Rabobank on insects as ‘the world’s newest livestock industry’

Insect protein start-ups are attracting varied investor interest as changing regulations and the drive for sustainability propel what amounts to the world’s newest livestock industry, according to a Rabobank analyst.

Such companies brought in $850 million of investment in 2020, according to Rabobank, which reports that consumer-facing insect protein companies attracted $311 million. The remainder was devoted to companies targeting plant nutrition and feed markets.

“Before it was more VC and PE investors investing in the insect companies,” senior seafood analyst Beyhan de Jong told Agri Investor. “What is changing now is we are seeing other ag industry leaders start investing, such as ADM or Cargill.” De Jong highlighted French insect meal producer InnovaFeed’s partnerships with both companies.

In a February report, entitled No Longer Crawling, Insect Protein to Come of Age in the 2020s, de Jong described conditions in a market that currently produces about 10,000 metric tonnes of protein annually and is expected to reach 500,000 metric tonnes by 2030. It examines legislative and cost barriers to scale and trends in related investments.

De Jong explained that some companies see backing insect protein as part of broader sustainability or circular economy initiatives. She added that investor interest has grown in tandem with regulatory developments, thus clearing the way for increased use of insect protein in animal feed.

Although pet food is currently the largest market for insect protein, de Jong explained that the July 2017 approval for its use as a component in European fishfeed was a driver for increased investor interest. Approval of insect protein as a component in poultry and pig feed, she added, could come as soon as next year.

The companies that have been most successful in attracting investment, she said, have been those already building scale to supply fishfeed markets, such as Protix of the Netherlands, UK-based black soldier fly producer AgriProtein and French mealworm supplier Ynsect.

Insect protein is currently more expensive than the fishmeal and soymeal it competes with in fishfeed component markets. De Jong said that given high demand, insect protein prices are unlikely to fall from their current range of between €3,500 and €5,500 per metric tonne any time in the next five years.

“After five years when the industry is complete with scaling up, we expect prices to decrease by €1,000 per tonne,” she said. “Maybe by the end of 2030, we can see that insect meal catches up with fishmeal.”

Modern insect farming takes place in facilities much like vertical farming operations, with trays housing thousands of larvae often controlled by automated systems monitoring light and temperature conditions, de Jong explained.

Black soldier fly is the main insect species being commercially developed for animal feed, she said, while crickets or mealworms have been the focus of human consumption markets. Producers compete, she added, in part by developing genetics for insect breeds capable of efficiently converting feed or with particularly high protein levels.

Though human insect consumption is likely to remain a relatively small market for at least the next 10 years, according to de Jong, there is interest in insects’ potential as a protein fortifier in bars and powders. Last week, for example, Ynsect acquired Dutch producer of mealworm ingredients Protifarm in a transaction it said would benefit from the European Food Safety Authority’s decision in January to approve mealworms as safe for human consumption.

De Jong said that although pet food customers are already attuned to the functional benefits of insect protein, it will take time to develop insect products with increased palatability, disease resistance and pharmaceutical use. Such developments, she added, will be important for the market’s future.

“It’s not only feed and it’s not only food,” de Jong said. “It is a new industry, so it’s not one product, it’s multiple products. It’s currently the youngest livestock animal protein industry that has been developed now so there is definitely a little bit more research needed.”