cost accounting principles of composting and food scrap

Cost Accounting Principles of Composting and Food Scrap Acceptance Considerations

AgRecycle, Inc.

AgRecycle was founded in 1991 and operates multiple composting sites in western Pennsylvania

Providing services and products to:

Governmental entities, landscapers, organic farmers, industrial and retail generators of food wastes, institutions, golf courses, universities, green roof medium suppliers, brownfield remediation contractors, and a wide variety of commercial enterprises.

• The details of this presentation are based on the premise that every compost facility has the purpose of making a marketable product -whether the level of product is of a coarse nature to fill an erosion deterrent sleeve, a lesser grade for brownfield reclamation use, quality grades for growing, or a premium grade for golf course use.

• Grinding leaves and letting them sit in a pile to decompose is not making compost.

Cost Accounting

• The imprecisions and deviations among feedstocks that are an inherent part of composting operations impact traditional cost accounting principles.

Cost Accounting Example

Processing of Leaves

Dry ¾”Optimum 3/8”Wet ¼”

AgRecycle’s Feedstock and Permitting Progression

1991-1996• Yard debris

• Clean wood waste



• Clean wood waste• Manures (and bedding)

• Paper




• Paper• Preconsumer vegetative food residuals


2006-today• Yard debris


• Paper• All food residuals

• Non-biosolid liquids• Green building materials

• Corrugated/Wax corrugated

Important language in our permit is, “…

organic wastes that have been source separated.”

AgRecycle has been accepting food waste since 1998 Began to do our own food waste collection and

hauling in 2007

Events

What are the three major factors that will make food waste diversion a sustainable reality?

1. Determining the sources where food waste is generated consistently.

Food Waste Generators• Based on a nine state audit on food waste generators, each determined that the

following six sectors were the generators of consequence.– Commercial

• Hotels and Restaurants• Restaurants (employing over 10 people)

– Food/Grocery Stores• Only stores employing over 10 people were included.• No convenience stores were included.

– Hospitals– Industrial

• This was defined as, “Any material that is generated either as a byproduct from the manufacturing of materials or any material that is discarded because of quality concerns.”

– Institutions• Schools- kindergarten through 12th grade (waste from cafeteria service only, no brown bag

residuals)• Colleges and Universities (waste from dining hall services only, no independent vendor waste,

and no brown bag residuals)– Prisons

• No juvenile facilities were included.

Generator Percentages based on a nine State Average

*Volume was determined from what the stores considered to be waste. Percentage does not include what was donated to food banks and other community organizations.

Institutions16.7%

Prisons2.2%

Food/Grocery Stores*9.9%

Commercial5.9%

Hospitals8.7%

Industrial56.6%

CommercialFood/Grocery Stores*HospitalsIndustrialInstitutionsPrisons

Common Unacceptable Items from Food Waste Generators

• Plastic (film or solid)– Including:

• Individual creamers• Individual butter containers• Beverage lids• Straws

• Styrofoam• Foil (condiment packets)• Glass• Metal

• Foam products• Treated paper (unless pre-

approved)• Labeling tags • Some paper beverage

cartons• GLOVES

Unfortunately with the exception of the industrial sector, no pure separated streams exist so these are the most common items the composter needs to warn against.



2. Realistic economic evaluation of the labor and equipment needed to handle food waste.


1. Determining the sources where food waste is generated consistently.2. Realistic economic evaluation of the labor and equipment needed to

handle food waste.• How will the materials be collected?

Retail food scraps weigh680 to 1,300 lbs. per cubic yard


1. Determining the sources where food waste is generated consistently.2. Realistic economic evaluation of the labor and equipment needed to

handle food waste.• How will the materials be collected?

• How will food waste be transported to the composting site?



2. Realistic economic evaluation of the labor and equipment needed to handle food waste.• How will the materials be collected?

• How will food waste be transported to the composting site?

• What type of pre-processing at the site may food streams need?



2. Realistic economic evaluation of the labor and equipment needed to handle food waste.• How will the materials be collected?• How will food waste be transported to the composting site?• What type of pre-processing at the site may food streams need?

• Reduction rate calculations as they impart operating costs



2. Realistic economic evaluation of the labor and equipment needed to handle food waste.• How will the materials be collected?• How will food waste be transported to the composting site?• What type of pre-processing at the site may food streams need?• Reduction rate calculations as they impart operating costs

3. Evaluating to what degree food wastes are compatible with your current operations?

Importance of Carbon• Food wastes cannot be composted alone. • Carbon to nitrogen ratios need to be in the

range of 30/1. • To make the process of food waste

composting cost effective, facilities accepting food need to have access to easy and readily available sources of carbon: LEAVES AND YARD DEBRIS.

• Currently, in Pennsylvania the majority of these carbon sources go to the public sector who receive subsidies to handle them.

6 Fundamental Cost Categories

Site Feedstocks Equipment

Labor Overhead Product Sales

Compost Site Considerations

• Composting only and if so, what feedstocks will be accepted?• Composting with customers using the site as the drop off point

for feedstocks.• Will you sell the finished compost directly from the site? If so,

will the site need to have ample space for trucks and personal vehicles to acquire your products?

• Does the site need to accommodate an office building?• Where will the garage/ building be to repair or house your

equipment?• What about fuel tanks for off road equipment and/or on the

road vehicles?

Site Selection Criteria

1. Site size2. Zoning3. Transportation considerations vs. cost of land4. Pre-existing land conditions5. Neighbors6. Technology compatible

Each of the above impacts the cost of composting.

Costs associated with Feedstocks

• Characteristics• Handling• Volume• Impact on site• Individualized tipping rates• End product markets

Costs associated with

Feedstocks

Characteristics


Feedstocks

Volume and Handling

Feedstock Volume

• Three main cost features– How much can be composted at a site – the bigger

the throughput the less site and equipment costs associated with each batch.

– Reduction Factors – unique to the compost industry and it is crucial to get the tipping structure correct to account for it.

– How many times and in how many different ways does the compost operator have to touch it?

Feedstock Handling Volume & Characteristics

• Individualized tipping rates • Impact on site


Feedstocks

End product markets

• The diversity of the end-uses reflects the diversity of compost products that can be

marketed.

AgRecycle Sales Markets• Landscape businesses• Professional growers• Golf courses• Garden centers• Lawn care companies• Universities and schools• Developers• Florists

• Public entities• Sod producers• Landscape architects• Agriculture• Brownfields• Abandoned mines• Rooftop gardens/ green roofs• Silviculture


Equipment & Labor

• Costs beyond the purchase price• Use• Impact on end product quality• Safety features• Other procedures


Equipment

Use“The more you use it, the

better the return.”

Windrow Turner (medium size, self powered)Data extracted from On-Farm Composting Handbook NRAES-54

1,000 cubic yards

5,000 cubic yards

15,000 cubic yards

Assumptions

Total Cost $17,360Hours 1Cost per cubic yard $17.36



Capital Costs $115,000Hourly operating costs $32Processing capacity 4,000

Equipment & Labor- Other factors

• Mobility• Impact on product quality

Equipment- Costs beyond the purchase price

• Repairs• Labor• Interest• Insurance

Compostable Products Acceptance

Considerations

Significant Time Impacts

on AgRecycle –prior to

accepting compostable

products

Why so much time?1. Most end users do not know what compostable really

means.2. Most food service product distributors are confused about

what compostable really means.3. Most food service product distributors confuse the terms,

all natural, biodegradable, compostable, and made from 100% recycled materials.

4. Most food service product distributors often mistake the fact that if a brand makes compostable products then all of their products are compostable.

5. Most food service product distributors want to sell you what is already stocked in their warehouses.

Why so much time?

6. The greater Pittsburgh area is in the bottom 20% of U.S. tipping fee rates therefore, AGRECYCLE MAKES ITS PROFIT FROM THE SALE OF OUR FINISHED COMPOST PRODUCTS. As such, we are fanatical about the quality of the feedstocks we accept.

• The next step is to work with the end user regarding the compostable product selection. We require all customers to send us an itemized list by product name and product number, for us to verify prior to agreeing to accept the products.

• The product verification can take anywhere from 10 minutes, to several hours, to weeks.

Pittsburgh Pirates Baseball Stadium

ASTM D6868

ASTM D6400

• We now keep a data base dedicated to compostable products.

• We have the ability to help customers find specific products. This is done most frequently for customers planning singular events. Food service companies and distributers are getting more involved in helping ongoing food operations locate compostable products.

• AgRecycle serviced 36 events last year that included the Pittsburgh Marathon, compostable weddings, etc.

Fact:

• For ongoing accounts, (not events) we know that if they are willing to pay extra for the compostable products that they are serious about making diversion a long term commitment.

Impact on Processing

Compostable Manufactured

Products

Reminder: important language in our Pennsylvania permit is, “… organic wastes that have been source separated.”

Unless the generator of the compostable products, that have been used at their facility, has dedicated staff to sort, we have the ……

Pittsburgh Convention Center

“All or nothing

rule!”

Pre determination prior to

acceptance.

• The all or nothing rule is essential to well managed composting site operations. If not, the time burden on site personnel is overwhelming and becomes cost prohibitive.

• Corporate cafeterias can be particularly complicated.

The FOUR biggest operational concerns, at the composting site, when dealing with

compostable products are:

• Operator inspection of materials.• How to process the materials prior to putting

them into a windrow• Litter• Do their degradation rates impact traditional

windrow management timelines? In Pennsylvania, with dramatic seasonal weather changes, hitting market timing cycles is crucial.

Litter

Timing

Impact of all feedstocks on

finished compost products

AgRecycle sells our products into very diverse markets.

AgRecycle cannot afford contaminants in our finished

products. Our survival economics depend upon it.

Downtown Pittsburgh

Soil Remediation Project

High End Landscaping

Organic certification issues

AgRecycle compost is Pennsylvania certified organic.

Compostable Product Conclusion

We approach our efforts regarding the acceptance of compostable products in the same manner we approach our equipment-rather than just another feedstock.. Upfront detailed selection standards coupled with ongoing maintenance and monitoring to achieve the highest quality finished compost, pay back time investments fourfold.

• Approximately 90% of all composting operations in the U.S., that do not receive government subsidies fail after 5 years.

Fundamental Challenges to Successful Diversion of Organics

• Enormous clout of major waste companies• Regulatory challenges• Subsidies/ perception that composting operations do not need

tipping fees• Lack of understanding regarding composting economics• The devaluation of compost products due to failure to produce

quality finished products.• Food waste composting operations are being deprived of necessary

feedstocks that can be handled cost efficiently.• Collection issues for source separated material• Generator misconceptions and needed behavioral changes• The absence of private sector development

TM

Carla Castagnero

[email protected]

www.AgRecycle.com

mailto:[email protected]�

cost accounting principles of composting and food scrap

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