Demand for insect protein within the aquafeed market still exceeds supply by a wide margin, however, recent investments will hoist global production over the 200,000-metric-ton mark by 2030 marking a major "turning point" for the sector.
Only 10,000 metric tons of insect protein is produced today, requiring additional financial muscle as well as research and development to get to the forecasted figure reported in Rabobank's recent analysis of the feed ingredient.
The existing players driving the charge include France's Ynsect, UK-based AgriProtein, Netherlands-based Protix, and France's InnovaFeed.
The first challenge for the emerging sector is scale, Rabobank said.
Many of these players have already built larger facilities to suit demand thanks to a large inflow of investment since 2018, with some working at or close to full capacity and others yet to be established.
Investor appetite has proved strong in recent years, with total disclosed investments in the overall insect protein sector passing the €1 billion ($1.2 billion) mark.
The largest sums were ploughed into Ynsect and InnovaFeed in 2020, as the latter company inked a partnership with aquafeed giant Cargill and announced plans for a new facility in the United States with Archer Daniels Midland's backing.
AgriProtein is also on track to build two industrial-scale maggot farms in the Netherlands and California in the next two years.
The Aqua-Spark backed Protix also recently raised €15.5 million ($18.6 million) in fresh capital, giving the group funds to expand its operations internationally.
Rabobank's private equity arm has been a shareholders in Protix since 2020, when the company inaugurated its production facility in Bergen Op Zoom, Netherlands.
By 2030, the aquafeed sector will contribute 40 percent of the global insect protein production, which is projected to reach 500,000-metric-ton. However, without strong demand from the aquaculture industry, insect protein will be used solely in niche markets, such as pet food.
Aquafeed manufacturers are still hesitant to jump on the bandwagon as long as volume is close to negligible, Rabobank reported.
High cost
Other than scale, cost is another major factor restricting the use of the new feed ingredient. The current price for 1 metric ton of insect protein ranges between €3,500 ($4,253) to €5,500 ($6,683), which is more than double the price of fishmeal and soy protein.
"Achieving scale without decreasing prices would mean less demand from the aquafeed industry and could create an oversupply risk," Rabobank said in the report.
The significantly higher price can be justified from a sustainability point of view. Alternative feed products such as insect feed decrease the dependency on marine ingredients and provide functional and nutritional benefits.
However, Rabobank expects costs to drop by €1,000 ($1,215) per metric ton as the industry completes the initial scale-up phase, followed by another significant cost reduction as the sector matures.
Legislation gets in the way
Legislation is also a key barrier to overcome when introducing the new ingredient to different markets.
The legislation differs between the key markets -- mainly Europe and the United States -- however, the industry is expecting major changes by 2022 that would enable more circularity, flexibility and cost advantages for insect protein sector.
Thai seafood heavyweight Charoen Pokphand Foods recently flagged its interest in insect protein as it funds Thailand's Chiang Mai University to develop insect-based protein from black soldier flies.
Seafood counterpart Thai Union is also no stranger to the segment. The company committed an initial $30 million (€27 million) -- through a new venture fund -- for investments in innovative companies that are developing breakthrough technologies in food technology.
The first investment was in Flying Spark, which uses fruit fly larvae that in nature feed on fresh fruits, and was also selected recently to be part of Ikea's startup accelerator.
