Eco Landuse Systems Pty Ltd
(D25) Biala, J. and Mueller, W. (2000) 'On-farm composting of organics - a business opportunity for farmers
Johannes Biala, The Organic Force
On-farm composting is not widely used yet as a tool for the appropriate management of agricultural and non-agricultural organic residues. This situation is likely to change in the future primarily due to stricter legal environmental and food safety requirements but also due to the recognition of business opportunities in the processing of organic residues and the sale of compost products. On-farm composting provides for very flexible contractual arrangements among involved parties.
So far, the agricultural composting and use of municipal and commercial organic residues seems under-utilised despite the benefits it delivers for waste management, the environment and the community as well as for the farmer. A current research project in Crows Nest (QLD) aims to develop a waste management strategy for rural communities that includes on-farm composting for the processing of municipal and commercial organics. The processing of organic residues through on-farm composting can alleviate the common ‘marketing’ problem for compost.
Currently there is very little tangible information available on the economics of on-farm composting operations in Australia. More research and information is required in this field to facilitate adequate planning.
Although farm-yard manure has always been one of the principal means of replenishing soil losses, even now the methods by which this substance is prepared are nothing short of deplorable. The making of farm-yard manure is the weakest link in the agriculture of Western countries.
- Sir Albert Howard, 1943
(Quoted in )
The above quote of Sir Howard seems to be as true today as ever. We have arrived at a situation where the agricultural and food processing sectors produce the bulk of our national ‘waste’ stream. Examples of two million tonnes of manure being produced per year on the Eastern Darling Downs  and the production of 40 million chicken and their excreta per annum in the Perth region  are a case in point. The agricultural paradigm shift from ‘mixed farming’ to ‘industry’ that relies predominantly on foodstuffs from external sources resulted also in a changed attitude towards manures. Rather than being an asset and used to maintain farm productivity, animal manures from large-scale intensive livestock units have often become a liability posing management problems and having the potential of causing serious detrimental environmental effects. This is particularly the case where insufficient land is available for manure application in line with good agricultural practice.
It should be expected that intensive livestock and other agro-industrial units have to manage and process their organic waste materials adequately just like any other industrial operation. If other businesses, i.e. farmers and growers are expected to use such products as input materials, they have to be of a sufficiently high quality standard.
The biological processing (e.g. composting or anaerobic digestion) of organic residues can reduce environmental and health risks and enhance the beneficial re-use of agricultural and non-agricultural organic resources. If these activities are conducted on-farm, they can also provide a business opportunity for farmers. Below, various aspects and examples of on-farm composting operations are presented.
In many instances, existing handling and ‘disposal’ procedures for animal manures and other organic residues have already changed substantially or will d o so in the future for any of the following reasons:
Existing re-use and disposal paths cease
to exist or become unviable
In South Australia for example, grape marc has become a major problem for wineries because of diminished demand for secondary processing . The broiler industry in South-East Queensland has to look for other means of disposing its chicken mortalities after the rendering plant burned down and now refuses to take in chicken after re-opening.
Voluntary action to prevent hazards or nuisance
In areas in Western Australia where chicken industries are concentrated, a health threat for animals, primarily cattle and horses and a nuisance problem for residents developed through infestations of the stable fly. Research revealed that stable fly infestations are mainly due to the outdoor storage and more importantly land application of raw chicken litter under moist conditions and that this was a key component in the stable fly breeding cycle . This important finding provides a potential management tool for the control of the stable fly infestations through adequate processing of the chicken litter prior to land application.
Organic farmers are required that all manures from both certified and uncertified sources shall be composted prior to use, preferably including also the farmers own manure [5,6]. It is emphasised that issues of end product food safety shall guide decision making in relation to manure use and handling at all times.
Overwhelmingly, changes to the handling and disposal/re-use of organic residues are brought about by legal requirements, which are introduced primarily to prevent and minimise adverse environmental effects. However, food safety and consumer protection aspects become also increasingly important issues. In Queensland for example the operation of feedlots and piggeries is classified as an ‘Environmentally Relevant Activity’, which require a license. The Department of Primary Industries assesses applications, establishes operating conditions and monitors compliance on behalf of the EPA. This includes not only the handling and processing of organics but also the appropriate use of such materials (e.g. nutrient budget). However, as soon as external organic residues are accepted for co-composting on a farm, e.g. sawdust or shredded garden organics as bulking agents, the responsibilities become ill defined and still have to be worked out.
It can be assumed that each State has produced industry specific manure (effluent) management and handling guidelines. However, the Victorian Department of Natural Resources and Environment (NRE) are only just developing comprehensive Guidelines for Manure Management, which apply across the board to all types of manures. The Guidelines aim to provide technical guidance in the following areas: Recommended manure uses based on Grading according to pathogen risks, monitoring manure for residues, treatment, stockpiling/storage, transport, transfer of ownership, site selection for land application and land application. The draft guidelines require that the grading and use of manure must be based on current scientific knowledge and that a risk management approach to environment, food safety and livestock health is applied . While heavy metals and therapeutic compounds are not seen as a major risk factor, pathogens are. Therefore, one of the centrepieces of the proposed guidelines was the grading of manures according to pathogen risks and the establishment of withholding periods (Table 1). This section however is no longer contained in the Draft Guidelines due to the current lack of scientific knowledge on these issues. The Victorian Department therefore called on the various industries to undertake relevant research and pledged to re-assess the situation in three years time. Even though the manure grading according to pathogen risks and withholding periods are no longer part of the proposed Victorian Guidelines for Manure Management, it is a clear sign of things to come.
The situation is considered ideal when the appropriate handling, processing and re-use / sale of animal manures and organic residues translates into a business opportunity for farmers. This implies that additional handling and processing cost are covered and income can be generated. Nevertheless, from a whole business point of view it may also be a wise business decision to adopt for example composting in order to comply with certain regulations and prevent problems with regulatory authorities, even if costs are not recovered directly through the sale or use of the composted product.
Table 1: Grading of manures according to pathogen risk, Draft Guideline for Manure Management 
According to the origin of the manures and organic residues, processing on-farm can be distinguished as follows:
1. manures and agricultural residues originating solely from the farm’s own agricultural activities
2. co-composting of manures / agricultural residues from internal and external sources and possibly also incorporating municipal and commercial organic residues;
3. processing of organic materials that originate solely from external sources.
Brian Barrett  provided an example of the latter in the description of his on-farm composting operation (Kyneton Compost), where he co-composts liquid food wastes and sawdust for his organic beef farm and also external sale.
As far as the operation and ownership of on-farm composting enterprises are concerned many different arrangements are possible and can be negotiated freely between involved parties. With on-farm composting operations it is common that the farmer owns the site and equipment and is the operator also. Hence, the farmer carries all risks and takes the profits. However, other arrangements, which generally involve subcontracting and joint ventures are also possible. It is not uncommon that subcontractors are responsible for the handling of manures and the subsequent on-farm composting operation. Such arrangements are in place for example in some feedlots in Queensland, a piggery in Western Australia (co-composting with garden organics, ) and some of Southcorp’s vineries in South Australia (co-composting of grape marc and chicken litter ).
Financial arrangements among partners can vary anywhere from the payment of a service fee if the farmer retains all of the compost to the payment of a gate fee by the farmer if the contractor is solely responsible for the composting operation and carries the risk of marketing the end product.
Joint ventures are also possible but are more likely where on-farm composting involves the provision of composting services for local authorities. Such schemes are popular in Austria, Switzerland and the UK (until recently). Municipal garden and kitchen organics are either taken to one or more farms where they are composted or one or more farmers process the organic materials at the local composting site. Assistance is often provided to establish the on-farm facility through capital grants and/or long-term contracts. In one case a joint venture saw the local authority provide the site for an enclosed composting plant, a waste management company built it and a group of 20 – 25 farmers provide the labour force (each part-time on a 1-3 day/week roster) and used some of their machinery to operate the plant.
As shown above, on-farm composting can be used not only for the processing of agricultural by-products but likewise for the processing of municipal and commercial organic residues. Such schemes in fact are able to deliver substantial environmental and social benefits, particularly for rural communities.
Recycling schemes in rural communities were often adopted from urban centres and hence focused primarily on the collection of dry recyclables. However, such schemes may not necessarily represent the best option for rural communities and may not make best use of limited resources. The transportation of dry recyclables to distant processing plants is expensive, the reduction of the municipal waste stream is limited and the reduction of negative effects caused by landfilling in non-engineered rural ‘tips’ is minimal. Rural and semi-rural communities need to take a fresh look at their recycling and waste management schemes and develop strategies that are well adapted to their circumstances and also benefit their own community. The segregation of municipal and commercial organics and their subsequent processing and use by local farmers represents such a recycling and resource recovery scheme that is well-adapted and appropriate for rural communities. On-farm composting of municipal and commercial organics provides a broad range of benefits:
· The recycling of organics diverts the single largest fraction in the domestic waste stream from being landfilled, hence has the highest potential for waste reduction and the best chance of being cost efficient
· The diversion of organics from the waste stream reduces some of the most environmentally detrimental effects of landfilling, methane and leachate emissions, which are generally unabated in non-engineered rural landfills.
· Relatively low organics processing costs through the use of existing machinery and infrastructure
· Ensuring the production of high quality compost that will meet the user’s specific needs since the end product will be applied to the fields of the compost producer (farmer)
· Avoidance of compost marketing costs and marketing problems since the farmer will guarantee to use the finished product
· Recovery and beneficial use of an otherwise wasted resource
· Reduction of methane and leachate emissions from rural ‘tips’
· Reduced need for transportation of organic input materials and finished products due to the close proximity of collection areas, processing site and receiving farmland.
· Beneficial effects of compost use on soil fertility and productivity and hence reduced reliance on external farm inputs
· Establishment of resource recovery scheme that is well-adapted for rural communities
· Money spent on the on-farm processing of organics stays within the community and provides support for the local economy
· The on-farm composting of organics provides a business opportunity for the agricultural sector
Benefits for the farmer (composter)
· Opportunity to generate supplementary income
· Opportunity to make use of available machinery and infrastructure
· Use of “free” compost
· Advantage through the beneficial effects of compost use, some of which may have a direct cost reduction or yield effect (e.g. nutrient content, improved water holding capacity)
· Savings through reduced need for external inputs (fertiliser)
On-farm composting schemes provide local solutions for local problems and they make use of farmers’ existing skills in managing biological / mechanical systems. Therefore, on-farm composting can be the ideal solution for rural and semi-rural councils. Even regional centres with 100,000 people can easily process their organic waste fraction through on-farm composting schemes. If more than one farm and more than one farmer are involved, there are various ways in which farmers can share large machinery in order to keep operating costs at a minimum or how several farmers could jointly operate and run a larger composting facility.
The Federal Department for the Environment (Environment Australia) has recognised the potential benefits on-farm composting schemes can deliver in improving resource recovery and waste management in rural areas. Therefore, it supports a research project that seeks to develop and implement an environmentally and socially sustainable resource recovery scheme for rural communities. The project will be realised in the Shire of Crows Nest, which is located approximately 170 km WNW of Brisbane.
The project encompasses the development of a strategy for the integrated collection and processing of municipal and commercial organics as well as locally available biosolids and septic waste. Subsequent to public consultation and education the strategy will be implemented and the on-farm composting operations will be planned according to the types and quantities of organics received. The composting operation as well as the input/output material will be monitored. Costs and benefits of the entire organic resource recovery scheme will be determined from the point of view of the council, the community, the farmer and the environment.
This pilot project will have value and be useful for all rural communities in Australia by developing and showing models and guide-lines for the collection, processing and use of organics in rural areas.
Ever since I became involved in composting and compost use in Australia, the single biggest problem was the lack of markets for recycled and composted organic products – and it still is not resolved. Once the easily accessible but limited urban markets are satisfied, compost producers turn their marketing efforts to farmers and growers in rural areas. However, farmers are generally not very willing to pay the costs to cover purchase, transport and application of recycled organic products. However, farmers see the use of compost quite differently, depending on whether they are asked to pay for its purchase and application or whether they can derive income from its production and still have a valuable product they can use.
Compost marketing costs can be avoided in cases where gate fees cover all processing costs and where the end product is used solely on-farm. Where the end product is marketed externally, on-farm use can provide a buffer and prevent the build-up of stockpiles. Contract on-farm composting at intensive livestock units will most likely require intensive marketing efforts to sell the generated products. This can create increased difficulties for the marketing of urban recycled organic products in agricultural markets.
On-farm composting, as any other commercial composting operation, has to cover processing costs and be profitable either through gate fees or sales revenue (or a mixture of the two). Therefore, farmers who take up on-farm composting should receive additional income. Cost and benefits, hence profitability are more difficult to determine where no direct income from gate fees or sales is generated. In such cases, i.e. where manure and/or agricultural by-products are composted and used solely on the farm, benefits have to be gained exclusively through improved soil fertility, water use efficiency and yields induced by the use of compost.
There is only very little detailed information available as far as the economics of on-farm composting are concerned, and even less with an Australian background. On the other hand, considerable information is available from Europe but generally, regulations, conditions and gate fees are completely different to those encountered here. However, the fact that on-farm composting operations such as Kyneton Compost in Victoria, Custom Compost in Western Australia and Envirorganics in Queensland have been operating for several years now (at least) indicates that their businesses are sound and viable.
It can be expected that the forthcoming final report of the AGWISE project (aims to develop viable organic waste re-use strategies for the QLD Murray-Darling Basin  will provide economic data on the composting of manures and the above mentioned project in Crows Nest will gather data on the composting of municipal and commercial organics in a farming environment.
A range of case studies of on-farm composting operations in the US demonstrated that an economic assessment and comparison was difficult due to their diversity in size, management, level of investment, input materials, end-use etc. . Examples of compost production costs per cubic meter were estimated to amount to US$ 5.2, 13.1 and 20.9 for three surveyed operations, while their sales prices per cubic meter of compost ranged between US$ 16 – 20, 21 – 31 and 35 – 46, respectively. Overall, the author concludes that ‘based on the information compiled, the economics of on-farm composting generally appear to be positive’.
In Australia, on-farm composting is still in its infancy but gaining momentum. It is likely that legal requirements concerning environmental and food safety aspects of manure management will result in an increase in on-farm composting operations. So far, the agricultural composting and use of municipal and commercial organic residues seems under-utilised despite the benefits it delivers for waste management, the environment and the community as well as for the farmer.
Existing on-farm composting operations in Australia and even more so overseas indicate that these businesses are sound and viable. However, currently there is very little tangible information available on the economics of on-farm composting operations and it is not possible to transpose the economics of overseas operations to Australian conditions, particularly not from Europe. The AGWISE project, which focused on manure processing, and the Crows Nest project which investigates the on-farm composting of municipal and commercial organics should provide detailed technical and economic data and hence facilitate proper planning (including business planning) for on-farm composting operations.
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