Recent research, in which eucalyptus wood chips were used to mulch avocado trees, showed there was no toxicity to young or old trees. Besides this, the trees used less water, developed a better root system and had less diseased roots than unmulched trees. Several studies have shown that eucalyptus chips do not contain any toxins. The reason other plants do not like to grow under eucalyptus is competition. Eucalyptus are strong competitors for water and nutrients. They also produce litter, which tends to smother young plants growing beneath. Most other wood chips (oak, conifer, sycamore, cypress, etc.) are also good for mulch. Even oleander can be used, but it should be composted for a time so that the glycoside poisons have time to break down before it is used
Cooperative Extension Ventura County