M. Charles Gould of Michigan State University Extension, has written an article on how to choose compost that increase the capacity of soil to hold water.
He reports that a 1994 study showed that a three-inch layer of leaf compost rototiller to a six-inch depth increase water holding capacity 2.5 times that of native sandy soil and provided almost a seven-day supply of plant available water. Another study showed that increasing water holding capacity of the soil by adding compost helped all crops during summer droughts by reducing periods of water stress.
Composting also reduces soil crusting, which helps with water absorption and penetration into the soil. Compost in sandy soils can facilitate moisture dispersion by allowing water to more readily move laterally from its point of application.
Read Gould’s entire article at the MSU extension web site.