Answer: I wouldn't do it, says Don Wilkerson, a nursery specialist with the Texas Agricultural Extension Service in College Station. Polystyrene peanuts are too large, coarse and light weight. To get them the right size, you'd have to shred them into quarter inch pieces or less, and the particles are so light they would migrate to the soil surface and blow away. The stuff isn't biodegradable, either. In a potting mix, perlite is better. In a clay garden soil, your best choices for improving structure are organic matter and gypsum, which also add nutrients.
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