis is confidential to consortium members at this stage.

Recommendations for further development were made to the consortium members.

Outcomes This project assisted consortium members identify the required next steps toward commercialisation and returns from the investment participation. The project will contribute useful knowledge that can help consortium members to take advantage of the perceived global supply shortage in bioactive extracts. Contributions to potentially fruitful collaborations between Australian producers and European personal care industry companies. The project showed the considerable market interests in extracts from Australia. The research has enabled a strategic focus and direction for the consortium. There has been further research investment with a second 18 month RIRDC and industry-funded project (total of $80,000 direct and $87,500 indirect contributions).Three extracts have been taken through to formulation. After some microbial issues have been addressed, samples will be presented with other data to potential customers in late calendar 2013 (Hazel MacTavish- West, pers. comm., 2013). The expectation is that a commercialisation partner will be engaged in 2013 for all three current extracts and one new extract (Hazel MacTavish-West, pers. comm., 2013).

Benefits Opportunity created for Australian producers to grow, extract and sell bioactives to the European personal care industry (e.g. from Tasmannia lanceolata). Long-term benefits include potential contribution to diversification of the extraction portfolio for specific crops thus making crop production enterprises more sustainable. Enhanced scientific knowledge and understanding.

PRJ-004905: Agronomic and extraction parameters for Centipeda cunninghamii production Project Organisation: University of Western Sydney details Period: May 2010 to May 2013 Principal investigator: Robert Spooner-Hart

Rationale Australia had a small, underdeveloped industry based on production and extraction of Centipeda cunninghamii, an endemic Australian traditional medicinal plant. Recent industry collaboration with Southern Cross University (SCU) had made significant advances into the modern herbal medicine industry through patented extraction and identification of the novel chemistry underpinning its biological activity. There was increasing international interest in high-quality C. cunninghamii extracts, and limited exports had already commenced, with formulated end-use products. This project aimed to tackle the identified key agronomic, harvest and postharvest issues which would enable the development of a viable Australian industry.

Objectives - To evaluate the three currently selected and grown phenotypes of C. cunninghamii, to determine which is superior, based on agronomic and chemical characteristics, with a view to its adoption as the industry standard. - To identify key pests and diseases, with a view to their management. - To investigate current agronomic practices (particularly fertiliser use and

irrigation) to maximise yield.

- To determine optimal harvest time to maximise yield and phytochemical quality.

Activities This project will span 3 years of field, pot and laboratory trials to select and superior genetic material, identification of production and post-production Outputs practices to optimise yield and quality, and the generation of data for establishment of an industry standard for the extract.

Activities and outputs achieved include:

First and second season field and pot trials were successfully completed. Weather data, pests and diseases data were recorded at all sites during the trial period. Fresh weights at harvest and oven-dry weights of all samples were recorded. Dried samples were sent to SCU laboratories where they were extracted so that yield and levels of bioactives could be determined. A field day was held on November 24 and included presentations on the history of Centipeda cunninghamii as a medicinal plant, its chemistry and potential uses. Robert Spooner-Hart presented information on the agronomy of the crop, and reported on the trials conducted in the RIRDC project and the results of the first two seasons, and their implications for farmers and the industry partner. Sonja Dymalovski, CEO of BioActives Exports Pty Ltd (BAX), the industry partner presented information about her company, the work they had undertaken on optimising quality of the extracts, their R&D in developing products and their interest in increasing the number of farmers growing Centipeda, to ensure they can meet their projected market demand (Robert Spooner-Hart, pers. comm., 2013).

Planned activities and outputs include:

Expand production of selected superior germplasm to generate more data. Conduct second year pesticide efficacy trials to generate data for permit applications, if required. Investigate optimisation of fertiliser and irrigation practices, based on modification of current practices (based on results from pot trial in year 2), with emphasis in yield/ha and quality extract. Investigate weediness of the species from year 1 and 2 crops. Conduct an economic analysis of C. cunninghamii, based on data from the 3 years. The economic analysis is not yet completed, although a deal of data has been collected. The analysis will be included with the final report.

Outcomes The main outcome from the Field Day presentations was that at least 3 farmers expressed interest in trial planting Centipeda. The three farmers expressing interest were either exiting from the dairy industry or were looking to diversify their olive and saffron operations, so a significant outcome of this project was a potential contribution to farm diversification. Also, further discussions had led to the potential trialling of Centipeda production on the north coast of NSW, as an alternative crop to lemon myrtle, which is under serious threat from myrtle rust. The number of phenotypes has been narrowed down to two; it is hoped to compare these two at other, new sites (Robert Spooner-Hart, pers. comm., 2013).

By the end of the project the principal outcomes will be clear protocols for production of Centipeda by farmers, at least in east Gippsland where the field trials were conducted; a choice of 2 superior cultivars which can be evaluated by potential growers at their own sites, together with an assessment of their yield and quality of extract; identified pests and diseases to be monitored for by growers, and recommended chemicals for their sustainable management; postharvest protocols, especially for drying of the harvested crop and its subsequent storage on farm or by BAX prior to extraction; protocols for optimised extraction of the bioactives from the harvested dried plant material; and confirmation that Centipeda does not pose a major weediness problem. The yield of bioactives is likely to improve by perhaps 10-20% from optimal harvesting of the crop at maximum flowering; further yield increases may be derived from higher planting densities (Robert Spooner-Hart, pers. comm., 2013). The farming system provides dried plant material current average of 3.9 tonnes per ha) and returning just over $20,000/dry tonne; the price may decrease as production expands (Robert Spooner-Hart, pers. comm., 2013). Current costs of production are estimated at about $10,000 per ha, including the cost of seedlings. With a yield increase assumed to be about 10%, the added cost of production may be about $1,000 per ha. Three hectares has been the largest area that has been grown over the past 10 years, and production has been less in most years, because of the limited demand for extract, which was related to the market. Based on discussions between the project leader and the industry partner BAX there may be an opportunity for the areas of Centipeda to increase in future.

Benefits Reduced cost of production per ha due to higher yields. Potential increase in area of Centipeda grown in Australia and increased export income from sale of formulated products. Enhanced scientific and technical knowledge and understanding.

PRJ-005404: Revision of Backhousia citriodora Essential Oil Standard Project Organisation: Australian Rainforest Products details Period: March 2010 to May 2011 Principal investigator: Erich Lassak

Rationale Backhousia citriodora (lemon myrtle) leaf oil was used in the compounding of flavours and fragrances as well as in aromatherapy and had been exported to Europe, mainly to Germany. In 2009, the quality of some of the Australian oils sold to a German buyer had demonstrated adulteration with compounds not found in genuine B. citriodora oil (aldehydes C8, C9 and C10) as well as containing abnormally high amounts of geraniol (up to 10%) not found in the genuine oils. This had harmed the industry as major overseas customers had stopped buying lemon myrtle essential oil.

The Australian Standard AS 4941 for Backhousia citriodora essential oil, first published in 2001, had to be revised in order to assure the greater chemical uniformity of the then currently produced oil and to extend its chromatographic profile by the addition of maximum levels of geraniol and of several other compounds not normally found in genuine lemon myrtle oil to guard against adulterations.

Objectives - To analyse samples and prepare a submission to Standards Australia for the revision of the Australian Standards AS 4941 Backhousia citriodora (lemon myrtle) essential oil.

Activities Tested and analysed 13 samples from a representative number of genuine and Backhousia citriodora oils. Outputs The study found the mean geraniol content and standard deviation were 1.55 per cent and 0.8 per cent respectively. The refractive indices and optical rotation of all samples complied with the values specified in AS 4941-2001. These values were within the range reported by other studies. The new analytical data combined with historical data was submitted to a statistical treatment in order to yield a statistical valid set of ranges for individual oil constituents. Co-injections of the three aldehydes (C8, C9 and C10) with Backhousia citriodora oil showed that the aldehydes are relatively easy to identify in the mixture using gas chromatographic traces. It was recommended that the three aldehydes must be absent from Backhousia citriodora essential oils. Traces of the aldehydes were therefore recommended as a means of revealing adulteration of Backhousia citriodora oil. To help define the chemical composition of Backhousia citriodora oil more accurately, it was recommended that the range of geraniol in the amended Australian standard be set at 0.6 to 2.5 per cent.

Outcomes The amendments to the Standard have now been included in the Australian Standard as recommended by the project. The amended Standard now reflects the current commercial composition of Backhousia citriodora oil more accurately and the quality of the oil has definitely increased (Erich Lassak, pers. Comm.., 2013). The new Australian Standard has potentially improved the image of Australian produced Backhousia citriodora oil. While there has been an increase in Backhousia citriodora oil sales to Europe and USA, it is not clear how much of this increase can be attributed to the revised standard (Erich Lassak, pers. comm., 2013). There has been an small increase in the price of the oil (a few %) due mainly to a rise in production costs (Erich Lassak, pers. comm., 2013).

Benefits Potentially a small increase in exports of Backhousia citriodora oil. Enhanced industry development through improved Australian Standard for Backhousia citriodora oil.

PRJ-007240: Investigating control options for Myrtle rust in native foods Project Organisation: North East Agricultural Services details Period: September 2011 to September 2013 Principal investigator: Peter Entwistle

Rationale The lemon myrtle industry was generally focused on “Chemical Free” production. With the advent of myrtle rust, this led to the need for softer chemical control options that are based on natural products or those acceptable under organic management for controlling myrtle rust. This project carried out assessment and field trialling of a number of soft control methods.

This project was part of another project to determine Minimum Residue Limits (MRL) for a range of fungicides and was monitored to assess efficacy through this project.

Objectives - The overarching objective of this project was to enhance production systems and to maintain competitiveness of lemon myrtle and syzygium producers.

Supporting objectives were:

- To assess the impact of myrtle rust on commercial plantations. - To identify and trial effective control alternatives for myrtle rust in commercial plantations. - To determine the effectiveness of commercial fungicides in controlling myrtle rust in plantations impacted by myrtle rust.

Activities Monitoring sites to determine the impact of myrtle rust were set up in and Bagotville, Casino and Dunoon for lemon myrtle and in Tullera for aniseed Outputs myrtle. The initial set of myrtle rust control trials were carried out with treatments imposed twice over 14 days and replicated three to four times. Treatments used were: hydrogen peroxide, potassium carbonate, calcium carbonate, sodium bicarbonate, microbe sprays, two forms of copper, a tea tree based formulation and paraffinic oil. Incidence and severity of rust was scored for each treatment. By 2012, the rust incidence had been quite variable but in most cases severity coincided with peaks in growth and had risen significantly in the Autumn period. Estimates of yield decline in lemon myrtle crops without treatments imposed varied from 30 to 70 per cent reduction in biomass. Aniseed myrtle crops were found to suffer to a greater extent and without treatment after harvest severe losses and stump death may occur. All treatments appeared to have some impact on the rust with slight reductions in sporulation recorded soon after treatment. The two copper formulations were the only treatments to give significant control of the rust but mainly when low levels were present prior to application. Plantations using chemical fungicides were generally more productive and some cases had excellent growth. The monitoring of efficacy in the MRL study showed that triadimenol and propiconazole were the most effective fungicides. Azoxystrobin and difenoconazole were found to be slightly less effective but still gave adequate rust control. Copper is the most effective soft chemical at this stage; other products are showing some effect but it is generally short term and will need to be carefully targeted to growth stage and rust incidence to have beneficial effects. Trials are still in progress to determine the effectiveness of some other products that have not been reported on to date (Peter Entwistle, pers. comm., 2013).

Outcomes The research is likely to show that the rust is seasonally variable in its incidence and severity. There are periods of good growth where the rust is not very active. This is generally under drier conditions during the spring and early summer. The cooler period of late winter is also likely to be rust free. Harvest timing will have a large bearing on the response of the crop to the rust. Crops that are harvested prior to peak temperature and moisture periods for rust development are likely to come under the most pressure. Some tree deaths

have already occurred in these conditions. Soft option controls will need to be carefully timed to gain benefit. The aim is likely to be to allow the lemon myrtle to retain as much plant health as possible. This will enable them to survive and produce after each harvest event (Peter Entwistle, pers. comm., 2013). Hard chemical control is an option to increase rust affected yields of lemon myrtle leaf for either the essential oil market or the bushfood and tea markets. Some plantations are already using fungicides effectively to manage the rust. Near normal yields have been obtained in the current season but the rust was absent for several months due to dry conditions (Peter Entwistle, pers. comm., 2013).

However, the currently available range of fungicides and the risk of residues are significant. There is currently another RIRDC project that is addressing these issues. The effectiveness of copper spray is likely to be high enough to justify its use as a soft chemical. The protectant nature of copper products is likely to allow the survival of infected plants during periods of high rust activity. Without this option there is likely to be a gradual decline in the health of the plantations and death of the plants is likely to occur in the worst cases (Peter Entwistle, pers. comm., 2013). The rust has no effect on the taste of lemon myrtle teas, even when harvested with high rust levels present. The main issue is the loss of yield. Leaf area is reduced leading to lower yields. The smaller leaf size resulting from rust infection also leads to greater losses during processing (Peter Entwistle, pers. comm., 2013). There are combinations of soft options that are still under investigation through a series of field trials. Some of these are likely to be combined with copper treatments to provide some protection from the rust. Yields are still likely to lower under this management system but they are likely to higher than untreated plantations (Peter Entwistle, pers. comm., 2013). It is possible that copper treatments could be used as an additional option to use in combination with a suite of chemical fungicides.

Benefits Copper alone will not save the herbal tea market. There is only a small portion of the industry that is certified organic so that most producers can use commercial fungicides. Potentially, some reduction in crop losses may occur due to treatment with copper sprays where a decision to avoid hard chemicals has been made. Potentially, improved industry image from use of control methods using copper sprays that are acceptable under organic management for controlling myrtle rust.

PRJ-007285: Determination of residues in riberries, lemon and anise myrtle and satin ash Project Organisation: AgriSolutions Australia Pty Ltd details Period: June 2009 to July 2013 Principal investigator: Rodney Burn

Rationale Myrtle rust (Uredo rangelii) had been detected in New South Wales and Queensland, and the Australian Native Food Industry Limited (ANFIL) had identified a potential threat to some of their crops. ANFIL applied for and was granted an emergency permit from Australian Pesticide and Veterinary Medicines Authority (APVMA) to allow use of fungicide products containing triadimenol, azoxystrobin and propiconazole to protect their crops.

To enable renewal of the permit as a minor use permit, APVMA required residue data from lemon myrtle, anise myrtle and riberry crops treated with triadimenol, azoxystrobin and propiconazole. An emergency permit was requested for additional fungicide products, however there was insufficient data to allow a permit to be issued. ANFIL representatives agreed that AgriSolutions Australia should conduct six field trials over two years with subsequent analytical analysis to generate the required data for submission to the APVMA. Additionally, observation would be made on the safety of the products on the various crops.

Objectives - To generate data on the residue levels of triadimenol, azoxystrobin, propiconazole, cyproconazole, triforine and difenconazole in riberries, lemon myrtle and anise myrtle products.

- To use this data to support an application for a minor use permit allowing the use of products containing the above chemicals on riberries, lemon myrtle and anise myrtle for the control of Myrtle Rust.

Activities The Site 1 trial in riberries at Cooroy Qld began on the 19th of December 2011 and and the final specimens were collected on the 16th of January 2012. Outputs The Site 2 trial in Satin Ash began on the 19th of December 2011 and the final specimens were collected on the 16th of January 2012. The Site 3 trial in lemon myrtle at The Channing NSW began on the 17th of December 2011 and the final specimens were collected on the 14th of January 2012. All specimens have been delivered to AgriSolutions Australia laboratory at Deception Bay, Qld. The remaining three trials commenced in spring 2012 and once those specimens are received, analysis of all trials will be conducted. There was a change in the chemicals tested in the final year (current year) due to limitations found in the first year (e.g. residues).

Outcomes Most of the new chemicals being tested are promising and are likely to be proven effective controls of the rust. It is expected that some of the new chemicals being tested will be efficacious and can be combined with the existing chemicals to provide a suite of chemical control measures that will reduce or maintain the existing levels of yield loss for the industry.

It is expected that minor use permits will be available to allow the use of the new chemicals to control myrtle rust in riberries, lemon myrtle and anise

myrtle.

Benefits Potentially reduced sales income losses from the impact of myrtle rust due to the availability of new chemical fungicides.

PRJ-008303: Monitoring Myrtle Rust in a Lemon Myrtle Provenance Trial Project Organisation: John Doran details Period: November 2011 to May 2012 Principal investigator: John Doran

Rationale A threat to the future health and genetic diversity of many species of the family Myrtaceae in eastern Australia is from Puccinia psidii sensu lato (s.l.) (syn Uredo rangelii). This exotic pathogen has the common name of myrtle rust in Australia but it is known as Guava or Eucalyptus rust elsewhere with origins in Brazil. First observed in Australia on the Central Coast of New South Wales in April 2010, it has now spread from Victoria to northern Queensland (John Doran , pers. comm., 2013). The disease has now been observed on many myrtaceous species including Backhousia citriodora (lemon myrtle). Lemon myrtle provides citral-rich foliar essential oil used in personal care products and dried leaves used in herbal teas, spices and food flavouring by the native food industry. Cultivars of B. citriodora that were used for these purposes were moderately to highly susceptible to the exotic rust fungus. The industry therefore needed rust-resistant cultivars for it to maintain production and its organic status. This project aimed to inform the industry if selection of naturally rust-resistant genotypes was a possibility in this species.

Objectives - To identify if there is any naturally inherent myrtle rust resistance in a 1995- 96 genepool planting of Backousia citriodora (lemon myrtle) seedlots and clones at Beerburrum in South East Queensland. - To mark any rust resistant plant types.

Activities Relabelling of treatments and a preliminary assessment of the level of rust and attack commenced in November 2011 on 1,500 plants, two months after Outputs coppicing. Rust was observed on 30% of the plants but at low levels and it was deemed to be too early to reliably rate rust susceptibility of the coppicing plants at that stage. A second site visit was undertaken, eight months after coppicing. Plant height ranged from 1-2m with each plant carrying many new soft shoots with some carrying abundant rust spores. A subjective assessment was undertaken to gauge the incidence and relative severity of rust attack and vigour of coppice regrowth on individual plants in the Beerburrum trial. Families of northern Queensland origins had, on average, higher levels of rust attack than southern Queensland sources. The clones from an atypical, prostrate form from Silver Valley (far N. Qld), were the exception at the time of the assessment. Variation in incidence and severity of rust attack was noted between and within families within provenances providing opportunities for selecting the most resistant phenotypes.

A family coded 1010 from Woondum in southern Queensland had the largest number of progeny (19) showing no signs of rust attack at the time. Several of these plants and plants from other families that had low rust scores

combined with vigorous coppice growth have been flagged for future work.

Outcomes This project has shown that it may be possible to select rust resistant cultivars of B. citriodora to replace the susceptible cultivars used by native food, essential oil and nursery industries. However, the study points out that there is still much to learn and this was just one assessment of disease incidence and severity at a given one time. Contributions to any further work by providing a starting point for research on myrtle rust resistance. Potential contributions to a process that may identify myrtle rust resistance with potential economic gains for the native food, essential oil and nursery industries. RIRDC and the University of the Sunshine Coast are supporting a new project commencing in the second quarter of 2013. The aims will include moving vegetatively representative plant materials from the Beerburrum genebank to safe sites, undertaking further trials of rust resistant varieties, new seed collections in the most resistant provenances and other relevant studies (John Doran, pers. comm., 2013). It is likely that with further trials the families identified in this study might be selected and adopted and grown in other regions to help control myrtle rust. For example, the disease may spread to the largest plantation of lemon myrtle near Proserpine in Queensland and that grower, along with the nursery industry, may seek rust resistant lines (John Doran, pers. comm., 2013). It is hoped that, in the first instance, rust resistant lines from Beerburrum may be able to meet all the other criteria of the native food industry like flavour. However, it needs to be noted that the rust could mutate as well as other strains of the disease come in from overseas. Hence first selections might prove susceptible to the new strains so implementation of an on-going selection and breeding program would be prudent. But even partial resistance should improve overall plant health and leafiness so yields should be better than susceptible forms (John Doran, pers. comm., 2013). The industry could contract severely if chemical controls fail to prevent a further yield decline. Growers would then produce alternative crops at lower gross margins than can be gained from lemon myrtle. If the new RIRDC project is successful, and rust resistant lines are eventually produced, the lines could be extremely valuable to the lemon myrtle industry. This value could be manifest in numerous ways. For example, resistant lines may allow an organic industry to be sustained; they may allow chemicals costs to be reduced; or they may form a part of a management strategy that may include both chemical and genetic control strategies. The wholesale value of the lemon myrtle industry in northern NSW is about $5 m per annum; the large plantation near Proserpine in northern Queensland would have a wholesale value much greater.

Benefits Potentially a highly significant contribution to industry economic gains from some future adoption of myrtle rust resistant plants (e.g. increased yields, possible sustainability of organic production, reduced fungicide use). Resistant lines could allow the industry to grow and reach its full market potential in the export market. Enhanced scientific knowledge/capacity. It is worth noting that because RIRDC was able to be responsive to this issue, the knowledge and capacity from all of these myrtle rust projects has been key in the development of other R&D projects in other parts of the agriculture, forestry and environmental sectors (Alison Saunders, pers. comm., 2013).

PRJ-000467: Quality assurance protocols to minimise pesticide residues in essential oils Project Organisation: University of Tasmania details Period: May 2004 to August 2007 Principal investigator: Robert Menary

Rationale The Australian essential oils industry had an obligation to provide quality products that met the maximum residue limit (MRL) guidelines of discerning customers. Additionally, strict regulations in relation to maximum residue limits were in place in many of the European Union and North American countries where Australian essential oils and extracts were routinely sold. Consequently the necessity for a comprehensive Quality Assurance Program for the essential oils industry that reduced the risk of pesticide levels exceeding the MRLs designated by the buyer was apparent.

Objectives - To develop a paper based on a chemical management plan for an approved supplier program. - To optimise analytical procedures for analysis of pesticides in essential oils. - To monitor pesticide behaviour in cropping cycle. - To undertake hazard analysis for pesticides used in crop production.

Activities Held a collaborative meeting between staff from Essential Oils of Tasmania and (EOT), researchers from University of Newcastle, farmers and consultants Outputs resulting in identification of all steps in the production cycle. Conducted pesticide determinations in oils, distillates, and herb samples using a strategy of targeted High Pressure Liquid Chromatography (HPLC) and gas chromatography/mass spectrometry (GC/MS) analyses. Undertook field trials and on-farm testing relating to calibration procedures and spray boom contamination in relation to their suitability as protocols for hazard reduction. Developed a HACCP based Standards Enforcement Plan for use by the essential oils industry and farmers. Developed an Approved Supplier Program for use by the essential oils industry and farmers. Identified the following four HACCP analysis critical control points: the selection of growers, heavy-metal contamination, QC testing through pesticide analysis in the extracted or distilled oil, issues relating to traceability. Confirmed through field trials that the withholding periods recommended by the pesticide manufacturer were suitable guidelines in most cases. Developed protocols for the calibration of spray equipment using a primary calibration, nozzle calibration and water sensitive paper cards.

Some key recommendations from this study were given, these included; implementation of the HACCP based hazard reduction program, use of field days and training sessions to familiarise farmers with the suggested protocols and the Approved Supplier Program, regular audits of production and processing facilities, testing of each of batch of oil for pesticide contamination, use of targeted HPLC or GC MS/MS to analyse pesticides in oils or distillates, clean-up procedure be developed where appropriate for some pesticides in particular essential oil matrices, industry move towards an online management system in the future.

Outcomes The first four recommendations above have been fully implemented with commercial modifications, leading to a reduction in pesticide use (Bob Menary, pers. comm., 2013). Reduction in likelihood of contaminated oils and extracts and subsequent need to reject a batch or lot. Potential to enhance traceability of any pesticide problems. An enhanced industry profile by minimising sales of contaminated products to discerning buyers as outcomes have been shown to be critical to sales assurance (Bob Menary, pers. comm., 2013). Potential reduced off-farm pesticide run-off from reduced pesticides use.

Benefits Reduction in chemical use. Reduction in risk of rejected lots. An enhanced industry image. Potentially, reduced contamination of off-farm waterways. Enhanced scientific knowledge about pesticides in the essential oils industry. Potentially, cost savings from optimal analytical procedures for analysis of pesticides in essential oils.

PRJ-000018: Management of post-harvest diseases using Australian essential oils Project Organisation: Department of Primary Industries, NSW details Period: January 2008 to January 2009 Principal investigator: Elena Lazar-Baker Rationale Postharvest losses of fruit and vegetables were estimated world-wide to range from 10-50% of saleable crop volume. One of the key contributors to postharvest crop loss was fungal infection. Research had identified essential oils as alternative fungicides for horticultural industries. Essentials oils compared favourably against synthetic fungicides because of their complexity which made it difficult for organisms to evolve coping mechanisms. In recent years consumers and regulatory agencies had expressed increasing concern over the health hazards of using synthetic chemicals for postharvest disease control. Another potential advantage of using essential oils was their volatile nature which implied that no or little residue is left on the produce after treatment. These provided an opportunity to investigate and evaluate the antifungal effect of Australian native essential oils and the potential for their use as natural fungicides for postharvest purposes. Objectives - To compare the antifungal properties of lemon myrtle oil against citral, and aniseed myrtle oil against trans-anethole on selected horticultural postharvest pathogens in-vitro. - To evaluate the optimal application methods for the selected oils/components in-vivo against inoculated and non-inoculated products. - To establish the efficacy of the oils/components necessary to achieve at least 50% reduction in postharvest disease. - To trial whether treatment with the selected oils/components under these conditions taints the taste of the product. - To submit for publication results of this work in peer-reviewed plant pathology/postharvest journal. - To undertake a cost comparison of these new treatments compared to current products to assess feasibility of developing new products. Activities Completed in vitro and in vivo laboratory trials to evaluate the antifungal and activity of lemon myrtle, aniseed myrtle and tea tree essential oils and two Outputs standards, citral and trans-anethole against postharvest pathogens such as: Botrytis cinerea, Monilinia fructicola, Fusarium spp. and Geotrichum candidum.

All in-vitro and in-vivo testing was carried out utilising the essential oils in the vapour phase as a fumigant rather than by direct contact as this application method seemed to be more applicable for postharvest disease management. The treatments that were most effective in controlling the individual pathogens were then evaluated further in in-vivo trials for their antifungal activity. Conducted a sensory evaluation trial to assess the effect of lemon myrtle essential oils on nectarines. Results demonstrated that lemon myrtle and tea tree oils exhibited antifungal activity against the tested postharvest pathogens via fumigation. Lemon myrtle essential oil and citral were the most effective treatments to control mycelium growth of M. fructicola and G. candidum. Lemon myrtle essential oil also inhibited M. fructicola spore germination. Preliminary data demonstrated that lemon myrtle in particular had potential as an antifungal agent to control postharvest pathogens. Based on the essential oils efficacy results of the in-vitro experiments, only M. fructicola and G. candidum were selected for further testing in in-vivo trials. Tomato fruit had lower sour rot (G. candidum) disease incidence following exposure to lemon myrtle essential oil and citral compared to the untreated control when stored at 10°C. Results from the sensory evaluation trials indicated that lemon myrtle essential oil treatment effect on sensory value in this experiment was not significant. The association between lemon myrtle essential oil treatment and intention to purchase was also not significant. Due to the preliminary nature of this work it was recommended that further research into the efficacy of lemon myrtle essential oil, needed to be conducted in order to collect scientifically reliable data on the potential use of essential oils for postharvest disease control. Two articles were prepared for publication in a peer-reviewed journal. Some further relevant research was carried out in ACIAR Project ASEM/2006/035 ‘Improving marketing efficiency, postharvest management and value addition of sweet potatoes in PNG’ (Australian component); the Australian essential oil lemon myrtle was screened in vitro for its ability to inhibit the growth of a range of micro organisms. Based on this screening, lemon myrtle treatment has been identified for further investigation in in vivo trials for its ability to inhibit dry rot disease progression. However, the in vivo results showed that the effect of the treatment on dry and soft rot development was variable, and requires more information into pathogen species susceptibility, pathogen load, and treatment penetration before recommendations can be made on their merit to the Australian potato industry. Lemon myrtle essential oil was identified as a great control option for sprouting during the testing within this study (Elana Lazar-Baker, pers. comm., 2013). Financial analysis suggested that only if the organic sector demanded the new product would it be feasible because it is currently cheaper to use conventional products for this purpose (Alison Saunders, pers. comm., 2013). Outcomes Despite some promising results, it is unlikely that essential oils can be used instead of chemical fungicides in the short term. For the purpose of registration of products, more research and trials are required, possibly including trials on formulation and concentration of the oils, toxicological trials and methods of application (Elena Lazar-Baker, pers. comm., 2013). Fungicides based on essential oils components could be used mainly by the organic industry where no alternatives are available. As the end product for organics is much more expensive compared with the conventional product, essential oils may be cost effective but cost effectiveness has not been

specifically analysed in the current project. Lemon myrtle essential oil is highly effective against postharvest Monilinia fructicola on nectarines. However the method of application needs to be further assessed (Elena Lazar-Baker, pers. comm., 2013). Potential to contribute to future studies that could lead to adoption of essential oils as natural fungicides. Potential essential oils industry diversification leading to market expansion and industry development. Potential contribution to reduced use of synthetic fungicides on horticultural produce. Benefits Potential financial benefit to horticultural industries from use of essential oils to control postharvest pathogens, particularly for organic products. Potential contribution to essential oils industry development. Enhanced scientific knowledge.

PRJ-000021: Develop Australian standards for oil of Australian Lavandin cultivars Project Organisation: Phytoquest details Period: July 2007 to March 2011 Principal investigator: Ian Southwell Rationale Australian commercial lavender farming has operated mainly from the Bridestowe plantation in Tasmania. More recently numerous other small-scale lavender farms have spread across Australia. Oil from these farms has at times approached the volumes produced at Bridestowe but tended to be mainly from L.intermedia x (lavandin). The quality of oil produced from these plantings had been variable. Some oil had been equivalent to ISO quality but other oil, although in no way inferior on organoleptic grounds, possessed physical and chemical parameters that differed from both the International and Australian Standards.

Consequently there was a need to elaborate an Australian Standard for Australian produced lavandin oils so that the industry could aim for a common, high quality, internationally acceptable oil. Objectives - To collect and analyse lavandin oils from Australian lavandin oil producers and collate the data for the purpose of developing new Australian standards to suit the range of lavandin oil cultivars which are currently grown and for which no standard(s) exist. - To use the collected data to determine if the present Australian Standard AS 5028-2002 for lavandin GROSSO oil satisfactorily accommodates the typical GROSSO oils derived from Australian-grown plants, and to recommend revisions if it does not. Activities Twenty-four lavandin samples were collected from industry producers over as and a wide range of locations and climates as possible. Outputs Three specialist essential oil testing centres were chosen (Wollongbar Primary Industries Institute, Southern Cross University’s Centre for Phytochemistry and Pharmacology, and Australian Botanical Products). Samples were subjected to olfactory, flashpoint, gas chromatographic, refractive index, relative density, optical rotation and solubility in alcohol analyses. As the project continued, it became apparent that it was not the time to approach Standards Australia or ISO about elaborating new standards especially for Australian-produced lavandin oils.

Main reasons were: industry had experienced a downturn since the project was initiated due to

climatic (drought) and economic (global economic crisis) reasons, consequently, insufficient samples were received for a statistically significant outcome, and submitted oils were found to be most variable with respect to the measured parameters and it was concluded that at a later time, when more samples which are less variable in their specifications are available, standards elaboration could be re-considered.

Compiled data on the characteristics of the analysed samples. Outcomes Project clarified the industry’s position with respect to the quantities and qualities of the lavandin oils produced throughout Australia. Data recorded by this project is of value in defining the characteristics of Australian produced oils. The project’s outputs were presented at an industry conference and recorded in their proceedings with a plea for consistency in genetic material and the oil quality. There is a yearly oil competition where chemical parameters are measured against organoleptic qualities - this is in itself a major step in the right direction. There is no intention of revisiting the standardising of lavandin oil in the near future as the industry downturn will need to show some reversal before this can be attempted again (Ian Southwell, pers. comm., 2013). If greater standardisation were achieved in the future, it would not necessarily result in a higher price to Australian producers (that is, for non-Bridestowe producers. However, to move more oils and products offshore, better standards would need to be in place. Overall returns may not however be much greater as much of the present profit is made in value adding. The whole project was aimed at improving the product from non-Bridestowe producers. At the International level, Australia succeeded in getting a specification column for Australian lavender included in the International Standard a number of years ago. This was quite an achievement for the local industry which back then was almost entirely Bridestowe oil as the rest of the industry was aiming at the higher yielding but lower priced ‘lavandin’ oils. Such a lavandin Standard would then be of more benefit to ‘non-Bridestowe’ than ‘Bridestowe’ producers (Ian Southwell, pers.comm., 2013). Benefits Enhanced industry and scientific knowledge concerning lavandin.

PRJ-000598: Commercial production of milkweed in a plant with anti-cancer properties Project Organisation: Department of Primary Industries and Fisheries, Qld details Period: January 2005 to February 2008 Principal investigator: Larry Cooper Rationale Prior studies done by Peplin Biotech Pty Ltd and the Queensland Institute of Medical Research had found milkweed (Euphorbia peplus) has bioactives called PEP compounds and these were suitable for use in treating various cancers, especially skin cancer. Earlier research on producing PEP compounds had focused on growing of material for clinical trials. Milkweed has been commercially produced in south-east Queensland and northern NSW for a number of years. There was a need for research on the development of intensive and cost effective production techniques for commercial production, extraction and supply of PEP compounds all year round for a larger market. Objectives - To build on the system for commercially growing Euphorbia peplus (milkweed), which was developed as a result of previous RIRDC funded projects. - To develop cost effective production techniques and reliable production of

PEP compounds all year round for a larger market. Activities Investigations were carried out in field and protected environment studies at and DPI&F’s Redlands Research Station, Cleveland. Outputs Trials were undertaken to find the optimal row width and planting density, fertiliser regimes and time of day to harvest. Plastic mulch and trickle irrigation produced a good environment for growth of milkweed. Plant spacing did not improve yield by a great deal and further work in this area would be low priority. Higher nitrogen gave larger plant weights but low phosphorus also produced the best plant weights. Potassium levels seemed to have little influence. Time of day harvest study showed no dramatic response to either temperature or solar radiation. Given project results, it was recommended that: the best systems are to use plastic mulch (efficient water use and weed control), trickle irrigation (efficient water use), plug seedlings (easier and more consistent establishment), followed by natural direct seeding and a fertiliser regime which includes high rates of nitrogen and low rate of phosphorus and potassium (maximise plant size and PEP compound production). Established a seed supply system at DPI&F Indooroopilly Research Centre, and carried out grower meetings and extension activities. Further areas that need to be researched were identified. Outcomes Some beneficial growing techniques were identified and recommended. Potential to maximise the yield of PEP compounds per unit area. Improved understanding by current and future producers of the benefits of using the recommended growing techniques. Workshops and surveys of potential growers have also resulted from the collaboration developed in this and the earlier two projects. The project contributed to the establishment of the production system in SE Queensland that provided the basis for sound organic production. Without this project, the production system would have had problems with compliance to strict protocols. Creating a consistent technique with known inputs and outcomes allowed Peplin/Leo Pharma to establish contracts with tight guidelines and information for their QA systems to be maintained (Larry Cooper, pers. comm., 2013). The project also led to further contract research for Peplin/Leo Pharma that have now refined the growing techniques and documented them for Peplin to supply to contracted growers (Larry Cooper, pers. comm., 2013). The size of the market world-wide is not available as it is commercial in confidence. However, Leo Pharma, a Danish company, paid $300,000,000 for the IP and rights to the technology. If most investors were Australian this would represent a significant export income to Australia. It also gives a good estimate of the value of the industry at that point but if Leo Pharma profit in the future, then the industry would be worth much more in the longer term (Larry Cooper, pers. comm., 2013). The principal outcome is an enhanced capacity to treat non-melanoma skin cancer, which is the most common and most expensive cancer to treat in Australia. Non-melanoma skin cancer (NMSC), which includes basal cell carcinoma (BCC) and squamous cell carcinoma (SCC), is the most common and expensive cancer in Australia and places a high burden on the population, health care system and government. Australia has the highest incidence of NMSC in the world. The total number of NMSC treatments in Australia increased from 412,493 in 1997 to 767,347 in 2010. It has been estimated that the number of treatments would increase to 841,984 in 2012 and 938,991 by

2015. The total cost of diagnosis, treatment and pathology was $511.0 million in 2010, estimated to increase to $703.0 million by 2015 (Fransen et al., 2012). The material is extremely expensive to produce, the Active Pharmaceutical Ingredient (API) costing tens of thousands of $AUD per gram to produce. However, despite the fact that the API is dosed very low (in microgram quantities) in the gel and a small amount covers many doses, it is still quite an expensive product to produce. Each tube contains approx 500 microlitres of gel, and each treatment course requires 2-3 tubes (Larry Cooper, pers. comm., 2013). There is likely to be a significant cost reduction in treatment due to the new product. Assuming the cost in 2012 was $730 per treatment and the cost of the new treatment is say $130 (excluding any subsidy from PBS), the net gain per Australian treatment would be say $600. Given the 2012 treatment number of 842,000 and assuming a 50% market penetration after five years, this could provide an indicative benefit to Australia of $506 m per annum in treatment costs. The product is now sold in US, Canada, Australia, Germany, UK/Ireland but Leo Pharma are about to launch the product in around 33 countries in total, including most of Europe (Larry Cooper, pers. comm., 2013). Benefits to overseas consumers could therefore be very significant. Growers of milkweed would also benefit considerably as their returns would be covered in the estimated $266 per treatment revenue generated by Leo Pharma. In 2013 between 10 and 100 ha of milkweed is being grown. Although a small area, the value of the crop at the farm gate is considerable. Actual prices paid are confidential between Leo Pharma and growers (Larry Cooper, pers. comm., 2013). While the investment in this project ($98,795) along with the other two DAFF projects, made a contribution to the success of this venture, it was dwarfed by the massive investment in taking a pharmaceutical to market. Hence only a small proportion of the net benefits to Australia can be attributed to the DAFF project. Benefits Enhanced scientific knowledge and understanding of production of milkweed. Contribution to the development and commercialisation of bioactives in the pharmaceutical industry. Significant contribution to generation of export earnings for a new product industry that is protected by patent and is likely to have a world-wide market. Potential reduced skin cancer treatment costs to governments and individuals Contribution to the development of a new high value crop industry.

PRJ-000703: Analysis of Dodonea viscosa as a potential remedy for anti-inflammatory and anti-bacterial applications Project Organisation: University of Newcastle details Period: July 2003 to November 2007 Principal investigator: Andrew Pengelly Rationale Dodonaea viscosa was most notably found in and around the rangeland regions of New South Wales. Ethnopharmacology reporting in Australia and elsewhere indicated a variety of therapeutic uses, in particular as a topical application with anti-inflammatory and analgesic properties. Phytochemical studies had confirmed a positive correlation between several groups of active constituents and the traditional usage. Numerous constituents such as triterpenoid saponins and flavonoids had been identified elsewhere, however little work had been conducted on Australian specimens. There was currently a large consumer demand for natural products that relieve pain and inflammation

associated with chronic conditions, and this species had the potential to produce a natural extract possessing these characteristics. Objectives - To develop analytical techniques to analyse for saponins, flavonoids, coumarins and diterpenes found in Dodonaea viscosa variety Angustifolia - To determine levels of each constituent group in various plant sections and determine the effects of some variables such as growing location. - To test extracts with a known biochemical matrix for anti-inflammatory and antibacterial properties. Activities Designed and validated an analytical method based on High Performance and Liquid Chromatography using the common flavonoid quercetin as a calibration Outputs standard, in order to quantify flavonoid levels in a range of D. viscosa samples. Made comparisons between four distinct geographical regions in New South Wales, and between specimens transplanted from their natural location (Burnbrae) to the Ourimbah campus site with other Burnbrae specimens. Comparisons were also made between plant part extracted and extraction solvent. Tested samples for anti-inflammatory activity using Cox-2 and PGE2 assays, for anti-oxidant activity using spectrophotometer and microplate assays, and wound healing activity using a human fibroblast proliferation assay. Specimens from Burnbrae were the most accessible of the regional sites, and these specimens contained slightly superior levels of flavonoids compared to the other sites, hence it was selected as the main harvest site as well as providing genetic stock for cultivation purposes. There was little variation in overall flavonoid levels during the months of testing, however flowers and capsules had very low levels. Leaves extracted with ethanol provided sufficient flavonoid levels to account for purported therapeutic actions. There was no evidence of influence on Cox-2 or PGE2 activity but D. viscosa extracts provided significant anti-oxidant activity, particularly when prepared by the hot water method. Initial results also showed an ability to stimulate human dermal fibroblasts and hence enhance wound healing. The constituent levels and biological activity appeared to be retained when wild plant stock is domesticated, making it a potential candidate for cultivation, were it to become the basis of a commercialised topical application. Presented a poster and an abstract by A. Pengelly, M. D. Lucock and P. D. Roach titled “The variation in flavonoids levels of D. viscosa subspecies Augustifolia, A traditional wound healing medicine” at the 2007 Phytochemical Society of Europe 50th Annual Conference in Cambridge, UK. Produced another article by A. Pengelly titled “Wound healing properties of traditional medicines” for the 6th International Conference on Phytotherapeutics, Canberra. Outcomes Confirmed that Australian D. viscosa had sufficient levels of active constituents to account for its reputation as a traditional medicine. Andrew Pengelly left the University of Newcastle (UNEWC) some years ago and despite various attempts those contacted at the School of Environmental and Life Sciences could not provide any information concerning the outcomes of the project. A Google search provided no further insight as to whether the project led to any commercialisation prospects or any further preliminary testing and feasibility work. Benefits Potential contribution to commercial growing and use of D. viscosa as a wound healing medicine.

Enhanced scientific knowledge on the use of D. viscosa as a wound healing medicine.

PRJ-000020: Production of TALGA lavender industry newsletter Project Organisation: The Australian Lavender Growers Association Inc. (TALGA) details Period: August 2007 to June 2009 Principal investigator: Michael Basile Rationale TALGA membership included growers who had been growing lavender for more than twenty years, professional plant propagators, rural suppliers, processing machinery manufacturers, rural consultants and many diverse professionals. Members had not been contributing content for their newsletter. It was proposed to have articles supplied by these hands on members, as well as to use full or condensed research papers sourced worldwide.

An extension of the distribution of the upgraded journal was planned to government, primary industry organisations, and tertiary education and research institutions. This was seen as a platform to initiate research projects of assistance to the lavender industry. Membership had also favoured a hard copy journal format. Objectives - To provide 4 x per annum Lavender newsletter with a more appropriate technical content than what was available at present. - To extend the distribution of the upgraded journal. Activities Eight extended Lavender Journals were published under this project. and Some sponsorship was attracted and part of the funds was earmarked for Outputs promoting the journal. Additional journal recipients included the Lavender Growers of Sequim (Washington State) and the Lavender Bag Journal in the UK. Outcomes Contribution of technical articles from local contributors improved. Forty copies of each edition were purchased by the Lavender Growers of New Zealand. Permission to use articles from similar journals in the UK and USA was granted and this increased the overseas content. Extended distribution to international organisations/individuals resulted in enhanced information sharing platforms. Unfortunately TALGA membership declined during this period due to drought and it was considered that the most cost effective option for the continuation of the journal was an e-journal. The e-journal has been instigated (TALGA website) with hard copies sent to those members with inferior internet connections (Michael Basile, pers.comm., 2013). The journal has been successful in educating some producers with regard to improved lavender production practices (e.g. weed control) (Michael Basile, pers. comm., 2013). Benefits Enhanced sharing of scientific and industry knowledge between different lavender industry stakeholders.

PRJ-000462: Production of Newsletter of the Essential Oil Producer's Association of Australia Project Organisation: Ian Southwell details Period: January 2006 to June 2011 Principal investigator: Ina Southwell Rationale There was a need for continued production of Essential Oil Producer’s Association of Australia (EOPAA) newsletter after retirement of the then incumbent EOPPA secretary, Erich Lassak. This report sought to similarly

report on: recent conferences, company news, regulatory matters, Standards Australia matters, recent publications and RIRDC news items. Objectives - To produce 10 issues of the newsletter over a period of 6 years. Activities Complied and submitted 10 newsletters to RIRDC for publication and and distribution. Outputs Each newsletter issue included details on the following: Recent conferences dealing with essential oils (both research and industry oriented) Company news and general trade information Regulatory matters such as National Industrial Chemicals Notification and Assessment Scheme (NICNAS) developments, Scientific Committee on Consumer Products (SCCP) opinions especially tea tree research Standards Australia matters: new standards (Australian as well as international) Information on recently published articles on essential oils of interest to Australian producers RIRDC news items Outcomes Provided growers, producers, distillers, formulators, traders, marketers and researchers with continued updates on current information brought together and shared by industry. Potentially, stimulated the growth and development of the natural products industry. Improved communication between sectors of the essential oil industry. Since the reconstruction and updating of the EOPAA Website, the Newsletter, and the monthly News Updates have been a most important medium for notifying members of clients who are looking to purchase oil products (Ian Southwell, pers. comm., 2013). The Newsletter informs members about oils and other products that are available for purchase. Benefits Potential enhanced industry development. Increased scientific and industry knowledge. More specifically, the Newsletter has provided members with updates from the regulatory authorities regarding safety issues associated with oils including toxicity concerns, standards and lessons that can be learnt from the essential oil industry around the world (Ian Southwell, pers. comm., 2013).

PRJ-000464: Clinical trial of kunzea oil for onychomycosis treatment commercial potential Project Organisation: University of Tasmania details Period: September 2006 to March 2009 Principal investigator: Glenn Jacobson Kunzea oil is an essential oil obtained from Kunzea ambigua. The oil is produced commercially in north eastern Tasmania; it is also endemic in the Rationale Furneaux Islands and the eastern coastal regions of Victoria and southern New South Wales. There was known to be considerable chemotype variability between areas. Kunzea oil from a NE Tasmanian producer is currently listed with the TGA (AUST L) ARTG 72143.

Onychomycosis, a fungal infection caused by dermatophytes, yeasts, or moulds, was the most common disease of the nails, accounting for 18-40% of all nail diseases. Anecdotal reports had indicated the potential to use kunzea oil to treat this disease. Approved topical treatment options were limited. A more

effective and affordable topical therapy for onychomycosis would result in the condition being treated more often in a cost-effective manner. Successful result would also bring economic benefits to Australian producers from sale of Kunzea oil to a large worldwide market. Objectives - To undertake clinical validation of kunzea oil for the treatment of onychomycosis. - To compare the effectiveness and tolerability of kunzea oil with amorolfine nail lacquer in treatment of onychomycosis. Activities Assessed and compared the efficacy and tolerability of topical application of and 100% kunzea oil versus amorolfine 5% nail lacquer (gold standard topical Outputs agent) for the management of toe nail onychomycosis. Screened 130 clinically diagnosed (86 men and 44 women) patients for the mycological confirmation (mycological culture) of fungal infection in their target great toenails. Enrolled 93 patients for the trial of 40±2 weeks; a total of 71 patients completed the study. Both kunzea and amorolfine treatment groups showed significant improvement in diseased nail area (p<0.001). In the kunzea group, diseased toenail areas decreased 38%. The response in the amorolfine control group revealed a similar pattern; the diseased toenail area was reduced 36%. There was no difference in efficacy between kunzea and amorolfine groups (p>0.05) in terms of diseased area reduction at completion. Mycological cure (absence of fungal infection) was found in 41% of kunzea cases. In the kunzea group, 34.4% patients showed marked improvement in their condition (> 50% improvement), 37.5% patients were found to have slight improvement in their fungal infected great toenails (>20% improvement), 18.8% patients were observed to have no change or to have experienced a worsening of their onychomycosis. Kunzea treatment was well tolerated with only two cases withdrawing due to local sensitisation to the treatment. A significant part of the project was a field survey on Flinders Island that demonstrated the existing areas of Kunzea ambigua sufficient to meet rapidly expanding markets with sustainable harvesting (Glenn Jacobson, pers. comm., 2013). Outcomes The project concluded that kunzea oil could provide a prospective low cost treatment for onychmycosis (Glen Jacobson, pers., comm.; 2013; John Hood, pers. comm., 2013). The project provided evidence that the existing Therapeutic Goods Administration (TGA) listed kunzea oil has a potential role as a topical antifungal therapeutic agent, given its in vitro antifungal activity, clinical efficacy and tolerability in onychomycosis. Potential increased interest in the use kunzea oil to treat onychomycosis leading to more R&D funds and thus enhanced delivery of the oil for treatment use. Additionally, supportive studies looking at antifungal activity against different pathogenic fungi and transdermal absorption have been completed as part of this project. These data will support efficacy claims for regulatory approval. The onychomycosis trial data is currently being used to support new treatment claims (“standard indication”) through a TGA consultant, approval expected by end of 2013. Kunzea oil cannot be currently marketed to treat onychomycosis until TGA revisions have been approved. Approval will be expected to open the market

for the oil with a specific efficacy claim/disease indication. The producer expects a significant and rapid increase in demand for the product once regulatory approval for the onychomycosis indication is achieved and the product can be marketed in Australia. It is expected this will raise interest in overseas markets which are currently depressed following the GFC with opportunities negatively impacted by high Australian dollar. Current domestic price is AUS$360/kg. It is estimated that less than one tonne of kunzea oil is currently produced. A scientific back up regarding efficacy and subsequent commercial development for onychomycosis treatment could expand the market; however, potential changes in price given changed demand and supply conditions are difficult to assess. Benefits Enhanced scientific knowledge. Potential expansion of the market for kunzea oil providing added economic benefits to producers.

PRJ-000763: Using frontier technologies for the quality assurance of medicinal herbs Project Organisation: Royal Melbourne Institute of Technology details Period: July 2006 to January 2010 Principal investigator: Eddie Pang Rationale Ensuring the safety and efficacy of herbal medicines had increased in relevance following negative media coverage, particularly in relation to the adulteration and substitution of herbal products. Calls for the stricter regulation of the herbal industry had subsequently increased. However, to police the industry, regulators required the necessary tools for the rapid identification of herbal species and products. As many commercial herbal products were available in either powdered or shredded form, authentication by morphological and histological methods was extremely difficult, if not impractical. Chemical analysis was restricted in many circumstances as the growth environment significantly affected the profiles and the amount of chemical compounds in herbal medicine plants. Recently, the identification of herbal products via DNA-based fingerprinting had been developed to complement the existing methods of microscopic examination and chemical analyses. This project sought to develop a single microarray capable of fingerprinting several hundred medicinal plants of economic importance. Objectives - To refine the prototype DNA fingerprinting microarray developed for Chinese medicinal herbs, expanding its functionality to include other herbs important to the Australian herbal industry, e.g. Ayurvedic, Western and Pan- American herbs. - To develop a database of DNA fingerprints for economically important species and chemotypes of medicinal herbs. Activities Performed Suppression Subtraction Hybridisation (SSH) on pools of DNA and representing different clades of flowering plants or single genera of medicinal Outputs plants. Generated hybridisation patterns for 47 species of medicinal plants from the Asterid and Rosid clades, as well as the genus Salvia by gridding subtraction products onto glass slides. Generated hierarchical dendrograms and performed principal component analysis to identify highly-informative polymorphic features which may be converted into PCR-based markers. Developed a fingerprinting microarray to identify important medicinal species. Generated distinct fingerprints for more than 40 herbal species from flowering plant clades, Asterids and Rosids. Constructed a sub-array to fingerprint different chemotypes of Salvia miltiorrhiza (Danshen). Generated reproducible hybridisation-based fingerprints for 22 medicinal plants from the Asterids and 15 from the Rosids. However, fingerprints from all species employed in the construction of both arrays have not yet been obtained. Published a paper by Jayasinghe et al (2009) titled effectiveness of an innovative prototype subtracted diversity array (SDA) for fingerprinting plant species of medicinal importance in Planta medica vol.75 no.10. Outcomes The developed microarrays have the ability to fingerprint species of medicinal and non-medicinal plants which were not used in microarray-potentially widening the application to general plant fingerprinting. Potentially a more enhanced quality assurance and identification tool for application by the medicinal plant industry for purposes of validating quality and content. Potential establishment of a fee-for-service facility for use by growers, manufacturers, pharmacological companies, the Therapeutic Goods

Administration and anyone interested in validating the identity of medicinal herbs. Potential improved management and regulation of medicinal herbs to curb product adulteration and substitution. The Salvia array has been employed to fingerprint 10 species of medicinal Salvia from around the world, as well as five regional varieties of Danshen. Benefits Potential reduced costs of validating medicinal herbs in Australia. Potentially, an enhanced quality assurance process for medicinal herbs produced or sold in Australia Enhanced scientific knowledge that is useful for accurate and efficient testing and identification of plants Potential enhanced research capacity

PRJ-000778: Development and economic assessment of Artemisia for production of anti-Malarial extract Project Organisation: Botanical Resources Australia Pty Ltd details Period: January 2006 to February 2010 Principal investigator: Rowland Laurence Rationale Malaria is a widespread tropical disease, with around 250 million cases and causing about 900,000 deaths each year. Over the last thirty years, malarial resistance to traditional, quinine-based treatments had increased considerably and the prophylactic effects of artemisinin, first noted in China in 1969, had received considerable attention. While anti-malarial vaccines continued to be researched, there were currently no effective alternatives to artemisinin for the treatment of malaria. Early work in Tasmania had obtained good leaf yields of A. annua and, in recent years, several overseas research programs had selected genotypes with increased levels of artemisinin. Given these market developments, there was a need to investigate the economic viability of artemisinin production in Australia. Objectives - To develop commercially viable techniques for the production of marketable extracts of artemisia, through the investigation of ways to maximise the yield of artemisinin, the anti-malarial compound, present in Artemisia annua L. Activities Two seed-lines were sourced from Brazil and Switzerland for this project. and Trialled production of artemisinin from direct sowing of seed in the field and Outputs mechanical crop harvesting. Undertook a pilot extraction of the harvested product. The results showed that sowing directly in the field requires precise sowing methods and a critical initial irrigation regime. Autumn sowing provided best results under local conditions. Two herbicides were found useful in a pre-emergence role and had no detrimental effect on crop emergence. Obtained leaf yields in excess of those published. Initial extractions were below published norms but it was believed this will improve quickly with better solvents. Seed-lines acquired from a Swiss breeding program found to be better suited to local conditions than was the Brazilian seed-line. The project found that while flowering was rarely in evidence under Tasmanian conditions, seed production is possible in greenhouse conditions or at lower latitudes. The project also found that artemisia can be propagated from stem cuttings, offering a simple and cheap method of maintaining desirable genotypes. Developed, to a semi-commercial stage, a production method suited to Australian field production which involves autumn sowing, chemical weed control and windrowing before harvest of dry leaf with a conventional

harvester. The variation in leaf artemisinin content among individual genotypes within both seed lines was found to be considerable and indicates that further selection and breeding could result in rapid improvement in leaf artemisinin content. Outcomes Implementation of the methods will potentially result in global sales of Australian produced extracts of artemisia. Potential diversification and alternative income source for Australian growers. Potential contribution by Australian growers and processors in controlling a global disease, malaria. Artemisinin is the most effective anti-malarial drug at present as there are significant levels of disease resistance to many of the more traditional quinine- based drugs. Artemisinin is responsible, alongside other WHO strategies of insecticidal nets and sprays, for a significant reduction in confirmed cases and deaths due to malaria over the last few years (Brian Chung, pers. Comm., 2013). The global market for artemisinin is around 50-60 tonnes per annum but the level of use is dependent, in part, on levels of funding provided by overseas aid programs. Such funding has reduced recently due to the knock-on effects of the GFC. Artemisinin used in combined therapy is currently the main WHO recommended anti-malarial drug. There is a very active world -wide search for anti-malarial vaccines and new drugs, including a possible manufacturing process for making artemisinin. However, none of these developments are near the commercialisation phase at this time. China and Vietnam are currently the major producers in the world. Production in these countries is based on hand weeding, hand harvesting leaves from plants in the wild as well as crops established from transplants. Production using transplants and hand harvesting is obviously far too costly for any Australian producer. Direct drilling, weed management using herbicides and machine harvesting technology has been developed by this RIRDC project. The real challenge now is to increase yield and to develop efficient postharvest processing technology (Brian Chung, pers.comm., 2013). The commercialisation of Artemisia production in Australia at this time is difficult for a number of reasons (e.g. static prices, high Australian $). However, the economics of production may be improved if the newer cultivars from the UK breeding program at York University have a significantly higher assay but these results will not be available until laboratory assay of the plant material after harvest in March/April 2013. A preliminary gross margin analysis indicated that a commercial yield of some 30kg/ha is required for the opportunity to reach a breakeven point. As the best research yield to date is 22kg/ha, the one possible means of significantly increasing the current yield is if the York University cultivars are to have considerably higher assay compared with the current Swiss cultivar (Brian Chung, pers.comm., 2013). Hence commercialisation of artemisia production in Tasmania will not be viable for some time yet. RIRDC is currently funding a follow-up project (PRJ 004897) to evaluate the York University cultivars, seed production in a polyhouse, herbicide evaluation and pilot post-harvest processing. This project will be completed in 2013. Benefits Enhanced scientific and industry knowledge. Potential development of a profitable new crop for Australia.

PRJ-000841: Growing Xi Shu and extracting an anti-cancer drug (Camptothecin) Project Organisation: Department of Employment, Economic Development and

33 details Innovation, QLD Period: September 2007 to September 2010 Principal investigator: Craig Davis / Kent Fanning Rationale Camptothecin (CPT) and its derivatives were extracted from the Xi Shu tree and had been registered as drugs for treatment of a number of cancers. CPT has quite a complicated structure and had been difficult to synthesise in the laboratory because of its unique chemistry. Therefore the major source of CPT had been via the Xi Shu tree. However, the tree was becoming rare in its native China (it was estimated that there were less than 4,000 trees in the wild). The size of the world-wide market for water-soluble derivatives of CPT in 2004 was estimated at $1 billion (US) which represented approximately one tonne of CPT in terms of raw material. Because of the popularity of CPT derivatives it had been estimated that at least 100 million young Xi Shu trees will be needed to cater for these demands.

While the drug could be extracted from all parts of the Xi Shu tree, researchers had developed methods to increase the amount of CPT harvested. One way was through the clonal propagation of elite cultures. Another production method was the repeat harvest of young Xi Shu leaves, without destruction of the tree. Therefore studying the propagation and harvest processes of this tree as well as devising more efficient techniques to extract available CPT could provide an important commercial enterprise as well as contributing to the fight against chronic disease. Objectives - To propagate and grow a plot of Chinese happy trees (Xi Shu or Camptotheca acuminata). - To devise methods for the regular harvesting of the young growth. - To develop a process for the extraction of camptothecin from the plant material. Activities Established a propagation method and 29 Xi Shu tree clones were grown in and pots, at Gympie in Queensland. Outputs Sampled leaf material to determine the variation in camptothecin concentration across the clones and the effect of pruning and age of the leaves on camptothecin level. Undertook extraction and analysis using accelerated solvent extraction (ASE) technology and high performance liquid chromatography (HPLC), respectively. Established successful propagation by cuttings method, with greater than 90% of cuttings forming roots under mist irrigation. Achieved levels of over 2mg camptothecin/g dry weight for several clones. Younger leaves had 2-10 fold greater levels of Camptothecin than older leaves. Pruning generally led to increased camptothecin content. Results showed that trees could be propagated very easily by cuttings thus removing the need for more expensive propagation systems such as tissue culture. Showed that the use of ASE technology using a pressured column as an extraction procedure provided several advantages over conventional extraction methods through decreased extraction time and improved throughput. Outcomes Although the Gympie field trial did not survive the prevailing drought at the time, no more trials have been undertaken to prove that the tree can be grown successfully in Australia in absence of drought conditions. A proposal was made, to RIRDC for a follow on project (Kent Fanning, pers. comm., 2013). The proposal was not funded probably due to a lack of industry participants (Alison Saunders, pers. comm., 2013). Major production is in USA and Japan. There is no commercial industry or production in Australia at present as there

is no commercial partner. It is possible that Boehringer Mannheim had or has a plot of Xi Shu trees in the Burnett but his has not been substantiated. Production systems are probably well established in USA and Japan (Kent Fanning, pers. comm., 2013). Benefits • No current evidence of prospective benefits to Australia • Some scientific capacity built in propagation from cuttings.

PRJ-002676: Flood irrigated tropical timber trials in the North of Western Australia Project Organisation: Forest Products Commission details Period: November 2007 to May 2011 Principal investigator: Liz Barbour Rationale A series of tree trials/plantings were established at the Frank Wise Institute from 1989 to 2007. The trials mainly focused on Tropical sandalwood (S. album) and possible hosts that may add value to the sandalwood system. It was from this research that the current sandalwood plantation system in the Ord River Irrigation Scheme (ORIS) evolved. There was an opportunity to review past information and remeasure the trials to understand growth rates and possible product development. Objectives - To investigate the growth of different tropical forestry species and different silviculture systems in a flood irrigated system. - To assess a range of sandalwood (Santalum album) hosts and high value timber species, including, African mahogany (Khaya senegalensis), Teak (Tectona grandis), Indian Rosewood (Dalbergia latifolia) and Pongamia (Millettia pinnata). Activities There were two main groups of trials, those concerned with sandalwood and its and hosts and those related to high-value timber species Outputs Heartwood development was more reliable in 15 year old sandalwood trees, and in some cases extended as far as 3.5 m up the tree compared to a maximum of up to 1.8 m in 8 year-old trees. The calculated heartwood volume for 15 year-old sandalwood trees was approximately 6.3 kg, with the majority (4.4 kg) occurring in the bole. Oil extracted from 11year-old and 15 year-old sandalwood samples was of high quality, as indicated by the alpha and beta-santalol composition standards required for S. album oil (ISO 3518:300E). Best hosts for tropical sandalwood were Cathormion umbellatum, Dalbertgia latifolia and Millettia pinnata. Hosts producing lower sandalwood growth rates were Cassia siamea, Khayasen egalensis,Peltophorum pterocarpum and Swietenia mahogani. Poor host performance was related to a fast-growing nature and spreading canopy that enabled dominant host occupation of the site and spatial competition with the sandalwood. Even when tropical sandalwood was growing with favourable hosts, spatial competition could negatively influence sandalwood growth. African mahogany (Khaya senegalensis) displayed superior growth rates with a mean annual increment (MAI) of 1.9 to 2.7 cm per year in comparison to other high value timber species in the trials. No new projects involving African Mahogany have been started. Further research and expenditure is hard to justify at the state level because of a lack of industry support with their being no new African Mahogany plantations been established in the ORIA since 2008. The industry is aware of the Forest Products Commission (FPC) resource and the growth data from this report was presented to the African Mahogany Plantation Industry Forum in 2011. Several queries from industry have been made regarding information and access to superior trees, however nothing of substance has yet to come from them (Liz

Barbour, pers. comm., 2013). Other species that demonstrated favourable growth rates included: teak (Tectonagrandis), with an MAI of 2 cm per year at 10 years old; and mahogany (Swieteniamacrophylla) with an MAI of 2 cm at 12 years old. Growth rate of Indian rosewood (Dalbergia latifolia) was moderate, but it was the only high-value timber species trialled that was able to promote good sandalwood growth. Compared to other high-value timber species, Millettia pinnata (pongamia) fits into a different performance group, with its high-value product being seed (which is then used for producing biodiesel) not sawlogs. The viability of producing biodiesel will largely depend upon oil quality and Pongamia seed yield of the genetic resources used in a given environment; to date although trial plantings have been made in several locations (not in conjunction with sandalwood), no commercial industry has been established (Liz Barbour, pers.comm., 2013). Outcomes In the past Cathormion was the primary host species used but the plantation companies moved away from it and the explanation given was due to insect infestations. Trial measurement showed that when the primary host was changed from Acacia trachycarpa to Sesbania Formosa, the growth of the latter overshadowed the Cathormium and stunted its growth. When the Sesbania died, the Cathormium was not strong enough to support the sandalwood growth and the plantation stressed. This also resulted in the companies moving to mixed host plantations of which Dalbergia has found a place in most plantations. This report has drawn interest in regards to host suitability and it has provided evidence for further changes in the host species and spatial arrangement being used by the plantation companies in the ORIA (Liz Barbour, pers.comm., 2013). In general, the observed stem form of all timber species was largely unfavourable for sawlog production, with stems often crooked or having short bole lengths and large branches. Given this, the recovery rates for sawlogs would be low and thus the concept of multiple products needs time to develop scientifically. Potentially, more efficient future use of limited land availability to grow only high-value timber trees with well established markets. The recommendation on which species (e.g.Dalbergia latifolia) should be evaluated in the future as well as what should be monitored will help any future evaluations and thus provide crucial information for future Potential better sandalwood and forestry industry management will result in increased sandalwood growth rates and higher-value timber products. During this project, heartwood rot was discovered within sandalwood and a report titled ‘Heartwood rot identification and impact in Sandalwood (Santalum album)’ was delivered to RIRDC in 2010 (see PRJ-004677 in this current evaluation). Only teak and African mahogany showed any potential as a commercial species but land prices have curtailed their development in the ORIS and neither are sandalwood hosts (Liz Barbour, pers.comm., 2013). Sandalwood has become the dominant crop in the ORIA and the plantation estate continues to expand, however the restriction to development mentioned above still prevail for other tree crops. The success of sandalwood to some extents limits the possibilities for other species as there is some opposition against increasing plantation area as to maintain areas for agricultural crops. The release of ORD Stage 2 and the potential for further land releases in the East Kimberly region, e.g. ‘cockatoo sands’ (ORD Stage 3), in the near future could potentially alleviate these issues and provide opportunity for the new plantation and new species (Liz Barbour, pers.comm., 2013).

Benefits Potentially, a contribution to improved management and yields for north WA sandalwood producers. Scientific capacity and knowledge about sandalwood, its hosts and other high- value timber species. Specifically, in terms of sandalwood (Liz, Barbour, pers. comm., 2013): The data and some methodologies established within the report can help drive improvement in plantation silviculture, e.g. host selection, spacing, rotation lengths. Plantation companies have expressed some interest in the data and have sought further information regarding the deployment of some methodologies. The report has also broadened the data available to investors and general public beyond that provided by plantation companies Specifically, in terms of timber species (Liz, Barbour, pers. comm., 2013): The expansion of the plantation estate has ceased in the ORIA. The standing resource (trials) and the report will however provide a valuable resource if opportunities arise to increase the plantation estate with the future release of agricultural land in the Kimberley region.

PRJ-004677: Heartwood rot identification and impact in Sandalwood (Santalum album) Project Organisation: Forest Products Commission details Period: June 2009 to June 2013 Principal investigator: Liz Barbour Rationale During destructive harvests to meet the objectives for RIRDC (PRJ 002676), the extensive presence of wood rot was noted as well as, what appeared to be, increased presence of aromatic wood surrounding the fungal disease. There was therefore a need to identify the rot and its impact in sandalwood. Objectives - To identify heartwood rot in Indian sandalwood Santalum album. - To assess the impact of the disease on heartwood oil production. - To assess a non-destructive system for measuring heartwood and any rot that may occur within the tree bole. Activities Fungi were isolated from samples taken adjacent to areas of rot within cross and sectional discs of Santalum album. Outputs These fungi were cultured and purified and their DNA sequences compared to data available on Genbank to provide isolate identification to the genera level. Four species belonged to the Ascomycetes and several isolates were identified from four genera of Basidiomycete fungi, all of which are known as potential rot causing fungi. Wood rot fungi infecting Indian sandalwood appeared to enter via the roots or where bark protection was lost either through mechanical damage or sun-scald. Trees appeared to respond to this fungal infection by encapsulating the disease with a darker ring of aromatic wood. The inner region of the infected wood degraded to such an extent that a hollow often formed providing an entry point for other pathogens and pests, such ants and termites, into the centre of the tree. The study is hypothesised that the primary wood rot infection does not kill the tree and that it is the secondary entry of other pests, particularly termites, that is implicated. Oil analysis confirmed the presence of sesquiterpenes in the aromatic wood surrounding the fungal infection. Correlations between entry route of the fungal disease and aromatic wood production indicated that infections via the base of the tree correlated with greater aromatic wood compared to fungal attack via the damaged bark. Identified a number of silviculture practices that undermined fungal disease

protection e.g. host pruning, sandalwood pruning, chipping for weed control on the mounds and mechanical weeding and spraying using tractors that may damage tree bole. An estimate of 3-4 % of the possible area into which oils can be deposited was made. In hindsight this figure is not rigorously explored or the method used well defined. Further work to improve this estimate is required, specifically, inventory plots and spatial patterns of fungi presence to account for plantation scale estimates (Liz Barbour, pers.comm., 2013). Outcomes Potentially, adoption of better silviculture management practices to minimise heartwood rot incidences in sandalwood. Potential adoption of non-destructive methods which are not detrimental to sandalwood in future studies and trials. Potentially reduced loss of sandalwood oil per tree and avoided loss of trees initiated by the fungi. Potential contribution to new significant scientific information through identifying new fungi species. All commercial growers received pre-publication copy of the report for comment. Feedback via conversations is that they are all very aware of potential effects of rot fungi. Elders Forestry committed further funds to current RIRDC project (PRJ-004786), as well as an ARC grant for research related to sandalwood fungi. RIRDC hosted a workshop at The University of Western Australia 3rd December 2010 where 21 industry people attended. A well-developed network of researchers from The University of WA and Murdoch University are aware of, and working on projects relating to sandalwood fungi (Liz Barbour, pers.comm., 2013). It is unknown whether specific changes have been made by plantation managers. The report has however definitely heightened awareness of the potential impacts of heartwood rot within the plantation companies. For instance, Elders Forestry increased their training on plantation hygiene and had staff report incidences of rot. Current RIRDC project, PRJ-004786, is investigating the influence of tree age at pruning and pruning time on fungi occurrence in wounds. The results should shed more light on the specific management measures that may reduce incidence of wood rot in sandalwood (Liz Barbour, pers.comm., 2013). Benefits Contributions to potentially reduced income losses for sandalwood growers due to improved management practices (e.g. a more informed analysis of the cost benefits of changing management practises versus the risk of fungi infection). Contributions to and enhancement of scientific knowledge beneficial to the industry.

PRJ-004698: The Melaleuca Book Project Organisation: John Doran details Period: August 2010 to May 2012 Principal investigator: John Doran Rationale There were some 290 species (327 entities inclusive of infraspecific taxa) of Melaleuca that occurred in Australia, the Pacific (PNG and New Caledonia) and South East Asia. General awareness that the genus has been substantially enlarged by changes in its taxonomy (e.g. Callistemon spp. are now part of Melaleuca) in recent years was lacking. Many species were multi-purpose plants providing a diversity of uses including brush fencing, ornamental trees and shrubs for gardens and street planting, farm shelterbelts, rehabilitating salt affected lands, fuelwood, poles and posts, wood for fibre, honey and foliar essential oils. Information on the oils of about 100 species was still lacking. This was a constraint to completion for the first time a comprehensive text on this important genus covering its botany, essential oils and utilisation. Objectives - To collect representative leaf samples of each of the remaining Melaleuca species that have not had their leaf oil analysed. - To extract the oils and carry out chemical analyses of these oils by Gas Chromatography-Mass Spectrometry. - To collate the data obtained with data from species already analysed to check for any patterns discerned within groups of species and identify any specifies that has potentially commercially useful oil. - To combine all the oil data with relevant morphological data and prepare for publication in book form. Activities Undertook a fieldwork in southwestern Western Australia where most of the and unsampled species occurred during spring of 2010. Outputs Collected 48 of the required species and sourced a further 48 species from reliable third party sources. Reduced the number of species for which there is no data on essential oils to four species and four infraspecific taxa. Identified several species as tea tree oil substitute species (e.g. M. halophila, M. hamata and M. ochroma), while M. bisulca was identified as potential source of linalool. Most species descriptions includes notes on taxonomy, name derivation, botanical description, natural occurrence with map of distribution, ecology, flowering, essential oil chemistry and yield, notes on utilisation and a colour image of flowers and foliage. Submitted a draft book for review to three experts. The book is presently with an ACIAR-nominated Editor and the authors are currently addressing queries. This will be followed by layout, proof checking and publication. Publication should be in the second half of calendar 2013 (Georgina Hickey, pers. comm., 2013). Outcomes Provision of important and up-to-date information on Melaleuca species and their essential oils in one comprehensive publication. Identified substitute species for the production of tea tree oil and a limited number of other species with potential for essential oil production. No specific interest has been evident to date from the tea tree oil industry or other investors in commercialising other Melaleuca species as a consequence of the work underpinning the book (John Doran, pers. comm., 2013). However, a small production of citral-rich oil from M. teretifolia has commenced in recent times from natural stands and plantations in Western Australia. The producer claims the oil has perfumery and therapeutic properties. This gives some confidence that other oils (species) will be developed but probably not to the extent of say Australian Tea Tree. The book

should help identify the best prospects (John Doran, pers. comm., 2013). Benefits Enhanced industry and scientific knowledge. Identification of species with potential commercialisation prospects. Potentially, enhanced professional relationships with researchers/stakeholders in other countries.

PRJ-005148: Development of antimicrobial coatings from pure Australian essential oils Project Organisation: Swinburne University of Technology details Period: August 2010 to May 2011 Principal investigator: Sally McArthur Rationale Biofilm formation costs billions of dollars every year across a wide range of industries. On ship hulls, it has been estimated that a biofilm of just a few hundred microns yields an average 20% increase in fuel consumption, thus leading to additional costs of approximately US$400 per hour. The food industry performed extensive system decontamination processes with harsh chemicals resulting in both environmental and financial costs, while bacterial infection resulted in the failure of biomedical devices, affected the storage stability of microfluidic based bio-diagnostics and sensors and was the cause of numerous medical interventions (e.g. dental plaque and wound infection). This project aimed to explore new methods of exploiting essential oils as thin film anti-microbial coatings for use in biomedical and environmental applications. Objectives The overall objective of this project was to produce antimicrobial coatings from commercially available 1,8-cineole (1,8-epoxy-p-menthane), citronellal (3,7-dimethyl-6-octenal), and citral (3,7-dimethyl-2,6-octadienal).

Supporting objectives were: - To develop plasma polymer films using pulsed deposition conditions. - To explore wet chemical routes for applying the essential oils to the surfaces of plasma polymers using both covalent coupling strategies and physical adsorption. Activities Compared three different deposition methods for creating thin films from and essential oils. Outputs Two different wet chemical routes were trialled to compare physical adsorption and covalent (chemical) immobilisation of the oils. The third deposition technique was plasma polymerisation. Essential oils were used as supplied and introduced to the low vacuum chamber prior to striking the plasma discharge using radio frequency. The explored chemical routes produced poor surface coverage and patchy coatings that were not stable. Plasma polymerisation was concluded to be an exciting method for producing nanoscale coatings that could be deposited onto virtually any dry surface. On-going work sought to explore mechanisms of antibacterial action of these films and further optimisation of the coating chemistries. Outcomes The first 7 months of this pilot study clearly demonstrated that it is possible to produce stable, thin film coatings from 1,8-cineole using plasma polymerisation. Work on this study continued after the project had formally ended. Analysis of bacterial interactions on the cineole plasma polymer surfaces demonstrated that the coatings were able to prevent bacterial attachment and growth of E.Coli for at least 5 days in culture. The most promising application appears to be with wound dressings and applications where reduced biofouling is required. There has been no further funding available to support further research with

the coatings. More research is required to explore the efficacy of the coating against a wider range of bacteria and to look at longer term behaviour (>5 days). Possibilities include incorporating the coating on electrospun fibres to investigate possible applications in wound dressings – the researchers are currently starting to explore funding opportunities and/or industrial partnerships to support such research (Sally McArthur, pers. comm., 2013). While the proof of concept has been demonstrated, there has been no commercial feasibility study undertaken. Benefits Contribution to a potential development of antimicrobial coatings from pure Australian essential oils. Potential increased essential oil industry income. Enhanced scientific knowledge.

PRJ-000468: Increased yields from peppermint crops through improved micronutrient nutrition Project Organisation: University of Tasmania details Period: July 2005 to November 2007 Principal investigator: Robert Menary Rationale Peppermint oil yields in Southern Australia were highly variable and this was impacting on the long-term viability of the industry. The average yield of 50 kg/ha, despite attempts to improve management practice, had not been sufficient to sustain profitability for farmers. Improved nutrition was likely to deliver the yield required to meet criteria for increased production. Particularly as the improved nutrition would enable a second cut to be made due to increased growth. The steam distillation facilities were also required for fennel, parsley, chamomile, celery and sage but the volume of herb to sustain viability of the steam distillation facilities primarily came from peppermint. Without peppermint, the steam distillation units would not be viable.

This project was undertaken in two stages, the first stage assessed the possibility of micronutrient deficiencies occurring in the field, and its findings were reported separately. Those finding led to a second stage which is discussed in this summary. Objectives - To survey commercial fields, collect samples and analyse soil and plants. - To identify already established critical levels for deficiencies. - To collect analytical data and recommend corrective action. Activities Conducted greenhouse and field trials to confirm the presence of sulphur, and molybdenum, boron and copper deficiencies. Outputs Confirmed that sulphur (S), molybdenum (Mo), boron (B) and copper (Cu) deficiencies existed. Established calibration data for detecting deficiencies. Undertook an on-field fertiliser trial which confirmed oil yield and plant responses to S, Mo, B and Cu. Devised diagnostic tools to develop scientifically based fertiliser recommendations for correction of deficiencies; these were made available to field advisory staff. Formulated a fertiliser mixture to correct deficiencies in field grown crops to help achieve high oil yields. Achieved oil yield of 130 kg/ha in the first year of trial and 103 kg/ha in the second year. Produced a CD entitled “Aspects of Peppermint Nutrition” which describes visible symptoms as an aid to detection of deficiencies in the field; this was distributed to all growers.

Outcomes An on-going fertiliser program based on evidence of nutrient deficiencies has been established for growers. Nutrient deficiencies have been reduced. Increased plant growth is evident and two harvests are being achieved by growers and average yields have increased (Bob Menary, pers. comm., 2013). The value of the additional yield is significantly greater than the additional cost of nutrients. Maintenance of steam distillation facilities throughput leading to improved viability and sustained distillation services for other industries such as fennel, parsley, chamomile and clary sage. The quality of the peppermint oil has improved and this has led to higher price than hitherto (Bob Menary, pers. comm., 2013). Benefits Improvements of gross margins for peppermint growers. Potential economic benefits for growers of fennel, parsley, chamomile, celery and sage as steam distillation facilities can be maintained. Enhanced industry technical skills and knowledge.

PRJ-000019: Spatial analysis of plant-host relationships in tropical sandalwood Project details Organisation: Forest Products Commission Western Australia Period: September 2007 to May 2008 Principal investigator: Liz Barbour Rationale The Forest Products Commission (FPC) and former entities of this Western Australian State agency, had been researching tree crops in the Ord River Irrigation Area (ORIA) since 1987. This report was an analysis of one of the trials established in 1999 at the Frank Wise Institute. Tropical sandalwood was a hemi-parasite and the plantation system required a series of hosts to support sandalwood growth. This trial was of current interest as the trial had progressed through the primary host stage and was now reliant upon the various secondary hosts for sustained growth of Tropical Sandalwood. The need for additional hosts beyond the primary host, and the identification of a superior secondary host, had been regularly questioned and this trial provided an insight to the role and value of this long-term host.

Objectives - To quantify the effect of six different secondary hosts on Tropical sandalwood growth. Activities and The six long term hosts selected were Khaya senegalensis and Cedrela Outputs odorata from the Meliaceae and Cathormium umbellatum, Dalbergia latifolia, Pongamia pinnata and Pterocarpus indicus from the Leguminosae. The short-term host was Acacia trachycarpa and Alternantha was used at the pot host. Initial results indicated that a combination of good coverage of the pot host alternantha and dense planting of the primary host, Acacia trachycarpa was successful in retaining sandalwood survival and maintaining growth for through the first years of the trial. The trial was assessed while the primary host was still alive and the final measurement was when all the primary hosts had died and only the secondary host was meeting the hemi-parasitic requirements of the Tropical Sandalwood trees. The two tested Meliaceae hosts (Khaya senegalensis and Cedrela odorata), had good survival but did not provide the necessary support for Tropical sandalwood growth in the Kununurra clay Ord River Irrigation System (ORIS).

Species belonging to the Leguminoseae family were found to be superior in their support of Tropical sandalwood growth although performance between the species differed. Identified Dalbergia latifolia and Pongamia pinnata as the two secondary hosts that are able to sustain sandalwood growth through to nine years of age with trends indicating that this growth will continue. The best performing secondary host system in the trial, Dalbergia latifolia, had a survival of 390 stems per hectare and a Tropical sandalwood production of 2m3 per hectare in the ninth year of growth. Dalbergia latifolia’s Tropical sandalwood growth rate was closely followed with the host support of Pongamia pinnata and Cathormium umbellatum. It was recommended that the trial be thinned so that the host ratios are even within the trial; this will help clarify whether the spatial arrangement or species is having the most dominant influence on sandalwood growth. This recommendation was followed up with a thinning of the Pongamia as well as further investigation. Statistical competition modelling was used and this work was published in the report for RIRDC PRJ-002676 (also included in this evaluation report) and is the first work of its kind for sandalwood. Spatial arrangements conducive to sandalwood growth varied with host species, such that a ‘one size fits all’ approach to host stocking to sandalwood arrangement together with spatial arrangement is not recommended (Liz Barbour, pers. comm., 2013). Outcomes Provision of greater confidence to the industry in attaining the required production rates to meet market demand as Cathormium umbellatum has been a dominant secondary host in the ORIS plantings. Identified two alternate hosts that should be considered for greater use, especially Dalbergia latifolia as its wood would have high sawlog demand and add value to the plantation system. Potential increased Tropical Sandalwood industry growth and sustainability in the Ord River region.

Specifically: Dalbergia is now commonly used as part of the regular host mixes by the plantation companies. The trend started to occur just prior to this report (site visitation at FPC trials provided early evidence of its success), but this report did provide data to back up their decision making. Pongamia (now classified as Millettia pinnata) has not been adapted, personal communications with plantation managers suggest one reason for this is they are worried about the size during latter stages of the rotation. Future measurement of this trial could be used to confirm or alleviate their fears. In the nursery system Dalbergia has been a difficult species to grow compared to Pongamia, which can be directly sown in the field. The information from this trial was shared with existing growers via personal communications and public forums. For example, members from sandalwood plantation companies were present at the Australasian forest genetics conference 2009 that visited this trial and results discussed by the principal investigator. The sandalwood industry consumed much of the land vacated as a result of the collapse of the sugar cane industry and has now become the dominant crop in the ORIA with plantations covering over 6,000

of the available 14,000 ha. In 2013 the first commercial plantations should be harvested. The report provided data and comparisons between three effective and ineffective hosts, and provided discussion on why this may have occurred. This should have improved the confidence of plantation managers in making informed host selections as prior to this there was very little evidence in the literature of sandalwood growth rates with different hosts. The evidence available for host selection was primarily observational; from trials & early plantations, or from natural stands in India. Benefits Contribution to improved survival and growth rates of Tropical Sandalwood. Enhanced scientific and industry knowledge about Tropical sandalwood and its primary and secondary hosts.

PRJ-000795: Fabrication of Electronic Materials from the Australian Essential Oils Project details Organisation: James Cook University Period: July 2006 to April 2008 Principal investigator: Mohan Jacob Rationale The essential oil industry in Australia was characterised by a low producer base and a highly competitive global market. Many essential oils traded were produced in developing, low cost countries and are thus traded at prices which were below the cost at which they could be produced in Australia. In order for Australian producers to be competitive, the industry needed to look to value adding or production/cost efficiencies. Through this particular project, the investigators focused on value adding by fabrication of polymer thin films from essential oils and their applications across industries.

The advantages of organic polymers were that they were cheap, easily processed, light and flexible. There was a need to move on from inorganic and expensive semiconductors such as silicon to these cheaper, safer and environmentally friendly polymer materials in the electronics and biomedical industries. Importantly, research was required into suitable materials for use as polymers and devices for advancement of this exciting area.

Objectives - The main objective of this project was to find a new industrial application for essential oils and hence increase the demand for Australian produced essential oils through the following project aims: • Fabricate high quality Plasma Polymerised thin films from Australian essential oils (tea tree, lavender and eucalyptus) as compared to d-limonene and alpha-pinene. • Study the electrical and optical properties of the polymer thin films and find suitable applications for the films • Test the polymer thin films as a protective/anticorrosive layer in devices. Activities and Several essential oils, such as tea tree oil, sandalwood oil, eucalyptus Outputs oil, alpha-pinene, d-limonene, lavender oil (a separate PhD project) and five different major components of two essential oils were tested. The project found that thin films of a wide range of thickness (from 200nm to 2000nm) can be fabricated. The thickness result showed suitability to various optical and electrical applications - from thin robust plastic electronic displays to

lightweight plastic solar cells. The fabricated thin films also indicated suitability for use as transparent protective coatings and encapsulating technologies to significantly prolong the lifetime of organic electronic devices. The refractive index indicated the material could be used in optics in many lens applications, including high refractive index lenses. The fabricated polymer thin films were found to be very smooth (roughness below 1nm), uniform and defect free, this is an important characteristic for use in microelectronics. In terms of surface properties and smoothness, the materials fabricated from tea tree oil and its components were found to be superior to that of alpha-pinene and d-limonene. The hardness of the material varied across materials tested, with Terpenine-4-ol exhibiting the highest hardness value. The hardness of the material could also be varied by changing the input RF powers; materials fabricated at low RF power were very soft and vice versa. The properties were not affected by the slight variations in the base material properties that are likely to occur. The properties of the material were also not altered with time and hence could be used in many protective layer coating applications. All the materials investigated exhibited energy gap in the range of 2.6 to 3.1 eV putting the materials in the semiconducting range. This study indicated that Polymer thin films fabricated from tea tree oil are biocompatible in mice. Importantly, this project determined that it is possible to use an environmentally friendly, inexpensive process of polymerisation to fabricate materials from essential oils in a reproducible manner with properties required by the optics, electronics, protective coatings, and bio-material industries. Outcomes Identified a new non-pharmaceutical market for the Australian Essential Oils Industry that has potential to increase demand for the produce. Potential for essential oil polymers to be used in bio-medical devices such as organ implants. Potential application of the novel organic polymer materials across protective coatings and electronics industries. The project helped to develop a new Radio Frequency Polymerisation facility at James Cook University. Provided training for three PhDs, one Masters, two Honours, and three undergraduate students at James Cook University. The study led to 12 accepted/submitted publications and conference papers. A prototype device was fabricated in collaboration with the Tokyo Institute of Technology. It was not extended to a flexible base, but the study showed no problems of developing flexible electronics components. As the focus of the project was on the fundamental studies, no progress to date has been made in terms of commercialisation to exploit the potential benefits. However, the Principal Investigator is searching for industry collaborators so that an ARC Linkage project can be pursued in 2013 (Mohan Jacob, pers. comm., 2013). Research into biomedical and electronics applications is continuing ; further results have been obtained and published

since the RIRDC report; there appears to be a significant market but its nature and size has not been determined (Mohan Jacob, pers. comm., 2013). Since the cost of essential oil is substantially less than the high purity chemical counterpart, the cost of fabrication should be less. Essential oils pose no manufacturing hazard and lead to environmentally friendly products and a low cost of disposal of unwanted chemicals. Hence the major improvement will be in terms of cost of fabrication and environmentally friendly products while maintaining equivalent efficiency of the currently available products. Benefits Potential economic benefits for Australian essential oil growers via development of new markets. Potential maintenance of existing prices (e.g. substituting new markets for existing markets where competition is fierce) Potential input cost savings for multiple other industries through use of lower costs and environmentally friendly protective coatings, electronics and bio-medical materials. Enhanced scientific research capacity.

4. Project Investment

The following tables show the annual investment by project for both RIRDC (Table 4) and for researchers, industry and other investors (Table 5). Table 6 provides the total investment by year from both sources.

Table 4: Investment by RIRDC by Project for Years Ending 2004 to 2014 (nominal $) Project 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total PRJ-000773 0 0 0 69,866 66,366 69,366 0 0 0 0 0 205,598 PRJ-000017 0 0 0 30,948 16,052 50,000 9,000 0 0 0 0 106,000 PRJ-006257 0 0 0 0 0 0 0 10,000 32,000 0 0 42,000 PRJ-004905 0 0 0 0 0 0 0 50,000 50,000 50,000 0 150,000 PRJ-005404 0 0 0 0 0 0 6,450 11,000 0 0 0 17,450 PRJ-007240 0 0 0 0 0 0 0 0 18,594 15,000 5,000 38,594 PRJ-007285 0 0 0 0 0 0 0 0 46,838 43,432 10,000 100,270 PRJ-008303 0 0 0 0 0 0 0 0 18,395 0 0 18,395

47 PRJ-000467 20,000 31,419 44,856 30,694 10,231 0 0 0 0 0 0 137,200 PRJ-000018 0 0 0 0 33,217 11,072 0 0 0 0 0 44,289 PRJ-000021 0 0 0 0 4,000 20,200 0 0 0 0 0 24,200 PRJ-000598 0 0 19,847 19,575 545 0 0 0 0 0 0 39,967 PRJ-000703 2,000 7,000 9,000 4,500 0 4,500 0 0 0 0 0 27,000 PRJ-000020 0 0 0 0 3,000 3,000 0 0 0 0 0 6,000 PRJ-000462 0 0 3,600 3,600 3,600 3,600 4,000 4,000 0 0 0 22,400 PRJ-000464 0 0 0 25,494 43,787 19,594 0 0 0 0 0 88,875 PRJ-000763 0 0 0 35,000 24,800 20,000 0 0 0 0 0 79,800 PRJ-000778 0 0 20,000 41,000 42,025 43,075 22,075 0 0 0 0 168,175 PRJ-000841 0 0 0 11,045 10,244 7,185 7,185 0 0 0 0 35,658 PRJ-002676 0 0 0 0 30,000 44,400 44,600 34,600 0 0 0 153,600 PRJ-004677 0 0 0 0 0 0 10,000 0 0 0 0 10,000 PRJ-004698 0 0 0 0 0 0 0 14,200 8,000 0 0 22,200 PRJ-005148 0 0 0 0 0 0 0 20,000 0 0 0 20,000 PRJ-000468 0 0 9,243 4,622 4,621 0 0 0 0 0 0 18,486 PRJ-000019 0 0 0 0 9,150 0 0 0 0 0 0 9,150 PRJ-000795 0 0 0 51,994 42,394 0 0 0 0 0 0 94,388

Total 22,000 38,419 106,546 328,338 344,032 295,992 103,310 143,800 173,827 108,432 15,000 1,679,695 Source : RIRDC Proposals

Table 5: Investment by Researchers, Industry and Others by Project for Years Ending 2004 to 2014 (nominal $) Project 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total PRJ-000773 0 0 0 33,000 35,000 37,000 0 0 0 0 0 105,000 PRJ-000017 0 0 0 0 142,883 149,973 0 0 0 0 0 292,856 PRJ-006257 0 0 0 0 0 0 0 0 117,000 0 0 117,000 PRJ-004905 0 0 0 0 0 0 0 262,872 262,872 262,872 0 788,616 PRJ-005404 0 0 0 0 0 0 2,000 3,000 0 0 0 5,000 PRJ-007240 0 0 0 0 0 0 0 0 6,250 6,250 0 12,500 PRJ-007285 0 0 0 0 0 0 0 0 5,000 0 0 5,000 PRJ-008303 0 0 0 0 0 0 0 0 0 0 0 0 PRJ-000467 4,003 41,009 45,197 48,113 0 0 0 0 0 0 0 138,322 PRJ-000018 0 0 0 0 24,579 7,918 0 0 0 0 0 32,497 48 PRJ-000021 0 0 0 0 12,600 11,750 0 0 0 0 0 24,350

PRJ-000598 0 0 29,414 29,414 0 0 0 0 0 0 0 58,828 PRJ-000703 18,923 36,848 35,325 17,405 17,405 0 0 0 0 0 0 125,906 PRJ-000020 0 0 0 0 21,350 21,400 0 0 0 0 0 42,750 PRJ-000462 0 0 4,400 4,400 4,400 4,400 5,000 5,000 0 0 0 27,600 PRJ-000464 0 0 0 21,358 44,925 23,638 0 0 0 0 0 89,921 PRJ-000763 0 0 0 122,230 98,605 87,647 0 0 0 0 0 308,482 PRJ-000778 0 0 21,250 43,562 44,650 45,765 23,453 0 0 0 0 178,680 PRJ-000841 0 0 0 12,528 12,847 18,963 0 0 0 0 0 44,338 PRJ-002676 0 0 0 0 0 324,726 208,468 50,000 0 0 0 583,194 PRJ-004677 0 0 0 0 0 0 12,000 0 0 0 0 12,000 PRJ-004698 0 0 0 0 0 0 0 1,000 0 0 0 1,000 PRJ-005148 0 0 0 0 0 0 0 84,834 0 0 0 84,834 PRJ-000468 0 0 13,955 9,228 4,727 0 0 0 0 0 0 27,910 PRJ-000019 0 0 0 0 66,626 0 0 0 0 0 0 66,626

PRJ-000795 0 0 0 67,309 31,155 0 0 0 0 0 0 98,464 Total 22,926 77,857 149,541 408,547 561,752 733,180 250,921 406,706 391,122 269,122 0 3,271,674 Source: RIRDC proposals

Table 6: Total Annual Investment by Year (nominal $) Year ending June RIRDC Researchers, Industry and Total Others 2004 22,000 22,926 44,926 2005 38,419 77,857 116,276 2006 106,546 149,541 256,087 2007 328,338 408,547 736,885 2008 344,032 561,752 905,784 2009 295,992 733,180 1,029,172 2010 103,310 250,921 354,231 2011 143,800 406,706 550,506

49 2012 173,827 391,122 564,949 2013 108,432 269,122 377,554 2014 15,000 0 15,00 Total 1,679,695 3,271,674 4,951,369

5. Benefits

Table 7 summarises the likely contributions to the principal benefit types delivered by each of the projects. Projects are identified as contributing to only one of the benefit types, although in reality some projects contributed to more than one type. The likely impacts are represented as follows:

Significant Impact:  Some Impact:  Minor or Undetermined Impact: 

Table 7: Summary of Benefits/Impacts from Individual Projects

Project Code Yield increase New industry Increased Decrease in Increased or production /product export adverse scientific cost decrease development profitability environmental /industry and market impacts from capacity access production PRJ-000773  PRJ-000017   PRJ-006257   PRJ-004905    PRJ-005404   PRJ-007240   PRJ-007285  PRJ-008303    PRJ-000467    PRJ-000018   PRJ-000021  PRJ-000598   PRJ-000703    PRJ-000020  PRJ-000462  PRJ-000464   PRJ-000763  PRJ-000778   PRJ-000841   PRJ-002676  PRJ-004677  PRJ-004698   PRJ-005148   PRJ-000468  PRJ-000019  PRJ-000795  

The projects are grouped below in Table 8 according to their estimated level of impact against the objectives of the Program as outlined in the Five Year Plan for the Program.

Table 8: Project Impact by 2008-2013 Essential Oils and Plant Extracts R&D Plan Objectives Objectives of the Essential Oils Project Assessment of Impact by Project and Plant Extracts R&D Plan 1.Improve production systems to PRJ-000773 High raise productivity and/or control PRJ-000017 High over product qualities PRJ-007240 High PRJ-007285 High PRJ-008303 High PRJ-000598 High PRJ-002676 High PRJ-000468 High PRJ-000841 Minor or undetermined PRJ-004677 Minor or undetermined PRJ-000019 High 2.Support the demonstration of PRJ-006257 High safety and effectiveness of PRJ-004905 High Australian products and facilitate PRJ-005404 Some the satisfaction of regulatory PRJ-000467 High requirements to enhance market PRJ-000021 Minor or undetermined access PRJ-000703 Minor or undetermined PRJ-000464 Some 3.Support new ideas that provide PRJ-000018 Minor or undetermined potential for growing the market PRJ-000763 Minor or undetermined for Australian product PRJ-000778 Some PRJ-005148 Minor or undetermined PRJ-000795 Minor or undetermined 4.Improve the industry and PRJ-000462 Some research capacity PRJ-000020 Some PRJ-004698 Some

At least some benefits have been delivered against all four objectives of the plan. Objective 1 had the highest proportion of projects considered of high impact. Some of the projects addressing Objective 3 (new uses for essential oils) had provided promising outputs but their impacts could not be determined at this point in time. Many of the projects built scientific and/or industry capacity (see table 7). However, projects were listed against this objective (Table 8) only when they directly addressed capacity.

While many projects addressed more than one of the four objectives, they were categorised according to what the analysts believed was their principal impact.

Table 9 provides in a triple bottom line framework a summary of the principal types of benefits associated with the outcomes of the overall investment in the Program.

Table 9: Triple Bottom Line Categories of Benefits from the Investment Levy paying industry Spillovers

Other industries Public Overseas

ECONOMIC BENEFITS

Increased yields/avoided Limited spillover benefits yield loss to some producers of essential oils Reductions in input costs Potential expansion of markets for existing products

Profits from development of new industries

Increased scientific capacity and industry capacity. ENVIRONMENTAL BENEFITS

Decreased adverse Decreased environmental environmental impacts impacts off farm (from on farm (from reduced reduced use of chemicals) use of chemicals)

SOCIAL BENEFITS

Decreased association Decreased chance of Persons in countries with chemicals by farm exporting chemicals off importing and using workers. farm with potentially Australian essential oils lowered community and plant extracts impact

Increased scientific knowledge and capacity

Public versus Private Benefits

It is anticipated that the majority of benefits from this investment will be private. Economic gains for the essential oils industry are the main benefits of these investments and it is unlikely that public spillovers (environmental and social) will occur outside a possible decrease in the use of inputs such as chemicals and an increase in scientific capacity. Consumers of new or improved products will also benefit but they are generally considered as part of the industry supply chain.

Distribution of Benefits along the Supply Chain

Some of the benefits described are related to increasing yields and decreasing input costs for essential oil producers. Other projects are related to expanding essential oil and plant extract markets via new uses or to the protection of existing markets through quality improvements. Benefits are likely to be shared along the product supply chain.

Benefits to Other Industries

The benefits identified are likely to be limited to existing and new producers, processors and marketers of Australian production of essential oils and plant extracts.

Benefits Overseas

The primary benefits overseas will be to persons in countries importing and using Australian essential oils and plant extracts. There may be limited spillover benefits to some producers of essential oils in other countries.

Additionality and Marginality

Table 10 shows the potential response to reduced public funding to RIRDC.

Table 10: Potential Response to Reduced Public Funding to RIRDC What priority were the projects in this analysis when Medium to High funded? Would RIRDC have funded this analysis if only half Yes, some projects but with significantly reduced of public funding of RIRDC had been available? project funding of about 50% of actual funding levels Would the projects have been funded if no public Yes, but with reduced public funding of about 25% of funding for RIRDC had been available? actual funding levels

Match with National Priorities

The Australian Government’s national and rural R&D priorities are reproduced in Table 11.

Table 11: National and Rural R&D Priorities 2007-08 (valid as of May 2013)

Australian Government

National R&D Priorities Rural R&D Priorities

1. An environmentally sustainable Australia 1. Productivity and adding value 2. Promoting and maintaining good health 2. Supply chain and markets 3. Frontier technologies for building and transforming 3. Natural resource management Australian industries 4. Climate variability and climate change 4. Safeguarding Australia 5. Biosecurity

Supporting the priorities: 1. Innovation skills 2. Technology

The projects within this analysis have contributed to all National R&D priorities and Rural R&D priorities 1, 2, 3 and 5. The investment also contributes to both supporting priorities for Rural R&D.

6. Quantification of Benefits

From the classification of benefits in Tables 7 and 8, 18 projects were identified as having benefits with some or significant impacts. The benefits from the following 13 projects were subjected to valuation.

• PRJ-000773: Growing the essential oils industry • PRJ-000017: Aroma and flavour products from plant waste • PRJ-006257: Bioactive extracts from Australian native plants for the personal care industry • PRJ-004905: Agronomic and extraction parameters for Centipeda cunninghamii production • PRJ-007240 Investigating control options for Myrtle rust in native foods • PRJ-007285 Determination of residues in riberries, lemon and anise myrtle and satin ash • PRJ-008303: Monitoring Myrtle rust in a lemon Myrtle Provenance trial • PRJ-000467: Quality assurance protocols to minimise pesticide residues in essential oils • PRJ-000598: Commercial Production of milkweed in a plant with anti-cancer properties • PRJ-002676: Flood irrigated tropical timber trials in the north of Western Australia • PRJ-004698: Melaleuca book • PRJ-000468: Increased yields from peppermint crops through improved nutrition • PRJ-000019: Analysis of Plant-Host Relationships in tropical sandalwood (Santalum album)

Some of the 13 projects were banded together for benefit valuation purposes. The benefits from the three projects addressing Myrtle rust were valued as one group as were the two projects associated with tropical sandalwood. This meant there were ten groups of projects where benefits were valued.

Projects where Benefits Valued

The following provides brief information on the projects where benefits were valued. The full set of assumptions used for the valuation for each project is provided in Table 12.

PRJ-000773: Growing the essential oils industry The benefit driver assumed for this project was a cost reduction due to improved management practices, including the cost reducing impacts of yield increases. The oils assumed to have received these benefits included peppermint, fennel, lavender and boronia.

PRJ-000017: Aroma and flavour products from plant waste This project identified the valuable components of boronia marc and processes for their extraction. This has resulted in an increase in production of valuable volatiles by the boronia industry.

PRJ-006257: Bioactive extracts for personal care industry This project is likely to produce commercial products in the personal care industry. Although more than one product may be developed, the analysis is confined to the likely benefit from the commercial development of products from pepperberry. The analysis allows for capital investment, likelihood of success and a small attribution to the RIRDC project.

PRJ-004905: Agronomic and extraction parameters for Centipeda cunninghamii production This project has led to a prospective yield and quality increase of bioactives from optimal harvesting of the crop at maximum flowering and from higher planting densities. This translates to a higher net return per ha after allowing for increased production costs.

PRJ-007240 Investigating control options for Myrtle rust in native foods PRJ-007285 Determination of residues in riberries, lemon and anise myrtle and satin ash PRJ-008303: Monitoring Myrtle rust in a lemon Myrtle Provenance trial

These three projects all addressed Myrtle rust control via both genetic and chemical control mechanisms. Two of the three projects are still ongoing but all three projects have demonstrated significant progress in being able to sustain this valuable export industry of herbal teas, oil and other added value products. Without the development of improved control methods is it likely that the industry would contract significantly and possibly be reduced to zero production and therefore change to other land uses. Specific assumptions are summarised in Table 12.

PRJ000467: Pesticide residues in essential oils There are two benefits identified from this project. The first is a risk reduction and the second is a reduction in the use and cost of pesticides. The first benefit assumes that the cost of an essential oil contamination incident is $50,000 and the risk is reduced from 1.5 incidents per annum to 0.50 per annum. The cost of pesticide has been reduced from the improved calibration of spray equipment.

PRJ000598: Commercial production of milkweed Milkweed has properties whereby active ingredients can be used to treat non melanoma skin cancers. This project (and some other RIRDC projects) contributed to the development of an industry that is expected to reduce skin cancer treatment costs significantly in Australia and internationally.

PRJ002676 and PRJ000019: Sandalwood companion trees and management These two projects supported trials on host species for the tropical sandalwood industry in northern Australia. The data produced have made a contribution to improved management and yields for north WA sandalwood producers.

PRJ-004698: Melaleuca book The book will be published in 2013 and is expected to provide both scientific benefits to both Australian and overseas scientists and industry members. It may also contribute to the development of new plant based industries. Value of the book is based on willingness to pay for the book; it is assumed purchasers of the book will accrue benefits equal to or greater than what they pay for it. For the copies given away (ACIAR policy) to selected individual and institutions, the benefit is assumed to be similar to those who purchase the book.

PRJ-000468: Improved peppermint yields from informed nutrition This project will provide yield benefits to peppermint growers through improved information on the plant’s nutritional requirements.

Projects Not Valued

Common characteristics of the 13 projects where benefits were not valued were:

• The project did not lead to any measurable outcomes or impacts. • There was only a weak linkage between project findings and any impact. • A difficulty was encountered in valuing benefits due to a lack of industry data. • Some projects were at the ‘proof of concept’ stage and were associated with significant uncertainties for assumptions regarding commercialisation.

Summary of Assumptions

A summary of the key assumptions made is shown in Table 12.

Table 12: Summary of Assumptions Variable Assumption Source PRJ-000773: Growing the essential oils industry Crop Estimate Estimate of Estimate Estimate Assumed Cost Assumed Benefit to of area production of gross of decrease saving extent of industry price variable in adoption costs variable by (80% of costs due industry price) to project (ha) (kg per ($/kg) ($/kg) (%) ($/kg) (%) ($ per annum) annum) Peppermint 40 2,800 50 40 10 4 80 8,960 Fennel 225 22,500 24 19.2 10 1.92 80 34,560 Lavender 10 450 100 80 10 8 80 2,880 Parsley 50 3000 70 56 10 5.6 80 13,440 Boronia 20 40,000 12.5 10 10 1 80 32,000

Total 345 91,840 Crop data As per table above Provided by Sam Smee, Essential Oils of Tasmania Attribution to investment 75% Agtrans Research Year of first benefits 2011 Agtrans Research Year of maximum benefits 2014 Agtrans Research PRJ-000017: Aroma and flavour products from plant waste Production of boronia 40,000 kg per annum Agtrans Research after discussions with Price $12.5 per kg Bob Menary and Sam Smee Increased production 15% Value of increased production $75,000 40,000 * 12.5 *15% Year of first benefits 2012 Agtrans Research Attribution to Project 50% Agtrans Research PRJ-006257: Bioactive extracts for the personal care industry Cost of commercialisation $1m over five years 2012-2016 Agtrans Research after discussions with Hazel MacTavish-West Likelihood of successful 50% Agtrans Research commercialisation Capital investment for facilities $2 m in 2016 Agtrans Research after discussions with First year of sales 2017 Hazel MacTavish-West Value of sales in 2017 $1m Agtrans Research after discussions with Value of sales in 2021 and thereafter $10m Hazel MacTavish-West Attribution to the single RIRDC 5% Agtrans Research project PRJ-004905: Agronomic and extraction parameters for Centipeda cunninghamii production Current area of production 3 ha Project Report Current yield 2.9 tonnes dry matter per ha Agtrans Research after input from Current farm gate price $20,000 per tonne Robert Spooner-Hart Current cost of production $10,000 per ha Yield increase assumed 10% Added production costs $1,000 per ha First year of benefits 2015 Agtrans Research PRJ-007240, PRJ-007285, PRJ-008303: Myrtle rust control Wholesale revenue from NSW /S $7 m per annum Agtrans Research after discussions with QLD lemon myrtle industry Gary Mazzorana Area of lemon myrtle trees in NSW/S 70 ha Agtrans Research after discussions with QLD Gary Mazzorana Wholesale revenue per ha $100,000 per ha $7 m /70 Wholesale revenue of alternative tree $60,000 per ha Based on an estimate of $45,000 to crop $60,000 for custard apples after

discussions with Gary Mazzorana Revenue lost if lemon myrtle industry $40,000 per ha $100,000 -$60,000; it is assumed that ceased to be profitable costs per ha are similar Area of lemon myrtle trees assumed 50 ha of NSW/SQLD area of 70 ha Agtrans Research lost due to rust Probability of success of new control 50% Based on factors such as projects not yet methods completed, chemical registrations still required, and unknown MRL limitations and potential for resistance developing for new chemicals Attribution to the three projects if 80% Other investment will be required e.g. output success achieved further resistance breeding First year of benefits 2014 Agtrans Research North Queensland industry Australian Native Lemon Myrtle Farms (ANLMF) at Proserpine has had a few small outbreaks of Myrtle rust but by cutting it out and cutting back the trees severely at harvest time, they have been able to control any outbreaks so far (Source: Representative of ANLMF). There have been reports of Myrtle rust in the surrounding regions (Suzie Perry, pers., comm., 2013). However, as this farm is certified organic, the projects analysed here, in the main, will not benefit this farm, as long as that status remains. As stated earlier, soft chemicals alone are not likely to save the organic industry. Any impact of the project investments for this farm will therefore be restricted to the findings of resistant types. Only partly resistant types could be selected pending current selection trials and these are likely to be effective only in conjunction with the use of hard chemicals. Increased resistance may be possible from a breeding program but this would take a long period to produce benefits. If, as a last resort, ANLMF had to use hard chemicals, they would lose their organic status and have to change marketing strategies. Any North Queensland benefits from the three projects under this specific scenario have not been valued in the present analysis. PRJ000467: Pesticide residues in essential oils Area of essential oils 300 ha Based on PRJ-000773 Cost of one residue incident $50,000 Agtrans Research, validated with Incident frequency before project 1.5 per annum discussions with Bob Menary Incident frequency after project 0.5 per annum Pesticide cost per ha $1,000 per ha Agtrans Research, after input from Bob Reduction in pesticide cost due to 20% Menary project Industry adoption 50% First year of benefits 2009 Agtrans Research PRJ000598: Commercial production of milkweed Cost of Australian skin cancer $615.6 m Based on discussions with Larry Cooper treatments in 2010 and sourced from Fransen et al 2012. Number of skin cancer treatments in 841,984 Australia in 2013 Cost per treatment $731 Cost per new treatment $130 Cost reduction per treatment $601 Total cost reduction $506 m Market penetration 50% Agtrans Research Cost to company purchasing patent $300 m Discussions with Larry Cooper (used to rights estimate attribution) Cost of RIRDC project $98,795 Project specification (used to estimate attribution) Attribution to RIRDC project 0.05% Agtrans Research (based on relative costs) First year of benefits 2013 Agtrans Research PRJ002676 and PRJ000019: Sandalwood companion trees and management Area of tropical sandalwood 6,000 ha Liz Barbour, pers. comm., 2013 Harvest commencement year 2013 Liz Barbour, pers. comm., 2013

Density 200 trees per ha Agtrans Research Yield without trials 15 kg heartwood per tree Agtrans Research Total yield without trials 3 tonnes heartwood per ha 200 x 15/1000 Maximum area influenced 5% Agtrans Research Maximum area influenced 300 ha 5% of 6,000 ha Increase in yield 5% Agtrans Research after general discussions on impact with Liz Barbour Yield with trials 3.15 tonnes per ha 5% increase for 3 tonnes Increase in yield 0.15 tonnes per ha 3.15-3.00 Rotation length 20 years Agtrans Research Annual harvest affected 15 ha 300 ha /20 Value of heartwood $70,000 per tonne Based on minimum Indian Price of $4,000 rupees per kg in 2011 converted at 57 rupees per A$ Total increase in value $157,500 per annum 0.15ha x 15 x$70,000 PRJ-004698: Melaleuca book Number of books sold or given away 1,000 Agtrans Research after discussions with over 8 years John Doran and Georgina Hickey Publication cost $40 per unit Sale Price $100 per unit Margin $60 per unit $100-$40 Year of publication 2013 Discussions with Georgina Hickey PRJ-000468: Improved peppermint yields from informed nutrition Before Project Yield of peppermint oil before project 50 kg per ha Input from Sam Smee and Bob Menary Estimate of peppermint area 40 ha Estimate of peppermint price $48 per kg After Project Yield of peppermint after project 70 kg per ha Agtrans Research after discussions with

Increase in price due to higher quality of 20% Bob Menary oil Price after project $58 per kg $48 x 1.20 Added revenue due to yield increase $960 per ha 20kg @$48 Added revenue due to price increase $700 per ha 70kg @ (58-48) Added cost of fertiliser nutrients $200 per ha Agtrans Research after discussions with Bob Menary Net revenue gain $1,460 per ha 960+700–200 Proportion of grower area adopting new 50% Agtrans Research practices Year of first adoption 2009 Agtrans Research Year of maximum adoption 2011 Agtrans Research

7. Results

All past costs and benefits were expressed in 2011/12 dollar terms using the CPI index. All benefits after 2011/12 were expressed in 2011/12 dollar terms. All costs and benefits were discounted to 2011/12 using a discount rate of 5%. The base run used the best estimates of each variable, notwithstanding a high level of uncertainty for many of the estimates. All analyses ran for the length of the investment period plus 30 years from the last year of investment (2013/14) to the final year of benefits assumed.

Tables 13 and 14 show the investment criteria estimated for the different periods of benefits for both the total investment in for the RIRDC/industry investment respectively. These investment criteria account for the cost of all 26 projects but only the benefits from the 13 projects where benefits were valued. These investment criteria therefore represent the lower bound for return on investment in the population of projects evaluated in the Essential Oils and Plant Extracts Program.

Table 13: Investment Criteria for Total Investment in the 26 Projects (discount rate 5%)

Investment Criteria Years from last year of investment

0 5 10 15 20 25 30 Present value of benefits ($m) 1.90 6.85 11.60 15.37 18.32 20.64 22.45 Present value of costs ($m) 6.19 6.19 6.19 6.19 6.19 6.19 6.19 Net present value ($m) -4.28 0.66 5.41 9.18 12.14 14.45 16.26 Benefit-cost ratio 0.31 1.11 1.87 2.48 2.96 3.34 3.63 Internal rate of return (%) Neg 6.5 12.4 14.2 14.9 15.2 15.4

Table 14: Investment Criteria for RIRDC Investment in the 26 Projects (discount rate 5%)

Investment Criteria Years from last year of investment

0 5 10 15 20 25 30

Present value of benefits ($m) 0.65 2.34 3.97 5.25 6.26 7.06 7.68 Present value of costs ($m) 2.14 2.14 2.14 2.14 2.14 2.14 2.14 Net present value ($m) -1.49 0.20 1.82 3.11 4.12 4.91 5.53 Benefit-cost ratio 0.30 1.09 1.85 2.45 2.92 3.29 3.58 Internal rate of return (%) Neg 6.3 12.0 13.8 14.5 14.8 15.0

Tables 15 and 16 show the investment criteria estimated for the different periods of benefits for the investment in those projects where benefits were valued but including only the investment in the 13 projects where benefits were valued. These results therefore represent the upper bound of return on the Essential Oils and Plant Extracts program investment.

Table 15: Investment Criteria for Total Investment in Quantified Projects Investment Criteria Years from last year of investment

0 5 10 15 20 25 30

Present value of benefits ($m) 1.90 6.85 11.60 15.37 18.32 20.64 22.45 Present value of costs ($m) 3.87 3.87 3.87 3.87 3.87 3.87 3.87 Net present value ($m) -1.97 2.97 7.72 11.49 14.45 16.76 18.58 Benefit-cost ratio 0.49 1.77 2.99 3.97 4.73 5.33 5.79 Internal rate of return (%) Neg 14.7 19.6 20.9 21.3 21.4 21.5

Table 16: Investment Criteria for RIRDC Investment in Quantified Projects (discount rate)

Investment Criteria Years from last year of investment

0 5 10 15 20 25 30

Present value of benefits ($m) 0.62 2.24 3.79 5.02 5.99 6.75 7.34 Present value of costs ($m) 1.29 1.29 1.29 1.29 1.29 1.29 1.29 Net present value ($m) -0.67 0.95 2.50 3.73 4.70 5.46 6.05 Benefit-cost ratio 0.48 1.74 2.94 3.90 4.65 5.23 5.69 Internal rate of return (%) Neg 13.7 18.4 19.7 20.1 20.3 20.3

The annual net benefit undiscounted cash flows for both total and RIRDC investment for the duration of investment plus 30 years from the last year of investment are shown in Figure 1. This graph refers to the benefits derived from the 13 projects where benefits were valued.

Figure 1: Annual Cash Flow of Benefits from the Projects Where Benefits Were Valued

2,500,000

2,000,000

1,500,000 Total

RIRDC 1,000,000 Annual ($) Benefit Annual 500,000

0 2004 2008 2012 2016 2020 2024 2028 2032 2036 2040 2044 Year

Table 17 provides the contribution to the Present Value of Benefits (PVB) made by each of the projects where benefits were valued. Note there are only ten benefit types for the 13 projects as the benefits for some projects were merged and valued together.

Table 17: Contribution to PVB from Each Project

Project Contribution to Contribution PVB to PVB ($m) (%) PRJ-000773: Growing the essential oils industry 1.12 5.0 PRJ-000017: Aroma and flavour products from plant waste 0.63 2.8 PRJ-006257: Bioactive extracts for personal care industry 2.51 11.2 PRJ-004905: Agronomic and extraction parameters for Centipeda cunninghamii production 0.20 0.9 PRJ-007240, PRJ-007285, PRJ-008303: Myrtle rust control 11.88 52.9 PRJ-000467: Pesticide residues in essential oils 1.61 7.2 PRJ-000598: Commercial Production of milkweed 2.00 8.9 PRJ-002676 and PRJ-000019: Sandalwood companion trees and management 1.89 8.4 PRJ-004698: Melaleuca book 0.05 0.2 PRJ-000468: Improved peppermint yields from informed nutrition 0.55 2.5 Total 22.45 100.0

Sensitivity Analysis

Sensitivity analyses were carried out on several variables. All sensitivity analyses were performed for the total investment and with benefits taken over the life of the investment plus 30 years from the last year of investment. All other parameters were held at their base values. Table 18 presents the sensitivity of the investment criteria to the discount rate. Note that this analysis is for the 13 projects where benefits were valued but including the investment for all 26 projects.

Table 18: Sensitivity to Discount Rate (Lower Bound Analysis) (Total investment, 30 years)

Investment Criteria Discount rate

0% 5% (base) 10%

Present value of benefits ($m) 47.33 22.45 13.00 Present value of costs ($m) 5.33 6.19 7.20 Net present value ($m) 41.99 16.26 5.80 Benefit-cost ratio 8.88 3.63 1.81

The benefits valued in the analysis proved to be moderately sensitive to the discount rate.

It is noted that the benefit from the potential Myrtle rust control investments is the largest benefit estimated, contributing 53% of the total Present Value of Benefits. Table 19 provides investment criteria for the key variable influencing the outcome for this group of investments: the probability of success. The results show that if the Myrtle rust projects produce no benefits, the investment criteria for the Program are still positive for the lower bound analysis (benefit cost ratio of 1.7).

Table 19: Sensitivity to Probability of Success of Myrtle Rust Investments (Lower Bound Analysis) (Total investment, 30 years)

Investment Criteria Probability of Success

0% 50% (base) 100% Present value of benefits ($m) 10.57 22.45 34.33 Present value of costs ($m) 6.19 6.19 6.19 Net present value ($m) 4.38 16.26 28.15 Benefit-cost ratio 1.71 3.63 5.55 Internal rate of return (%) 8.7 15.4 19.9

Confidence Rating

The results produced are highly dependent on the assumptions made, many of which are uncertain. There are two factors that warrant recognition. The first factor is the coverage of benefits. Where there are multiple types of benefits it is often not possible to quantify all the benefits that may be linked to the investment. The second factor involves uncertainty regarding the assumptions made, including the linkage between the research and the assumed outcomes.

A confidence rating based on these two factors has been given to the results of the investment analysis (Table 20). The rating categories used are High, Medium and Low, where:

High: denotes a good coverage of benefits or reasonable confidence in the assumptions made

Medium: denotes only a reasonable coverage of benefits or some uncertainties in assumptions made

Low: denotes a poor coverage of benefits or many uncertainties in assumptions made

Table 20: Confidence in Analysis of Cluster Coverage of Benefits Confidence in Assumptions

High Medium

8. Conclusion

The 26 projects were categorised according to an assessment of their relative impacts. Eighteen projects were identified as having benefits with some or high impacts. The benefits from 13 of these projects were subjected to valuation. Some of the 13 projects were banded together for benefit valuation purposes. The benefits from the three projects addressing Myrtle rust were valued as one group, as were the two projects associated with tropical sandalwood. This meant there were ten sets of benefits valued from the 13 projects.

Benefits were delivered against all four objectives of the R&D Plan. Objective 1 had the highest proportion of projects considered of high impact. Some of the projects addressing Objective 3 (new uses for essential oils) had provided positive outputs but their impacts could not be determined at this point in time. Many of the projects built scientific and/or industry capacity. However, projects were only listed against the ‘Improve the industry and research capacity’ objective when they directly addressed capacity.

Through valuing benefits of just 13 of the 26 projects included in the analysis, the investment in this population of projects provided positive investment criteria. It is estimated that as a lower bound the program provided a benefit cost ratio of 3.6 to 1.

When compared with just the costs of the benefits from the 13 projects where benefits were valued the benefit cost ratio was 5.8 to 1. This indicates an upper bound of returns from the program and assumes no other projects outside the 13 produced any benefits.

The positive results in terms of the benefits identified and those valued, demonstrate that the Program is delivering impacts and providing a return on investment. The overall result should be viewed positively by RIRDC, the industry, and policy personnel responsible for allocation of public funds.

The process used in this evaluation allowed for a qualitative classification and assessment of all the projects in the population and has provided useful information for both demonstrating accountability for past investment decisions as well as for the allocation of program resources in the future. It is suggested that this approach to economic evaluation could be used for other RIRDC programs in the future.

References

RIRDC (2008) “Essential Oils and Plant Extracts Five-Year R&D Plan 2008 – 2013” https://rirdc.infoservices.com.au/items/08-053

Fransen M, Karahalios A, Sharma N, English D, Giles G and Sinclair R (2012) “Non-melanoma skin cancer in Australia”, Med J Aust 2012; 197 (10): 565-568. https://www.mja.com.au/journal/2012/197/10/non-melanoma-skin-cancer-australia

Economic Evaluation of Investment in the Essential Oils and Plant Extracts R&D Program By Peter Chudleigh, Buyani Thomy and Andrea Bath Pub. No. 13/083

This report presents the results of economic analyses of completed (and some current projects) within RIRDC’s Essential Oils and Plant Extracts R&D Program.

The information contained in the report is targeted at Program and RIRDC management, those within the essential oils and plant extracts industries, and the wider community. Other target audiences are the Australian Government and the Council of Rural Research and Development Corporations.

RIRDC is a partnership between government and industry to invest in R&D for more productive and sustainable rural industries. We invest in new and emerging rural industries, a suite of established rural industries and national rural issues.

Most of the information we produce can be downloaded for free or purchased from our website .

RIRDC books can also be purchased by phoning 1300 634 313 for a local call fee.

Phone: 02 6271 4100 Fax: 02 6271 4199 Bookshop: 1300 634 313 Email: [email protected] Postal Address: PO Box 4776, Kingston ACT 2604 Street Address: Level 2, 15 National Circuit, Barton ACT 2600

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Cover image: Centipida cunninghamii trial site in Gippsland, Victoria