Clarification via floccules of ferric hydroxide is a globally leading technology in processing and treating surface water, and converting it into drinking water. The ferric–based coagulation sludge obtained is routinely dewatered and mixed with biowaste, assuming that the finest colloidal fractions of clay present will improve the cation–exchange capacity of the composts produced. However, in relation to the application of these types of compost, farmers repeatedly and independently of one another reported lower yields and crops suffering from phosphorus deficiency, even under proper phosphorus fertilization. A 5-year study revealed that the cation–exchange capacity tends to increase, which is beneficial over the long term. Nevertheless, the analyses performed revealed, for the first time, that this widespread practice lowers the level of mobile phosphorus, on average, by 62% and the level of extractable phosphorus by 55%. To make things worse, the quality of the extractable phosphorus declines, since the biologically available calcium, magnesium and aluminum based phosphates are gradually being replaced by ferric phosphates (originating from the ferric sludge). Given that phosphorus is the most expensive nutrient, this finding is of great environmental and economic importance, since the formation of ferric phosphates locks this most expensive nutrient into a form available neither to soil microbiota nor plants. It is recommended that new ways of using ferric–based coagulation sludge be developed.