Recycling spent mushroom substrate (SMS) for fertiliser in a circular economy (MU21006)

Completed project

Publication date: February 17, 2026

Delivery Partner: Frontier Ag & Environment

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What was it all about?

This project investigated the potential of developing a spent mushroom substrate (SMS) circular economy by improving the value proposition of SMS for the end-user (primarily grain growers). The research found that while value-adding of SMS is technically feasible, there are a number of economic and logistical challenges which may be difficult for the mushroom industry as a whole to overcome.

Challenge

The mushroom industry is interested in understanding the opportunities for spent mushroom substrate (SMS) reuse back into the broadacre cropping systems from which wheaten straw is sourced to manufacture the original mushroom substrate. There are many competing uses for straw and getting access to it can be challenging, especially in times of drought. Strengthening linkages between the mushroom industry and grain growers via a circular economy may improve access to wheaten straw by mushroom composters in the future.

Response

This project was conducted in three stages:

A review was completed to investigate various means by which SMS could be transformed into value-added fertiliser or soil amendment. Desktop research and mushroom industry consultation were included as part of the review process to ensure that the findings were both technically sound and applicable in the “real world”.

The SMS supply chain was examined by mapping sources of wheaten straw in relation to mushroom composting and production facilities.

SMS was characterised to establish the potential value proposition of the product to the grains industry. This included consultation with the grains industry to gain insight into the opportunities and barriers associated with the reuse of SMS in broadacre agriculture.

Benefit

Value-adding of SMS is technically feasible through processes such as drying and pelletisation with/without the addition of nutrients, producing a product which may be of greater perceived value to farmers.

However, the project has identified a number of economic and logistical challenges which are difficult for the mushroom industry as a whole to overcome. These challenges include:

A significant geographical spread between the cropping farms from which the straw is sourced, compost manufacturers, and the mushroom growers who then generate the SMS. There are far fewer compost manufacturers than mushroom growers. The compost manufacturer has the relationship with the straw supplier, but SMS is generated from mushroom farms over a wider geographical area in each State.

Value-adding to SMS is likely to be a costly process that involves significant investment in new infrastructure as well as R&D into fertiliser product development and marketing. Such an investment is unlikely to be attractive for many businesses when re-sale arrangements for SMS are already in place without the burden of cost recovery that comes with value-adding.

The nutrient profile and carbon composition analysis indicate that SMS offers no particular advantage to grain growers over other types of organic by-products that may be locally available to them.

For cropping farmers to consider receiving SMS-derived products, a range of issues around product quality/integrity, transport, logistics and soil/plant benefits need to be addressed in order for them to understand the value proposition of using these products either instead or, or in-addition to other farm inputs.

The opportunity for entering into more favourable supply agreements for straw by returning value-added SMS to grain growers is probably therefore limited to larger farms that operate both composting yards and mushroom farms.