12 March 2021 - Dutch agricultural market specialist Rabobank expects global demand for insect proteins could reach 500,000 tonnes annually by 2030; fifty times more than the 10,000 tonnes produced in 2020, according to a new analyst report.
Despite the potential for use in a range of animal feeds the industry’s growth has been limited so far by high production and product costs, as well as insufficient supplies and legislation issues.
However, Rabobank predicts that the sector will grow in the next decade, with growth in the aqua feed market showing the greatest potential to increase insect protein usage globally, “Beyond inclusion in aqua feed formulas, a range of R&D-driven opportunities will create additional areas of future success for this new industry,” the report states. While it predicts lower levels of growth in pet food and poultry markets, there is still lots of room for expansion.
The company is forecasting insect protein consumption in the aqua feed market to reach 200,000 tonnes by 2030, which will account for 40% of the estimated insect market at that time. Despite this, insects are still forecast to account for less than 1% of the overall aqua feed market. At present insect consumption in the aqua feed market is only a few thousand tonnes per year.
At present pet food represents the largest market for insect proteins. By 2030 Rabobank expects aqua feed consumption to have exceeded that of pet food but estimates the pet food industry will still use 150,000 tonnes of insect protein each year. Rabobank believes that growth in the pet food market will be supported by the premiumisation of pet food, the sustainability benefits of insects and their hypoallergenic properties. However, the growth is expected to be limited by the overall size of the pet food market relative to the animal feed industries using insects to produce traditional animal proteins.
Insect protein demand in the poultry industry is forecast to reach 70,000 tonnes annually by 2030. It is expected that the greatest growth percentage will be seen in layer hens, however, the size of the broiler market means it could still account for 50,000 tonnes a year.
“The egg market allows for differentiated concepts and categories, such as free range, organic, omega-3 added, etc., which gives space to market insect-fed eggs. We believe the potential is more limited for broilers, due to the high price point of insects compared to soybean meal,” the report states.
It is the pricing relative to soy-based animal feed proteins which is also seen as the limiting factor for adoption in the swine industry, for which Rabobank forecasts 30,000 tonnes will be used annually by 2030.
At present the greatest barrier to the insect protein market is scale. Currently, demand for insect protein continues to outweigh supply. “Aqua feed companies state that the lack of available volume is one of the key reasons for not using insect proteins, as they deal with large quantities and production runs. Some pet food companies also state that the market could absorb more if the availability were higher,” the report highlights.
The majority of the 10,000 tonnes produced at the moment is led by a handful or larger producers and many more small-scale companies. The larger companies, such as French producers Innovafeed and Ynsect or Netherlands-based Protix have driven investment in the industry and have already constructed large-scale plants to tackle the issue of supply. Some of these plants are already working at, or close to, full capacity.
Investment in the industry has grown exponentially in the last few years. In 2018, investment was 45% higher than in the three previous years combined. While levels remained steady in 2019 last year saw another huge surge in investment. Since the EU permitted the use of insects in aqua feed in 2017 it has allowed multiple European competitors to grow their businesses. Total disclosed investments in insect protein farming at present is estimated to be approaching EUR 1 billion. The figure below (extracted from the report) shows the growth in capital for insect farmers in the last five years.
Another factor in the relatively slow adoption rate of insect protein in animal feed is the cost of the final product. Currently, one tonne of insect protein costs between EUR 3,500 and EUR 5,500, which is considerably more than the EUR 1,200 - 2,000 per tonne for fishmeal or USD 370 per tonne for soymeal, making it hard for farmers to choose insects as a direct alternative.
Insect protein supporters believe the price is justified as the sustainability, nutritional and health benefits allow for insects to be marketed as a premium product. As large-scale producers utilise the new production facilities it is inevitable that increased supply will help drive down costs and make insects a more attractive proposition.
The final hurdle that the insect protein market needs to overcome is legislation. Currently the legislation governing feedstocks and end markets for insect farming varies globally. For example, currently in the EU former food waste cannot be used in feedstocks for insects, but there is hope that that will change by 2022. The industry expects unprocessed former food waste to be greenlit as a feedstock ingredient for insect farming. This would increase the circularity and sustainability of production, while also offsetting costs by utilising a previous waste product.
Much as is the case for the food we feed insects, the animals which insects can be fed to do not currently adhere to an industry-wide standard. In the EU insect protein is permitted for use in the aqua feed and pet food markets, but only insect meal and insect oil can be fed to poultry or swine. Whereas in the US, where the rules are regulated by the Food and Drug Administration (FDA), insect meal is not allowed for pets, but is for broilers and uniquely salmon, while in Canada it is permitted for pets but prohibited for swine and salmon. The report expects legislation changes throughout 2021 in North America.
The benefits of using insect protein are numerous , Rabobank says. Insects typically have a high-quality high protein content between 50-80%, provide health benefits to animals, while production is a very efficient process which is highly sustainable and in some cases fully circular.
The report from Rabobank estimates consumption will reach 500,000 tonnes per annum of insect protein by 2030, but acknowledges that this development hinges on improvements in the technology of scale, price adjustments to bring the final product in line with more traditional proteins and legislative changes worldwide.
Beyond 2030 the report believes the increased supply and lower costs will allow insect proteins to compete with traditional aqua feed and soy protein solutions as supply expansion becomes easier with increased scale. “After reaching half a million metric tons (by 2030), it will get easier for the industry to expand supply. From that point on, it will take much less time to double or even quadruple production volume and exceed one million metric tons.”
Finally, the report highlights that continued research and development, as well as wide-scale education could even lead to the development of specialised insect ingredients and products with applications beyond feed and food, but that considerable innovation and investment will be needed to reach that point.