A combination of mulch and sterilized organic fertilizer is provided for hydro seeding and hydro-mulching for seed establishment and erosion control. The composition includes hammer milled straw, horse manure and urine, sterilized with heat and processed to provide an optimal particle size. The incorporation of horse manure utilizes a dispersible natural fertilizer collected and processed within a certain time frame which provides an efficient method of recycling “green” horse manure” and liquid waste having a higher acidity than decomposed animal waste. Tackifiers and flocculants such as ground paper aid pumpability and help tack the straw fibers to the ground. The equipment includes a gas heat source, a dryer vessel and a processing unit. The dryer vessel receives the bedding composed of straw and manure for contact with the heated gases to convert the same to a sterilized dry material.