To apply compost, use it on an empty and weeded farming patch before planting a seed or sapling. It can be used on all farming patches except the evil turnip patch. It can also be used before treating a patch with supercompost. Treating a farming patch with both compost and supercompost does not seem to improve your chances of having healthy crops nor does it seem to improve your chances of receiving more of them, although it does provide experience for applying both.