The Economics of Composting is a challenging discussion because
there are so many variables involved and because every stable and
small farm is unique in how it operates. This article explores several
topics under the category of “Economics”, with an over-arching
emphasis placed on horse owner responsibility. Additional articles
about marketing compost can be found on the O2Compost Blog. Click
The Cost of Manure Management
The cost of manure management can be divided into four categories,
including: 1) hard costs; 2) soft costs; 3) intangible costs, and
4) lost opportunity costs. Hard Costs are those that can be tallied
from a check register or bookkeeping program. These include the
cost of stall bedding; labor to clean stalls; and disposal cost.
For those who subscribe to a pick-up service, the disposal costs
can be further sub-divided into roll-off container rental, weekly
pick-up, tipping fee and occasionally a dubious “environmental
compliance fee”. Occasionally this picked up manure is recycled
however quite often it is deposited in a regional landfill.
Soft Costs include those items that are more difficult to measure,
such as the stable manager or owner’s time; wear and tear
/ maintenance on the tractor or truck used to handle the manure;
the cost of fuel for a multi-purpose vehicle; labor spent hauling
the manure instead of working on other value-added projects around
the stable, etc. Soft costs may also include the expense for fertilizer
used in managing pastures instead of a lesser amount of fertilizer
(or no fertilizer) used when applying compost to the pasture.
Intangible Costs are those that can’t be measured and that
we seldom stop to think about. These include such items as adverse
impacts on surface water and ground water resources; odors and neighbor
complaints; farm aesthetics and potential lost business or undervalued
stall rental rates; environmental compliance liability; decreased
property value; and the eventual cost of site clean-up. In this
latter case, it may be noted that a large pile of manure and shavings
will roughly double in volume when excavated from the pile and transferred
to a truck, thereby doubling the cost of transport and disposal.
The Lost Opportunity Cost primarily includes any revenues that
have not been generated through the sale of finished compost. A
well composted manure product will result in a modest profit center
for the farm or a source of donations to a favorite charity. With
additional revenues, all types of hard, soft and intangible costs
listed above can be off-set thereby improving the small farm or
stable’s bottom line.
Expense vs. Investment
One of the objectives with the O2Compost Training Program is to
reduce the amount of labor involved in composting, thereby saving
both time and money. Some time does need to be committed to the
composting process; however this can be minimized by employing a
With aerated composting, a timer operates a blower, typically set
for a 2- to 3-minute On-cycle followed by a 20- to 30-minute Off-cycle.
(Keep in mind that Aerated Composting requires no turning of the
pile). The blower cycles On/Off 24-hours a day and the only additional
labor includes periodically taking pile temperatures and then removing
finished compost from an aerated bay to make room for the next batch.
Depending on the size of the blower and location of the site, electrical
power costs will typically range between $5 and $10 per month.
With manure disposal, there is a never ending expense, month after
month, year after year. With composting, there is the initial investment
in the O2Compost Training Program and the construction of an aerated
bay system; however both of these can be written off as a business
expense, amortized, or otherwise justified by eliminating the perpetual
disposal expense. As such, a compost system is unusual in that it
actually generates a return on investment, unlike most other investments
on a farm.
Cost of Construction
The cost of constructing a compost system will range widely depending
on the type and size of system that is constructed, the materials
that are used for construction and whether or not a contractor is
used to do the work. As can be seen in other sections of this web
site, there are many different styles of composting systems, with
the two basic styles being the On-Grade Compost System and the Top-Down
The On-Grade Composter is the simplest, least expensive system
to build and is particularly well suited to flat ground. The Top-Down
approach requires considerably more excavation and site preparation
as well as a retaining wall placed up against the hillside. While
this approach is ideal for moderately sloping ground conditions,
it will roughly double the cost of construction. In addition to
these two basic approaches, additional area under roof can be provided
for curing and storage of the finished product, and additional concrete
aprons and driveways can be added to facilitate all weather conditions.
The types of materials used in constructing any of the composting
systems include lumber; poured-in-place concrete walls; stackable
concrete blocks; and masonry blocks. In addition to these materials,
O2Compost is now working on a kit design that involves metal barn
building materials. Keep an eye on our Blog for details in early
The O2Compost Systems do not require roofs, however a roof is strongly
recommended to keep excess rain and snow off the pile and to provide
shade during the summer months. There is nothing worse than dealing
with tarps during the winter months when it’s cold, dark and
wet outside. If a roof is not in the initial construction budget,
we recommend leaving the post “hang high” so that a
roof can be added at some later date.
The most significant cost component is the expense of construction.
If the owner and some friends or existing staff build the system,
the cost of construction will be minimal (perhaps a case of beer
and free compost forever). However, if a contractor is brought on-site
to build the system, the cost will often be two to three times the
cost of materials. All of the O2Compost system designs are simple
and use conventional construction methods. That being said, a contractor
may provide a somewhat higher bid simply because it’s the
first time he has constructed a structure that integrates a simple
technology such as aeration.
Question - So, how much does a compost system cost? Answer - It
- For a free standing aerated static pile system; on existing
grade with no concrete; without any structural containment; and
with easy access to electrical power and water - the cost will
be in the range of $100 to $1,000, depending on the type of aeration
- For an on-grade 3-bay system; constructed on flat sandy soil;
out of lumber; with a roof and minimal concrete; and built by
a husband and a brother-in-law - the cost will likely range from
$3,500 to $10,000.
- For a top-down system; built with a combination of stackable
concrete blocks and lumber; with a roof; and built by a contractor
who is familiar with farm construction - the cost will likely
range from $15,000 to $25,000.
- For an on-grade or top-down system; constructed out of concrete
retaining and divider walls and steel; designed to be architecturally
consistent with the other buildings on the farm; with 6-months
of storage plus a considerable amount of concrete for aprons and
driveways; and built by a home builder - the cost will likely
range from $25,000 to $50,000 or more.
The O2Compost design drawings include a detailed materials list
as well as a bid sheet for contractors to use in preparing their
bids. This approach makes it possible to compare “apples with
Regardless of the approach that is taken and the ultimate cost
of the structure, it is important to keep in mind that your compost
system solves a problem and is capable of generating revenue. In
addition, your compost system will retain its value when it comes
time to sell the farm, just as a barn or other out building will
add to the value of the farm. Finally, if you choose to sell your
compost, part of the asset value is in the fact that you have already
set up a clientele and a distribution network. This would be “like
magic” to anyone who is thinking about buying your farm.
Small Farm Grants
In many areas of the United States, the local Resource Conservation
Districts (RCD’s) have grant money to help you with the cost
of construction. O2Compost has worked with several RCD’s and
landowners to construct grant-funded systems. Typically, the RCD’s
contribution will be approximately 50% of the hard cost, however
in Maryland and possibly other states, grants can be for as much
as 87% of the cost. This is definitely worth doing. It is our experience
that the grant does not cover non-construction costs such as the
O2Compost Training Program.
A grant is not free money, unfortunately. What we have learned
from the several RCD projects that we’ve constructed is this:
1. Grants are available on a cyclic basis and it may take a year
or two for grant money to become available.
2. Grants are awarded on a competitive basis, going first to
those farms where there will be the greatest return on their investment
- from a water quality and regulatory compliance standpoint.
3. There is a considerable amount of time consuming paperwork
involved in seeking a grant of this type, followed by long periods
of waiting (and wondering what the heck is going on).
4. The design standards are considerably more rigid than for
conventional farm construction and therefore your portion of the
expense will be for higher grade materials, thicker concrete,
etc. In other words, you will be spending 50% of a higher price
and will actually save perhaps 15% to 25% when all is said and
done. This is not necessarily a bad thing because the final structure
will likely be there 30 years from now.
5. The RCD will not reimburse you for any costs incurred prior
to you signing the grant cnotract and being given the go ahead
with construction. You will be responsible for payment for the
full cost of construction and you will be reimbursed with the
RCD's share once they have signed off that construction has been
completed in accordance with project specifications. You must
submit all receipts with your reimbursement request so paper management
is critical. When dealing with a contractor, it is also critical
that he meets the construction specifications exactly. To this
end, it is a very good idea to keep a large retainage (say 15%)
until the work is finally signed off. This will motivate him to
see it through to the very end. If you give him his full amount
due before getting signed off, you may end up paying for the entire
6. Occasionally, the construction window that you are given is
somewhat narrow, leading to a scenario that reads: "hurry
up and get your paperwork submitted; and then wait and wait and
wait; and then hurry up and get 'er built". We have also
had an experience where money is not available one day and then
is available the next. Where money is granted to other farms,
it can be rescinded by the RCD if the farm owner does not take
action in a reasonable amount of time. In this case, the RCD may
face a "Use It or Lose It" situation which will hinder
their ability to obtain future grant money for their district.
As a result, your project may get turned down initially but come
back to life at a less than opportune time. My friends with the
RCD's openly admit that this is a problem with the system - and
7. When you have received an RCD Grant, your state and local
representatives may feel obliged to drop by periodically to see
how everything is going. The folks with the RCD are non-regulatory
and in fact they truly are there to help you. If you don’t
mind visitors or being part of a farm tour from time to time,
then this will likely not be a problem.
8. Is it worth all the trouble? Yes, in most cases it is worth
the effort. However, it is important to consider the points made
above before committing to a potentially long and drawn out process.
Marketing Compost Products
Every activity on the production side of composting is prescriptive
and systematic. The goal is always to produce a high quality finished
product that is safe to use in any application while minimizing
the time and effort that goes into the production process.
On the other hand, marketing your compost is a very creative process.
Your marketing strategy will depend on several factors, including:
- The volume and quality of your finished product;
- The amount that you want to net from selling your compost;
- The amount of time you are willing to devote to the marketing
/ sales process.
While marketing can take many forms, the following observations
generally apply to all scales of operation:
1. While you can begin marketing your compost immediately, your
sales will follow production of a finished product. As a friend
of mine says, “You can’t sell out of an empty wagon”.
2. Compost sales are seasonal, typically beginning in early March
and ending in mid- to late October. This seasonal range will shrink,
expand or shift somewhat depending on your region and climate.
The winter months between the growing season are your opportunity
to cure and store your compost. “Older compost is better
3. Most of your marketing energy will be spent in the first year
of start-up. This is because once people begin to buy it, they
will return year after year and your market will expand by word
of mouth. Initially, you will need to build consumer confidence;
however, this challenge will be replaced by sales that exceed
your production capacity.
4. Larger volume sales to a single buyer will yield lower profits.
Conversely, smaller volume sales to many buyers will yield higher
profits. I call this the Mayonnaise Effect – you can buy
5-gallons of mayonnaise at Costco or a pint of mayonnaise at your
corner grocery store for about the same amount.
5. If you have 50 or more horses, you will be producing a large
volume of compost. Therefore, your best strategy may be to have
a single buyer such as a local farmer, landscaper or nursery man
take all of it at a lower price.
6. If you have 5 to 10 horses, you will produce enough for local
garden club members and home owners and your strategy might be
to sell it on Saturdays between 10:00 AM and 4:00 PM, loading
out small trucks and trailers thereby yielding a higher return.
7. You may hate the idea of selling anything, in which case you
will be tempted to give your compost away. Please don’t
do this. Compost has value and people won’t appreciate it
if you don’t receive something in exchange for it. One idea
that might work for you is to have your customers make out a check
to a local non-profit organization (i.e., a horse rescue facility
or therapeutic riding center). They can write it off their taxes
and you can feel good about contributing to your community. Similarly,
you can offer 10 cubic yards for a local auction.
8. You will at some point run out of well-cured compost, in which
case you may be tempted to sell a “hot” batch because
people will be clamoring for it. Unless they are friends and you
know for a fact that they will set it aside until it’s ready
to use, I strongly advise against selling it before its ready.
Your reputation for selling a well cured, weed seed free product
needs to be nurtured and protected at all costs.
I often get the question, “How much can I ask for my compost?”
Assuming that you sell your compost in smaller quantities (e.g.,
trailer loads) for a higher return, you can reasonably ask $15 to
$30 per cubic yard. I have a client in South Carolina who delivers
his compost to the “ladies in the garden club” for $80
per 2-cy trailer load.
Aside: One cubic yard (cy) is a volume that measures 3-feet by
3-feet by 3-feet. A cubic yard is equivalent to 27 cubic feet and
approximately 200 gallons. A standard pick-up truck bed will hold
roughly 2 cy when heaped up. Also, 1 cy will fill approximately
(40) 5-gallon buckets. If you set up shop at your local farmers
market, and you sell a 5-gallon bucket of compost for (let’s
say) $1.50, you will earn $60 per cy. To do this however, you will
want to train your customers to bring their own buckets.
For planning purposes, it is reasonable - if not somewhat conservative
- to assume $20 / cy loaded out at your facility. As you develop
your market, you will at some point be unable to meet the market
demand. That’s when your price should go up … and up
… and up. Please remember that “Compost has Real Value”
and follows the principles of supply and demand. Don’t be
afraid to ask a premium price for a premium product.
The O2Compost Training Program provides assistance with developing
and implementing a personalized marketing strategy and we are always
interested in hearing your success story and your challenges. For
more ideas on marketing compost, keep an eye on the O2Compost Blog.
The Business of Composting
Several of our clients have taken the O2Compost Training Program
and created a home-based or commercial business from it. I love
this part of what we do.
In this context, the Business of Composting often involves bringing
together a wide range of organic residuals from off site to a central
production plant. In some cases, these materials are picked up for
a fee and/or received at the facility for a fee. They are then prepared
for composting (i.e., shred if necessary and mixed together in desired
proportions); composted and cured; and post-processed (i.e., screened)
to produce a finished product. In some cases, these materials are
bagged. However, going from a bulk product to a bagged product is
a very large step and should be carefully researched before making
the necessary investment in equipment and infrastructure.
In my workshops, I offer the following recommendations to everyone
who is thinking about entering the business of composting:
1. Evaluate your Motives and Strategies
• Problem Resolution
• Cost Avoidance
• Convert an Expense into Profits
• Create a Value Added Finished Product
• Establish Product Differentiation (e.g., blended potting
• “Boutique” – Small Volumes, Highest
Quality, Local and/or Internet Markets
• “Big Dog” – Large Volume, Good Quality
/ Regional Market
2. Develop a Business Plan
• State your Business Concept in Writing
• Define your Business Strategy
• Analyze Markets / Competition
• Describe Operations, Facilities & Equipment
• Run the Numbers
• Seek Professional Assistance (i.e., Account, Attorney,
3. Get Started
• Define your Objectives and Set Goals
• Start Small and Grow in Planned Increments
• Don’t be Afraid to Make Mistakes - but realize...
• Small Scale Mistakes are Better than Large Ones
• Strive to Produce a GREAT compost product
• Provide Excellent Service to your customers
• Always Think “Safety First”
4. Manage Production
• Develop a Systematic Approach to Operating Your Facility
• Identify Constraints in your System, and …
• Resolve those Constraints Wherever Possible
• Plan, Monitor, and Make Adjustments.
• Talk to Other Composters (outside of your market area)
• Learn from Their Successes and Mistakes!
• Be a Good Neighbor
• Work with your Local / State Regulators (“the
Fish Always Win”); and
• Have Fun!
O2Compost - Our Mission
As environmental engineers, scientists and educators, O2Compost’s
mission is to teach the art and science of aerated composting, and
in so doing empower our world community to become committed stewards
of our land and water resources and bold leaders in sustainable
It is O2Compost’s objective to convert our collective
thinking from “Organic Waste Problem” to “Natural
Resource Opportunity” and to positively impact the world for
generations to come.
Thank you for reading this article on “The Economics of Composting”.
I believe that each of us has the responsibility to manage our wastes,
in what ever form they take, and to create a beneficial impact on
the earth. In this context, “Earning a Profit” is a
Please feel free to send your questions to me: email@example.com.
With your permission, I will post your question and respond to it
on the O2Compost Blog.