ResearchPDF Available
Financial feasibility analysis of
insect farming in the
Netherlands
MSc Thesis Report
Jacco Kooistra
September 2020
MSc Thesis Report
Jacco Kooistra (951118462060)
MSc Management, Economics & Consumer studies
Business Economics, BEC-80436
Supervisors:
WUR: Miranda Meuwissen & Hilde Niyonsaba
NGN: Poppy Eyre & Marian Peters
Feb - Sept 2020
Wageningen University & Research
DISCLAIMER
This report is written by a student of Wageningen University as part of the bachelor/master
programme under the supervision of the chair Business Economics. This is not an official publication
of Wageningen University and Research, and the content herein does not represent any formal
position or representation by Wageningen University and Research. This report cannot be used as a
base for any claim, demand or cause of action and. Wageningen University and Research is not
responsible for any loss incurred based upon this report. It is not allowed to reproduce or distribute
the information from this report without the prior consent of the Business Economics group of
Wageningen University (office.bec@wur.nl)
Words
from the
Author
Preface
The worlds human population is growing with an exponential rate. This means that every second 3
new born baby will set foot on this planet and will need high quality food to survive. Although the
human population cannot grow exponentially forever, but it is for sure more and more food is needed
to feed everyone on the planet. Besides, the food market is highly skewed depending on where you
live on the planet. It is quite despiteful that there are areas where there is a higher chance of dying
from obesity (too much food), if you remember that there are still areas where people die of a food
shortage. Furthermore, history showed us that even well civilized areas can be hit by a food shortage,
since external circumstances such as climate and diseases are out of our control. It goes without saying
that we as human beings face the biggest challenge of the century. The Covid-19 outbreak has
developed into a pandemic with an unprecedented rate. Major economic losses and income declines
will pose a huge risk on the food security. In addition, the food trade is highly compromised because
of the closing borders. The current recession is expected to last much longer, even in high income
countries. With an increasing world hunger in the upcoming years, feasible solutions are more now
needed than ever.
Insects, some might see them as a home invading pest, some people are scared to death by even the
smallest crawler, others might think they are beautiful, and many biologists see them as important
little machines playing crucial roles in the ecosystem. The fact that insects can and are eaten by humans
is however not the first thing many people think about. A Bug Buffet might seem bizarre to some
people, but it is a vital food source for others. In some places, like the notorious Khao San Road in
Thailand, only the bravest tourists dare to eat a creepy crawler of a stick. Pictures are taken and respect
is earned. However, in various places insects are just part of the daily menu. And this is not without
good reason. Insects are not only rich in proteins and fatty acids, they also consist of many vitamins
and minerals. Besides all the good macro and micronutrients, farming insects is much better for the
environment than the traditional cattle farming. The question remains however if it is feasible in the
Netherlands. Although I highly believe in creating opportunities instead of waiting for them to happen,
this thesis will give an extensive and critical scientific overview about the feasibility of insect farming
in the Netherlands. It seems very optimistic, and maybe even naive to imagine a world that is
economically stable, where everyone has sufficient food, where oceans are clean, waste is minimal
and forests untouched. But insect farming, combined with a visionary approach, dedication, and a lot
of hard work, might create a very small step into this direction.
Acknowledgements
“If you limit your competitor’s growth in an
immature sector,
you eventually limit your own growth.
Lars-Henrik Heckmann
Executive summary
The growing global population and its increasing demand for animal protein urge for innovative
solutions to produce alternative proteins for food and feed. At the same time, within the European
Union (EU) alone, huge amounts of waste are generated in the food supply chain. Insect rearing on a
large scale is seen as one of the solutions to tackle these two problems. Insects are an innovative and
alternative protein source for food and feed purposes, and they can upgrade low value waste streams
into high quality proteins.
Until the publication of this report there was hardly any financial data available on large scale insect
rearing. Data regarding financial feasibility of insect farming is important for policy makers, investors,
banks and other stakeholder to assess credit risk, formulate policies and regulations for this emerging
sector. This research assessed the financial feasibility of insect farming in the Netherlands by
conducting a literature review followed by interviews with insect farmers and experts. The focus in this
report was on the rearing and reproduction of H. illucens, T. molitor, A. diaperinus and A. domesticus.
Table 1: Quantitative and qualitative results from interviews
5000 @Risk simulations
1Costs and revenues are based on the potential harvesting quantity of reared T. molitor
2Fresh produce: insects are not processed yet, i.e. right after harvesting. All costs are attributed to the output of fresh produce.
3 Not available(n/a): the data is not provided in the interviews and therefore not available.
4Labour costs for family labour is accounted for with a gross salary of €1,680 per month.
5Total indirect costs: labour + pest control + inventory costs + land & building costs + transport & fuel costs + consultancy costs + insurance
costs + research & development costs + other costs (e.g. waste, marketing)
The key decision parameters like the variable costs, the indirect costs, and the sales price vary within
a range based on the input of the respondents. The obtained financial data from the interviews was
used as input for stochastic simulation of the financial performance for different future scenarios. The
selected financial variables for stochastic simulation incorporate components of randomness to reflect
the uncertainty that occurs in the real system, by specifying probability distributions. These results can
Rearing
T. molitor
Reproduction
T. molitor1
Rearing H. illucens
Rearing A.
diaperinus
Rearing L.
migratoria
# farms interviewed
3
2
2
1
1
Financial data (€/tonne fresh produce)2
Revenues
Sales price fresh produce
4,472
1,771
<3,500
n/a3
40,000 (human
consumption and
pet food)
Variable costs
Feed
Energy & water
Total variable costs
Gross margin
807
314
1,121
3,351
94
45
139
1,632
In case of low value
waste streams
potential < €0
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Mostly fed with
grass
n/a
n/a
n/a
Indirect costs
Labour4
Total indirect costs5
1,225
2,300
646
850
Reproduction is
knowledge and labour
intensive
High costs on R&D
n/a
n/a
Labour-intensive
n/a
Operating profit
Probability (Operating profit <0)
Cost price (indirect costs + variable costs)
Return on assets (ROA)
1,051
3.1%
3,421
50%
782
n/a
999
289%
n/a
n/a
>3,500
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
be found in Table 1. The average gross margin for T. molitor rearing farms is €3,351 per tonne of fresh
produce. For T. molitor reproduction farms this gross margin is €1,632 per tonne of produce. The
operating profit for a T. molitor rearing farm has a mean of €1,051 per tonne of fresh produce. The
probability of operating under loss with T. molitor rearing is 3.1%. For a T. molitor reproduction farm
a mean of €782 per tonne of fresh produce. The calculated return on assets (ROA) for a rearing farm is
50% and for the reproduction farm it is 289%. This profitability performance efficiency indicator is
calculated by dividing the operating profit by the total assets. In comparison, the values for the ROA of
agricultural companies in the EU ranges from -8.2% to 7.33%. Especially for T. molitor reproduction
farms, interviewed farmers state that there is only limited technical machinery for sale on the market.
This limited availability is due to the novelty and innovativeness of this business model solely focussing
on reproduction. Entrepreneurs in mass insect rearing and reproduction are pioneers and therefore,
the supply of specialised machinery is scarce or very expensive. Respondents active in the reproduction
of T. molitor admit they have difficulties valuing the assets they invented themselves. The Spearman
rank correlation coefficient is applied between the operating profit and the input distributions (the
variables) of T. molitor rearing and reproduction. From this analysis can be retrieved that regarding the
rearing of T. molitor, labour costs, feed costs and price have the highest influence on the operating
profit. For reproduction farms of T. molitor the labour costs and the selling price have the highest
influence on the operating profit.
The data found in the literature review was not completely consistent with data found in the
interviews, which could be related to the different research contexts. Research focussing on the
increase of nutritional value of the insect will have little emphasis on the operating profit. Regarding
the results from the interviews it was remarkable that there is no debt involved in T. molitor farming.
One of the reasons for this, according to the respondents, is that creditors are hesitant with providing
credit and no unnecessary risks are taken with the uncertainty that is present within the sector.
Overall, it can be concluded that insect rearing in the Netherlands is financially feasible. Of the four
species in scope in this research, this conclusion can only be drawn for T. molitor rearing and
reproduction farms. For the ROA it must be taken into account that the asset intensity is quite low,
which results in a relatively high ROA. Regarding insect rearing in general, the feasibility depends on
the goal and the vision of the entrepreneur.
This research contributes to the (credit) risk assessment of policy makers, investors, banks and other
stakeholder as it anticipates on the need for reliable economic data to contribute to building (credit)
risk assessment frameworks for the entire insect value chain.
List of abbreviations, calculations & definitions
IPIFF International Platform of Insects for Food and Feed
PIP Processed insect proteins
R&D Research and development
COGS Costs of goods sold -> variable costs
OPEX Operational expenditures
ROA Return on Assets
Equations
1.     
2.     
3.       
     
     
   
4.     
5.    
6.    

Contents
LIST OF ABBREVIATIONS, CALCULATIONS & DEFINITIONS 11
1. INTRODUCTION 14
1.1 BACKGROUND 14
1.2 PROBLEM STATEMENT 16
1.3 OBJECTIVE 17
2. LITERATURE REVIEW 18
2.1 H. ILLUCENS 18
2.2 T. MOLITOR 21
2.3 A. DIAPERINUS 24
2.4 A. DOMESTICUS 26
2.5 CONCLUSION OF LITERATURE REVIEW 28
3. MATERIALS AND METHODS 29
3.1 CONCEPTUAL FRAMEWORK 29
3.2 SELECTION OF SAMPLE FARMS 30
3.3 INTERVIEW DESIGN & DATA COLLECTION 32
3.4 STOCHASTIC SIMULATION MODEL TO ASSESS VARIATION IN T. MOLITOR FARMING 33
3.5 QUALITATIVE INSIGHTS RETRIEVED FROM INTERVIEWS 34
4. RESULTS 35
4.1 EMPIRICAL PERSPECTIVE ON FINANCIAL FEASIBILITY 35
4.2 VARIATION IN FINANCIAL OUTCOMES OF T. MOLITOR FARMING 36
4.3 SENSITIVITY ANALYSIS OF COST ITEMS ON OPERATING PROFIT IN T. MOLITOR FARMING 38
4.4 QUALITATIVE FINDINGS FROM INTERVIEWS 38
5. DISCUSSION, CONCLUSION & RECOMMENDATIONS 41
5.1 DISCUSSION 41
5.2 CONCLUSIONS 42
5.3 RECOMMENDATIONS FOR FURTHER RESEARCH 44
REFERENCES 46
APPENDIX 1: INTERVIEW VARIABLES FOR T. MOLITOR AND H. ILLUCENS FARMS 49
List of tables
Table 1: Quantitative and qualitative results from interviews ............................................................... 9
Table 2: Characteristics of the literature review ................................................................................... 18
Table 3: Research context and financial figures for H. illucens production .......................................... 20
Table 4: Research context and financial figures for T. molitor production ........................................... 23
Table 5: Research context and financial figures for A. diaperinus production ..................................... 25
Table 6: Research context and financial figures for A. domesticus production .................................... 27
Table 7: Characteristics of the interviews with farms and experts. ...................................................... 31
Table 8: Coding scheme data set ........................................................................................................... 32
Table 9: Stochastic and deterministic variables in the Monte Carlo simulation model for T. molitor
rearing and reproduction farms. ........................................................................................................... 33
Table 10: Financial results for default scenarios. .................................................................................. 35
Table 11: Simulation results for T. molitor farms .................................................................................. 36
Table 12: Spearman rank correlation coefficient between ‘Operating profit’ and input variables. ..... 38
List of figures
Figure 1: Insects as food and feed: circularity……………………………………………………………………………………15
Figure 2: Structured overview of the corporate finance approach of firms, including three main
components: Operation, Investments, and Finance………………………………………………………………………….29
Figure 3: Sequential quantitative approach………………………………………………………………………………………30
14
1. Introduction
1.1 Background
The growing global population and its increasing demand for animal protein urge for innovative
solutions to produce alternative proteins for food and feed (European Commision, 2017a). Increasing
the meat production in the conventional way cannot be part of the solution to fulfil the increasing
demand of proteins (Herrero, Henderson et al., 2016). The conventional source of protein: the
livestock industry, is an important contributor to the emission of greenhouse gas, consumes and
pollutes a relative high amount of water and contributes to deforestation and soil erosion (Garnett,
2011; Steinfeld, Gerber et al., 2006). A transition towards different and innovative food and feed
production systems is needed (Chia, Tanga, van Loon et al., 2019).
The main protein sources in pig and poultry diets are fishmeal or soybeans, which are characterized by
their lack of sustainability and dependency on imports (Selaledi, Mbajiorgu et al., 2019). Furthermore,
soybean production is one of the main drivers of deforestation in South America (Lambin & Meyfroidt,
2011; Nepstad, Stickler et al., 2006). The land area for cultivation of soybeans is limited and cannot
satisfy the aforementioned growing global demand for animal protein in the future (van Huis &
Tomberlin, 2017). At the same time, within the European Union (EU) alone, 100 million tonnes of waste
is generated in the food supply chain, of which 45% originating from households (Timmermans, 2015).
This huge amount of food waste is one of the main causes for agri-food supply chains to be
unsustainable, and therefore an interdisciplinary approach towards food waste reduction approach is
needed (Saber & Silka, 2020). Insect rearing on a large scale is seen as one of the solutions to tackle
these two problems. Insects are an innovative and alternative protein source for food and feed
purposes and they can be reared on bio waste streams like decaying organic materials such as pulp,
distillers grains, fruits and vegetables that are not intended for consumption (Makkar, Tran et al.,
2014). Besides, they can upgrade low value waste streams into high quality proteins. Insects are cold
blooded animals, which makes them highly efficient in converting food. This, in combination with their
low water requirements (Bosch, van Zanten et al., 2019), the potential to lower environmental
impacts, and their high nutritional value make them an interesting sustainable alternative for food of
animal origin (Cortes Ortiz, Ruiz et al., 2016). The black soldier fly (Hermetia illucens) and the yellow
mealworm (Tenebrio molitor L.) both have been proposed as suitable insects for mass rearing (Selaledi,
Mbajiorgu et al., 2019; J. K. Tomberlin & Huis, 2020). It is proven to be technically feasible to rear
insects on a large scale and use the end-product as a high-protein ingredient in pig and poultry feed
(Veldkamp, van Duinkerken et al., 2012).
Today, it is allowed in Europe to use insect derived proteins, whole insects and insect derived fats in
pet food, feed for fur animals, and aquaculture animals. Additionally, whole insects and insect derived
fats are allowed in feed for pigs and poultry (European Commision, 2001, 2011, 2017b). The
International Platform of Insects for Food and Feed (IPIFF) is pleading for legislation and authorisation
of the use of processed insect proteins (PIP) in the feed for pigs and poultry (IPIFF, 2018) in the
European Union (EU). The target of the IPIFF is that within two to three years the ban described above
will be ‘relaxed’ (IPIFF, 2019b). This demand by the IPIFF is endorsed by the Dutch Ministry of
Agriculture, Nature and Food Quality as minister Schouten stated in her speech at the opening of the
new facility of Protix (Schouten, 2019).
15
There are different scenarios for the applications of insect proteins and bio waste streams as can be
seen in Figure 1 below.
Until now the mass-production of insects in Europe had three possible sales markets: (1) pet feed; (2)
sterile insects technique to be released into the wild to regulate populations; (3) biological control
companies producing for example predatory mites for pest control purposes (van Huis & Tomberlin,
2017). Limited research on the financial feasibility of insect farming is conducted because there was
no need to and as stated, the market was limited and specialised looking at the three options as
described above. A fourth one that could be added to those three earlier mentioned is insects for food,
but this is expected to take some time. In tropical regions insects are commonly accepted as a source
of food for quite a long time. Entomophagy is what this practice of eating insects is called. In the
Western culture people are hesitant with eating insects. Since the 1980’s it is gaining interest and more
and more articles on this topic are published (Pippinato, Gasco et al., 2020) but still the negative
attitude towards insects that is embedded in the Western culture (Looy & Wood, 2015) prohibits the
adoption of insects as a novel protein source in food. The potential ease of regulations as described
above, adds a fifth sales market to the existing four, namely feed. At this moment, the adoption of
insects as feed is the most likely to happen soon. Different studies have proven that insects, when used
for feed purposes, can have prebiotic effects. This in its turn has effects that are beneficial for the
health of the animals (De Carvalho, Teixeira et al., 2019; A van Huis, 2020).
In order to be a suitable substitute for conventional animal feed and human consumption, farmers
need to be able to produce large quantities and be able to guarantee a continuous quality (RDA, 2018).
To reach these stadia insect farmers need to invest in capacity to offer satisfying volumes with costs
that can compete with conventional animal-derived products. Essential in these large-scale industrial
farms is that approximately 80% of the production process is automated. This will decrease human
labour, and increase productivity and efficiency which in its turn will contribute to the consistency
regarding the quality and the quantity (Cortes Ortiz, Ruiz et al., 2016). Currently, high mechanization
levels are not feasible because of the various uncertainties. This has two consequences: one the one
hand qualities are varying per batch because when processes consist for a relative high amount out of
human labour, margins in feeding, weighing, selecting etcetera are higher than when these processes
are automated. On the other hand, products that are available on the market have a higher price
because of the high amount of labour and thus the higher costs (Cortes Ortiz, Ruiz et al., 2016).
The number of start-up companies in this emerging sector has been estimated to be more than 200 by
March 2017 (van Huis & Tomberlin, 2017). Start-ups often consist of unique characteristics like the
way they are organized, the growth-plan or the financing structure (Audretsch & Ács, 2003). Despite
these unique characteristics there are often restrictions regarding the operational decisions. These
Figure 1: Insects as food and feed: circularity (Veldkamp et al., 2012)
16
include debt and financial considerations (Berger & Udell, 2005). Smaller businesses and start-up
companies have major difficulties to succeed. Around 60% of the start-ups go bankrupt within 5 years.
This amount can even increase to 90% when looking at the longer term (da Silva, Fabrício et al., 2015;
Nobel, 2011).
1.2 Problem statement
When PIP is allowed to be processed in feed this will cause a huge expansion in market potential which
cannot be fulfilled by the current producers. A report of Hilkes and de Klerk (2016) estimated that, at
that time, in the Netherlands, around 500 tonnes was produced. If in 2020, only 1 percent of the broiler
chicken feed is replaced by insects, the demand will increase with 70,000 tonnes. Market studies on
the insect feed market indicates that it will reach $1.07 billion in 2022 with an annual growth of more
than 100% (van Huis & Tomberlin, 2017).
Data regarding profitability and financial feasibility of insect farming is important in order for policy
makers, investors, banks and other stakeholder to be able to assess the credit risk or to formulate
policy and regulations for this emerging sector that wants to supply new markets. Limited available
information of SME’s and the sector they operate in, leads to reluctant credit providence by banks and
investors. Spreads will be priced, directly or indirectly, higher in such cases by in financing firms (Gabbi,
Giammarino et al., 2020) while this credit supply is highly important for entrepreneurs in order to start
a new business or to scale up their existing business. The willingness of financial institutions to provide
SMEs credit with a certain interest rate is dependent on credit risk. This risk is partly calculated inter
alia on the risk of a firm going into default, which is calculated based on a framework containing
reference data from comparable existing businesses, relevant sector information, and the business
model. These reference data are currently only limited available for insect companies, and therefore
there is a need for reliable economic data to contribute to building such a framework for the insect
sector. This will improve the quality of the risk assessment and also the credit access for insect farmers
(Blok, 2020).
As stated before, there is no financial data available on large scale insect rearing. Therefore, in this
report, a literature review will be conducted on the scarcely published data. Thereafter interviews will
be conducted to obtain state-of-the-art and practical financial data. After the data collection the data
needs to be analysed. The insights of this analysis need to get published in a pragmatic way to be useful
for the whole industry. For a new industry to grow and flourish it is important to cooperate. Regarding
cooperation one could think of sharing best practices, set-up study associations, and update farming
courses. In the case of the insect value chain, cooperation among breeders is seen as one of the most
important factors by the industry itself based on various interviews conducted by Marberg, van
Kranenburg et al. (2017). According to Makkar, Tran et al. (2014), research regarding insects as feed
and food should be extended with analysis on financial feasibility. An obstacle, however, is that insect
rearing companies are likely to keep the knowledge and the data they have gained for themselves in
order to maintain the competitive advantage (Marberg, van Kranenburg et al., 2017; van Huis &
Tomberlin, 2017). Partly because of this lack of knowledge sharing and lack of cohesion within the
insect value chain there are a lot of uncertainties within the insect value chain.
17
1.3 Objective
The objective of this research is to assess the financial feasibility of insect farming in the Netherlands.
The focus will be on the rearing and reproduction of H. illucens T. molitor, A. diaperinus (lesser
mealworm) and A. domesticus (house cricket), which are proven to be suitable as feed material for
animals (Cortes Ortiz, Ruiz et al., 2016; Józefiak, Jozefiak et al., 2016; Makkar, Tran et al., 2014;
Rumpold & Schlüter, 2013). The sub-objectives will be:
1. To review literature on costs and sales prices involved with the rearing and reproduction of H.
illucens, T. molitor, A. diaperinus and A. domesticus.
2. To collect the most likely, optimistic, and pessimistic cost and revenue data from insect farms
in the Netherlands.
3. To analyse expected farm profitability.
18
2. Literature review
Table 2: Characteristics of the literature review
Resulted in
Satisfy constraint
Non-peer reviewed articles
H. illucens
57 articles
6 articles
1 article
T. molitor
25 articles
4 articles
1 article
A. diaperinus
7 articles
0 articles
3 articles
A. domesticus
97 articles
4 articles
1 article
The systematic literature review aimed to provide a comprehensive overview of the business economic
figures of insect production. Defined search queries included: TITLE-ABS-KEY (“common name insect
species" OR "scientific name insect species" AND "feed" OR "food" AND "finan*" OR econom*").
Sources date from 2010 until the moment this report was written (July 2020). The results of this search
query in Scopus can be found in Table 2.
It is assumed that the effect of inflation on the data is limited due to the negligible effect of the changes
in price levels on insect related products in the OECD area and in China (FAO, 2016; OECD, 2020). All
data have been converted to Euros, for which an exchange rate of 1/1.10 (EUR/USD) is used (retrieved
from (Investing.com, 2020) on 27th of May 2020). All data is calculated to euros per tonne of produce
in order to be able to compare.
The following inclusion criteria are used:
- the business model needs to adaptable for commercial purposes
- the initiated business model needs to meet or comply to EU-regulations i.e. insects cannot be
reared on human excreta.
In this literature research, two types of literature are included, namely peer-reviewed scientific
literature and non-peer-reviewed literature. This latter literature is included in this literature review
and marked as non-peer-reviewed literature in the tables.
2.1 H. illucens
The main benefit of mass rearing H. illucens is the fact that this species is highly efficient in converting
low value food waste streams into high quality proteins. The timespan in which H. illucens larvae are
ready to harvest is very short compared to other insects which are suitable for mass rearing. The
development time from young larvae to prepupae depends inter alia on the temperature, humidity,
and density in which the larvae are reared, and varies between 15 and 52 days. (Diener, Studt Solano
et al., 2011). H. illucens larvae have also proven to reduce microbial contaminations in substrates (De
Smet, Wynants et al., 2018). Even though, there are many benefits and potentials in favour of the H.
illucens relative to other insect species, also some challenges exist. The performance of H. illucens
depends on the composition of the substrate streams. Most important are the extent to which proteins
and digestible carbohydrates are present (Gold, Tomberlin et al., 2018). Maintaining of the population
in which mating is crucial is seen as an important and challenging part of the process. H. illucens
19
demands special conditions regarding light and space as the requirements for other insect species are
less. This causes H. illucens mating to be a more labour and knowledge intensive process (Cortes Ortiz,
Ruiz et al., 2016; Oonincx, Volk et al., 2016).
H. illucens consist of several bioactive compounds which can be extracted and processed into lipids,
proteins and chitins which can be used for pharmaceutical and nutritional purposes (Jantzen da Silva
Lucas, Menegon de Oliveira et al., 2020). If these valuable by-products can be extracted from insects,
the potential added value will lead to major changes in the viability of insect businesses, this also
involves the frass that is produced by insects which has the potential to be used as a fertilizer (Houben,
Daoulas et al., 2020).
20
Table 3: Research context and financial figures for H. illucens production
1€4.34/m3;2€0.5/kWh;3€21.41/hour;4€1.54/m3;50.034/kWh;6€15.40/hour;7€0.0528/kW.
a: peer-reviewed scientific literature
b: non-peer-reviewed literature
Characteristics
Price (€/tonne produce)
Costs (€/tonne produce)
Literature source
Country of
research
Research context
Underlying source of data
Dried
Meal
Fresh
Feed
Water
Electricity
Labour
Gas
Buildings
(Ites, Smetana et al., 2020)a
DE
Modular system 24.51t of
dry larvae/year.
Determined on raw material
prices, market prices, and
average costs
6,500
18,190
1,760
3171
1,2742
1,5203
(Chia, Tanga, Osuga et al., 2019)a
KE
Feeding trial to implement
larvae meal
Local market prices Kenia
2019
464
(Pleissner & Smetana, 2020)a*
DE
Hypothetical process.
1,092 t of dry larvae/year
Based on price of dried larvae
sold in retail market (place /
year not available)
1,816
21
1604
1265
1356
1,0097
(Ferrer Llagostera, Kallas et al.,
2019)a
ES
Willingness to pay for
insect-based aquaculture
Personal communication
(2016)
Personal communication
(2018)
5,090
2,273
(Mancuso, Pippinato et al., 2019)a
IT
SWOT analysis of European
insect sector
Personal communication
(2018)
2,000
2,500
(Abdel-Tawwab, Khalil et al., 2020)a
EG
Feeding trial; H. illucens
meal for fishmeal
Local market retail price in
Egypt (2020)
427
(Hilkes & de Klerk, 2016)b
NL
Report on the potential for
insect sector
Personal communication
(2015)
2,000
3,000
21
The prices and costs of H. illucens production can be found in Table 3. As can be seen there is a lot of
variation within the data. The reason for the variation in cost-related financial data can be clarified
because of the different rearing techniques and the different circumstances under which businesses
operate. Throughout the literature the optimal conditions under which H. illucens must be reared,
differ a lot. There are numerous technical variables that influence both cost and revenue streams. For
example, the optimal temperature varies from 25 (Gobbi, Martínez-Sánchez et al., 2013) to a maximum
of 35 degrees Celsius (Salomone, Saija et al., 2017). Also, the humidity level that is required for rearing
is considered to be between the 60-70 percent (Sheppard, Tomberlin et al., 2002; Tomberlin, Adler et
al., 2009). And next, the amount of larvae can vary between 0.1 and 5 per square centimetre (Barragan-
Fonseca, Dicke et al., 2017). These differences in technical variables are one of the major reasons to
influence the financial cost figures, even if business are focussing on the same insects and have
common goals (Diener, Studt Solano et al., 2011).
Beside the costs, the price of H. illucens varies considerably throughout the literature. The price of H.
illucens larvae meal in 2016 found by Ferrer Llagostera, Kallas et al. (2019) is a lot higher than the price
for which H. illucens larvae meal is traded on the local market in Egypt in 2020 (Abdel-Tawwab, Khalil
et al., 2020). The explanation of this difference is not traceable in the literature, but the differences
can possibly be assigned to the quality of the product and the difference in economic circumstances
between Egypt and Spain. A pattern that can be recognized in the literature is that the markets on
which insect products are traded, are relatively local and regional when comparing this to other,
incumbent, agricultural commodities such as milk or potatoes. For these latter agricultural
commodities the market is developed and internationally orientated (Duc Huynh, Burggraf et al.,
2020). These latter products are more likely to be exported. Besides the willingness to pay in local
(national) markets: features like the quantity of purchase, the size of the order, the processing format
and the type of stakeholder influence the price (Ferrer Llagostera, Kallas et al., 2019).
* Regarding the article of Pleissner and Smetana (2020), one variable is kept out of the data. In this
article they described a fatty acid that can be extracted from H. illucens which could be seen as linoleic
acid with a content of 0.043 g/g H. illucens would be valued at €6,848,000 per tonne. This would have
a significant influence on the financial feasibility. Therefore, considering the importance of this
parameter, the author was asked to clarify this finding. The reaction of Pleissner (personal
communication, March 19, 2020): “the calculation of revenues from products was challenging. What
we tried was to state a maximal gain. You can rely on a relatively high gain from linoleic acid, but this
requires intensive downstream processing, which was not considered in our study. Actually, I would
suggest stopping at biomass level.
2.2 T. molitor
Besides its reputation to damage stored food, T. molitor is suitable for inclusion in feed and food stuff
as a protein source (Elahi, Wang et al., 2020; Ji, Liu et al., 2016; Veldkamp & Bosch, 2015). T. molitor
meal has a lot of potential to function as additive in Western diets because of the neutral taste when
incorporated in flour, the high amount of protein, beneficial amino acid profile, unsaturated fats and
mineral content (Aguilar-Miranda, López et al., 2002; Brynning, Bækgaard et al., 2020). On top of the
nutritional benefits, the inclusion of T. molitor in poultry diets benefits probiotic bacteria which are
beneficial for animals, and therefore, the potential to reduce the use of antibiotics (Grau, Vilcinskas et
al., 2017; Islam & Yang, 2017). Similarly, to the other insect species in scope in this research, the
technical performance of the growth and quality strongly depend on the feed substrate and the
conditions. The development cycle varies from 26 days in the most optimal scenario to 730 days under
22
the worst circumstances (A.E & Alkoaik, 2009). Regarding the relative humidity, the larvae grow fastest
on 70% and hardly grow when relative humidity levels are lower or equal than 13% (Fraenkel,
1950).The breeding process of T. molitor can be organised relatively cheap and easy. For inclusion in
aquaculture feed T. molitor meal has a great potential. (Selaledi, Mbajiorgu et al., 2019).
23
Table 4: Research context and financial figures for T. molitor production
Characteristics
Price (€/tonne produce)
Costs (€/tonne produce)
Literature source
Country of
research
Research context
Underlying source
of data
Dried
Meal
Fresh
Feed
Water
Electricity
Labour
Gas
Buildings
(Mancuso, Pippinato et al.,
2019)a
IT
SWOT analysis of
European insect sector
Company data
Krecafeed (Proti-
farm, 2019)
10,850
17,0001
(Reverberi, 2020)a
CN
Description of the
development of
cricket farming.
Pet food price
3,636 -
7,2723
(Rumpold & Schlüter,
2013)a
NL
Potential and
challenges of insects as
an innovative source
for food and feed
production
Retail price
32,3302
(Meuwissen, 2011a)b
NL
Description of insects
as a novel protein
source
(de Bakker &
Dagevos, 2010)
Retail price (NL,
2011)
97,0001
15,800
1,090
2,140
710
(Cortes Ortiz, Ruiz et al.,
2016)a
CN
EU
Insects mass
production
technologies
Retail price
Retail price
5,727
45,454
1 Frozen; 2 Freeze-dried; 3 Defatted meal; a: peer-reviewed scientific literature; b: non-peer-reviewed literature
24
The results which are presented in Table 4 show some outliers. The downside outlier is a price that is
calculated for defatted powder in China published by Reverberi (2020). One possible explanation for
this lower price could be the differences in regulations between China and the Western world. The
source only mentions the market prices and therefore this data cannot be verified, prices are not
retraceable to the production processes or substrates T. molitor is fed with. These price deviations
can be explained by the dry matter content of the insects, which is lower in freeze-dried T. molitor. In
the conventional feed industry, prices are mostly corrected for the amount of dry matter within the
product. In the literature research this correction is not applied or is not described in the articles.
2.3 A. diaperinus
A. diaperinus is reproducing itself in for example spilled feed and manure in poultry farms, where it is
known for its ability to spread many pathogens that cause serious diseases and are harmful to the herd
(Rumbos, Karapanagiotidis et al., 2019). The perspective on A. diaperinus has recently changed from a
harmful pest to a novel food source when it became listed in the EU Regulation 2017/893. It is mainly
used for avian pet feeds, as well as reptile and fish feed as it a suitable insect for inclusion in aquafeed
meal.
25
Table 5: Research context and financial figures for A. diaperinus production
1Freeze dried
a: peer-reviewed scientific literature
b: non-peer-reviewed literature
Characteristics
Price (€/tonne produce)
Costs (€/tonne produce)
Literature source
Country of
research
Research context
Underlying source of data
Dried
Meal
Fresh
Feed
Water
Electricity
Labour
Gas
Buildings
(de Bakker &
Dagevos, 2010)b
NL
Report on the sustainability
of meat consumption from
the consumer perspective.
A. diaperinus described as a
novel protein source.
Small scale (no definition)
4,750
(Hilkes & de Klerk,
2016)b
NL
Report on the potential for
insect sector
Based on the price of
Protifarm 2016
15,000
(Meuwissen,
2011b)b
NL
Market analysis report
Retail price (NL, 2011)
11,8001
26
The number of studies in which A. diaperinus is used for feed purposes is scarce. The data found in the
literature can be found in Table 5. Some studies have evaluated the effect of feeding A. diaperinus to
turkeys, this outcome was positive when compared to the conventional feed (Despins & Axtell, 1994;
Rumbos, Karapanagiotidis et al., 2019). The selling price by Protifarm in 2016 was €15,000. The
difference with the price found for fresh A. diaperinus in the report of de Bakker and Dagevos (2010)
could have two possible explanations. Firstly, the market circumstances were different in 2016
compared to 2010; since the market for insects as feed and food has grown 10 to 25 percent annually
(Hilkes & de Klerk, 2016). Secondly, meal consists for a higher part out of dry matter.
2.4 A. domesticus
By-products of the food industry, especially barley mash, are proven to be suitable for feed of A.
domesticus (Sorjonen, Valtonen et al., 2019). Locusts, grasshoppers and crickets are well known by
consumers in rural and urban areas in Latin America, Asia and Africa (DeFoliart, 1989; Arnold Van Huis,
Van Itterbeeck et al., 2013). Locusts are known as a major pest in Africa, the Middle East, and Australia.
A group of locusts can become gregarious and migratory when they are with a highly dense population.
This is the phase in which they begin to swarm (Makkar, Tran et al., 2014). Crops and other kinds of
biomass will be devoured by these huge amounts of locusts. These swarms can contain up to 10 billion
insects with a total weight of 30,000 tonnes (DeFoliart, 1989; Makkar, Tran et al., 2014; Arnold Van
Huis, Van Itterbeeck et al., 2013). These large swarms make it relatively easy to catch them. Some of
these locust species are therefore harvested for food, especially in Africa (Arnold Van Huis, Van
Itterbeeck et al., 2013). However, there is a major problem regarding the use of insecticides. Seen their
status of agricultural pest, they may be sprayed by farmers or by governments due to their control
programmes. This results in significant amounts of residual toxic amounts of chemicals when these,
harvested from the wild, locusts are consumed (Makkar, Tran et al., 2014; Arnold Van Huis, Van
Itterbeeck et al., 2013). A. domesticus is in the United States one of the most promising species of
industrialized insect rearing since it is easy to farm when taking into account the processes, and can
be reared on a large variety of organic streams (Makkar, Tran et al., 2014). Since a couple of years, the
cricket powder market for food ingredient purposes has gained interest as a sustainable and novel
protein source.
A. domesticus is a species that is harvested in another phase and stage then the other insects. Where
the other insect are harvested in the larval stage (T. molitor and H. illucens) A. domesticus has no larval
stage and therefore, when grinded, are not as suitable to be processed as meal as the other insects
which is relatable to a high amount of exoskeleton (Brynning, Bækgaard et al., 2020).
27
Table 6: Research context and financial figures for A. domesticus production
1Average cost calculation of five different feed formulations; 2Freeze dried
a: peer-reviewed scientific literature
b: non-peer-reviewed literature
Characteristics
Price (€/tonne produce)
Costs (€/tonne produce)
Literature
source
Country of
research
Research context
Underlying source of data
Dried
Meal
Fresh
Feed
Water
Electricity
Labour
Gas
Buildings
(Morales-
Ramos, Rojas et
al., 2020)a
US
Research on new cricket diet
formulations.
Cricket powder price was based
on the average of 9 different
companies.
84,590
5,9141
(Hanboonsong,
2013)a
TH
Description of edible insect
farming in Thailand.
Market price Northeast of
Thailand
2,363
3,272
(Reverberi,
2020)a
CA
US
US
EU
Description of the development
of cricket farming.
Cricket Farm Inc.
Mohammed Ashour, founder of
Aspire Food Group,
Kevin Bachhuber, a USA cricket
farming consultant
Michiel van Meervenne, founder
of the Belgian edible insect
association.
18,182
36,364
30,000
45,455
(Halloran, Roos
et al., 2016)a
TH
Assessment of actors in the
cricket industry
Average sales prices Thailand
26,363
1,867-
3,952
(Halloran, Roos
et al., 2017)a
TH
Analysis impact of cricket
farming on livelihoods
Average sales prices from 5
Northern provinces Thailand
2,018-
2,950
(Meuwissen,
2011b)b
NL
Market analysis report
Retail price (The Netherlands,
2011)
200,0002
28
The data found in the literature is listed in Table 6. The data from the research of Morales-Ramos,
Rojas et al. (2020) is based on the average cricket powder price of 9 companies in the United States.
Originally from the source, four different revenue streams are discussed which represent crickets
reared on four kinds of substrates.
The prices in the research of Morales-Ramos, Rojas et al. (2020) diverge between €68.05 and €82.71
per kilo occur due to the fact that the researchers looked at ready to consumer level on the internet.
The volumes of product are quite low in this sales formats and as stated in the article of Pippinato,
Gasco et al. (2020), the smaller the sales format, the higher the prices when calculated back to tonnes.
That is also a possible explanation for the difference in sales price between the prices found in the
article of Reverberi (2020) and Morales-Ramos, Rojas et al. (2020). The first one concentrates on
wholesale level, which means large (order) quantities and therefore lower prices than the data found
in the latter source.
There is no data available on other variable and indirect costs than feed. Nevertheless, costs of mass-
production are high, which can be explained because of the primitive rearing techniques in which too
much labour is involved. Also, the commercial feed formulas that are used, are relatively expensive
(Morales-Ramos, Rojas et al., 2020).
2.5 Conclusion of literature review
Overall, it can be concluded that for all species, the prices are depending on geographical location,
type (i.e. feed or food) of the market, and quantity sold. Prices were relatively low in countries where
low operational costs apply, compared to Western countries. Prices for produce for food were in
general higher than prices for feed, which could be ascribed to the higher required quality for food
production and the small quantities sold. A reduction in prices over time has been observed which
could be explained by the increased competitiveness and a stable demand. The market circumstances
were for example different in 2016 compared to 2010; since the market for insects as feed and food
has grown 10 to 25 percent annually.
Information on operational costs was available to varying degrees for the different species. Differences
on operational costs between species exist, for instance in labour costs, where different hourly tariffs
were used which could be related to the mostly low levels of mechanization of insect farms making it
a labour-intensive process. Also, variation in cost-related financial data can be clarified because of the
different rearing techniques and the different circumstances under which businesses operate. It was
suggested that increasing levels of mechanization will reduce labour costs, and that the use of low
value feed substrates will reduce operational costs but will not always benefit the revenue. This is can
be applied to all insect species in scope in this literature review.
29
3. Materials and methods
This chapter consists of five subchapters in which the methodology and models used in this research
will be described. An overview of the interviews and the corresponding characteristics is given and the
combination between literature review and interviews in the field will be evaluated. As the data
retrieved from these interviews have been used as input for the stochastic modelling, the distribution
types and the parameterization of the variables can also be found in this chapter.
3.1 Conceptual framework
The conceptual model shown in Figure 2 represents the systematic analysis of the financial feasibility
of insect farms. The literature review is an all-encompassing element in this systematic representation.
It reviews all the financial data of a business and involves three components of a corporate finance
approach: operations, investments, and finance.
The corporate finance approach holds for insect farms, also if they are organized as family businesses,
but a correction for own labor should be applied. Own labor is accounted for under operations. With
the collection of the data during the semi-structured interviews the variables focus on the calculation
to gain insights into the variable costs, also known as the costs of goods sold (COGS). These COGS are
subtracted from the revenue which then results in the gross margin. After having calculated this gross
margin the operational expenditures (OPEX) and overhead costs that can be combined into indirect
costs are subtracted which results in the operating profit (Hillier, Westerfield et al., 2016). This
operating profit is representative for the technical performance of the business. To assure
comparability all financial data is calculated per tonne of product (fresh or hatched are most likely).
With regards to finance, the interest, which is related to the magnitude of debt, together with the
amounts payed for lease, are considered as costs in the profit calculation. The approach and the
selection of the variables are based on interviews held with experts in the field of business economics,
and credit risk assessment experts of financial institutions. Regarding risks three scenarios are plotted:
a most likely, a pessimistic, and an optimistic scenario.
Figure 2: Structured overview of the corporate finance approach of firms, including three main components: Operation,
Investments, and Finance.
30
To achieve the main objective which is to assess the financial feasibility of insect farming in the
Netherlands, the sequential quantitative method approach was used, a graphical representation of this
approach is shown in Figure 3. This approach is based on quantitative research and consists of: a
literature review, interviews with insect farmers, and expert elicitation in a sequential approach as
described in Figure 3 (Östlund, Kidd et al., 2010; Teddlie & Tashakkori, 2009). Before data collection,
an extensive literature research, which is described in Chapter 2, was carried out as well as expert
elicitations, to obtain fundamental knowledge on the insect sector and relevant business financial
parameters for insect farms.
The literature review was helpful when inviting potential participants. In the invitation it was explained
that a literature review was completed already and that it would be of great value if this data could be
verified with practice. This line of reasoning in which theory and practice meet each other was widely
supported and welcomed by the respondents. Besides, the literature review was helpful as an
instrument for reflection. After the interviews were conducted, this data has been compared to the
literature review.
3.2 Selection of sample farms
For the sake of external validity, to which a high importance is attached because of the approach and
objectives that are chosen, the size of the sample needed to be large enough (De Vaus, 2001).
Therefore, for the semi-structured interviews, all farms that are focusing on the rearing and
reproduction of one or more of the insects in scope (H. illucens, T. molitor, A. diaperinus, A. domesticus)
in the Netherlands that are operating at least one year, were invited for an interview. This time-
constraint is important for increasing the reliability and representativeness of the data. The contact
details of these farms are retrieved from Google Maps and from the partner of this research, NGN.
Selected participants were first approached via phone call in which the research and its relevance was
discussed. Then an invitation and consent form were sent via email. After two weeks a follow up phone
call was initiated in which additional question could be answered and an appointment for an interview
was made. In total 21 of the 43 invited entrepreneurs/experts were willing to participate in this
research. These 21 participants can be divided into 12 experts and 9 entrepreneurs.
For the T. molitor a distinction has been made between the rearing and the reproduction. When a farm
is specialised in reproduction it cannot be compared to other farms focussing on rearing. Therefore
this division is applied. Hence, a common business model is rearing and reproduction under one roof.
These kind of farms are included under ‘Rearing’ whereby, when looking at the input of rearing farms,
needs to be accounted for the purchase of eggs or freshly hatched T. molitor. Eventually, when looking
at the operating profit in terms of validity, it does not matter if the reproduction is outsourced or not,
provided that it is accounted for in the calculations.
Figure 3: Sequential quantitative approach
Selecting relevant
parameters and
conducting a
literature review
Collecting
quantitative data
through in-depth
interviews
Analysing,
reviewing and
interpreting results
31
Table 7: Characteristics of the interviews with farms and experts.
*JK= Jacco Kooistra; HN= Hilde Niyonsaba
In Table 7 the characteristics of the interviews that have been conducted can be found. In some
interviews, particularly these with expert, the focus was on qualitative information. The expertise of
the experts varied. Five of the twelve interviews focussed particularly on the insect value chain (also
the interviews with consultants). Current, past, and future hot topics and scenarios have been
discussed. Besides, examples of topics that were touched upon during these interviews were market
development, cooperative models to increase the consistency of quantity/quality of the production,
cost items like labour, feed, and the future development of these cost items when the value chain will
mature (e.g. automation). One interview particularly focussed on research of the insect value chain.
Interviewee
Intervie
wers
Date
Set-up
Qualitative/
quantitative
insights
Expertise
Production (x in
tonnes per year)
Expert 1
JK/HN*
14-04-2020
Online video call
Qualitative
Insect value chain
n/a
Experts 2, 3
JK/HN
06-04-2020
Online video call
Qualitative
Insect value chain
n/a
Experts 4, 5, 6
JK/HN
27-03-2020
Online video call
Qualitative
Research insect value chain
n/a
Expert 7
JK/HN
22-04-2020
Online video call
Qualitative
Consultancy
n/a
Expert 8
JK/HN
23-04-2020
Online video call
Qualitative
Financial risk management
n/a
Expert 9
JK/HN
24-03-2020
Online video call
Qualitative
Business economics/scientist
n/a
Experts 10, 11
JK/HN
20-05-2020
Online video call
Qualitative
Financial risk management
n/a
Expert 12
JK
18-05-2020
Phone call
Qualitative
Insect value chain
/consultancy
n/a
T. molitor rearer 1
JK
29-05-2020
Face to face
Quantitative
+ qualitative
T. molitor rearing
40 < x < 60
T. molitor rearer 2
JK/HN
18-05-2020
Online video call
Quantitative
+ qualitative
T. molitor
rearing/reproduction
40 < x < 60
T. molitor rearer 3
JK/HN
17-05-2020
Online video call
Quantitative
+ qualitative
T. molitor
rearing/reproduction
80 < x < 100
T. molitor
reproductor 1
JK/HN
17-04-2020
Online video call
Quantitative
+ qualitative
T. molitor reproduction
x > 150
T. molitor
reproductor 2
JK/HN
12-05-2020
Online video call
Quantitative
+ qualitative
T. molitor reproduction
50 < x < 80
H. illucens rearer 1
JK/HN
07-05-2020
Online video call
Quantitative
+ qualitative
H. illucens rearing
/reproduction
10 < x < 20
H. illucens rearer 2
JK
20-05-2020
Online video call
Quantitative
+ qualitative
H. illucens rearing
/reproduction
x > 150
L. migratoria rearer
1
JK
28-05-2020
Email
Quantitative
L. migratoria rearing
/reproduction
x < 10
A. diaperinus rearer
1
JK
11-05-2020
Phone call
Qualitative
A. diaperinus rearing
/reproduction
n/a
32
Thoughts about the approach of potential respondents and the structure of the farm interviews were
exchanged. The interviews with the financial risk management experts deep-dived into the added
value of this master thesis, the eventual set-up of the publication and the analysis of potential
customers for financial institutions. Lastly, the very first interview focussed on the relevant variables
and parameters for this research and the broader structure of the publication, partly based on the
book ‘Kwantitatieve informatie veehouderij’ (Quantitative Information Livestock Farming) (Blanken,
Buisonje et al. (2019).
In the interviews with the entrepreneurs in insect rearing and reproduction the focus was on
quantitative data. Some interviewees provided extra qualitative information. This will be discussed in
chapter 3.4.
3.3 Interview design & data collection
Businesses were hesitant to participate in the research. However, when agreed upon participation,
there was no hesitation with sharing their financial information. This resulted in the fact that it is only
justifiable to publish data for T. molitor to be able to assure complete anonymity to the respondents.
For the other species, qualitative insights gained during the interviews will be shared.
All the interviews have been conducted by the same couple of interviewers, and for the farm
interviews, the same structure and questions were used to aim for a common understanding of the
questions among the farmers (De Vaus, 2001). The variables obtained are shown in Appendix 1:
Interview variables. Included are: (i) farm characteristics and technical parameters such as feed
conversion and mortality, (ii) indirect and variable costs, and (iii) revenues and (iv) financial obligations.
Table 8: Coding scheme data set
The expert interviews were unstructured. During these interviews the questions asked by the
interviewers were based on the expertise of the expert and on the publications of the expert or the
organisation for which he or she works. Furthermore these conversations were interactive and
questions were mostly based on the answers of the respondents. As a way of preparation some key
words of potential topics for discussion were written down as back-up. In this way the interviewer
could always fall back on potential topics of interest.
After the interview form of the farm interviews was assessed, the interviews with the insect farmers
were conducted. The data was handled in a discrete way to assure participants of anonymity. The
Ranked on date
ID
Interview 1
578321
Interview 2
467216
Interview 3
689432
Interview 4
356105
Interview 5
056589
Interview 6
463521
Interview 7
595315
33
characteristics and data of participants have been coded with a unique identification number as can
be found in Table 8. These identification numbers and corresponding participants have been saved in
a secured datafile.
The financial data that is published, is published in such a way that nobody is able to trace the financial
data back to participants. Regarding the variables modelled with a pert distribution the respondents
were asked to describe the most likely scenario, an optimistic and a pessimistic scenario.
3.4 Stochastic simulation model to assess variation in T. molitor farming
Table 9: Stochastic and deterministic variables in the Monte Carlo simulation model for T. molitor rearing and reproduction
farms.
Parameterization
Variable
Distribution type
Description
Reproduction
(n=2)
Rearing
(n=3)
Technical data (tonne produce)
#FTE/tonne produce
Assets (€/tonne produce)
#Batches per year
Normal
Normal
Pert1
Mean
SD
Mean
SD
Minimum
Most likely
Maximum
0.03
0.003
411
16
5.2
6.3
7.5
0.04
0.01
2,128
2,036
4.3
4.9
7.4
Revenues (€/tonne produce)
Sales price
Pert
Minimum
Most likely
Maximum
1,500
1,760
2,000
3,500
4,500
5,500
Variable costs (€/tonne produce)
Feed
Energy & water
Normal
Normal
Mean
SD
Mean
SD
94
34
45
10
807
257
314
132
Indirect costs (€/tonne produce)
Labour
Pest control
Tangible assets
Depreciation (10%)
Maintenance & insurance (5%)
Land & buildings
Transport/fuel
Consultancy
Insurance
Accountancy
R&D
Others (e.g.. waste, marketing)
Normal
Normal
Normal
Normal
Normal
Normal
Normal*
Normal*
Normal
Normal*
Normal*
Mean
SD
Mean
SD
Mean
SD
Mean
SD
Mean
SD
Mean
SD
Mean
SD
Mean
SD
Mean
SD
Mean
SD
Mean
SD
646
105
6
1
41
14
21
7
44
16
42
18
14
2
7
1
5
2
33
14
4
1
1,225
261
17
7
265
221
132
111
429
142
149
88
2*
n/a
30*
n/a
39
11
n/a
n/a
11*
n/a
1Questions regarding the most likely, the optimistic and the pessimistic scenario have been asked during the interviews.
*The variables ‘Consultancy’, ‘Insurance’, and ‘Others’ are deterministically modelled for ‘Rearing. ‘R&D’ costs do not play a role in T. molitor
rearing.
34
These interviews have been systematically evaluated and analysed by using a stochastic simulation
model that accounts for the risk. Hereby the key decision parameters like the variable costs, the
indirect costs, and the selling price vary within a range based on the input of the respondents. The
obtained financial data was used as input for stochastic simulation of the financial performance of
small and large scaled insect farms for different future scenarios varying regarding market price levels
and financial data. The selected financial variables for stochastic simulation incorporate components
of randomness to reflect the uncertainty that occurs in the real system, by specifying probability
distributions (Hardaker, Lien et al., 2015). For stochastic variables a probability distribution was
selected that best mimics the data to capture the uncertainty around the parameters. These scenarios
refer partly to the current situation and partly to future scenarios that the entrepreneur considers to
be realistic. This determination of probability distributions for each of the variables can be found in
Table 9. The uncertainty is studied by a Monte Carlo analysis with 5000 @Risk iterations. The
profitability is evaluated by means of the operating profit (calculations can be found in the List of
abbreviations, calculations & definitions’). Better said, the profit from the production of one tonne of
fresh insects. Besides, the profitability in relation to the assets is assessed by calculating the return on
assets ratio (ROA), this ratio is suitable to assess agricultural businesses in a start-up or transition phase
(Katchova, 2010).
3.5 Qualitative insights retrieved from interviews
The time frame for an interview is approximately 60-70 minutes, however some were extended as
participants had a clear vision on market development and business practices which they were eager
to share. Since gaining knowledge and insights in what is going on within the sector would help increase
the reliability of the publications and maybe could explain or declare some differences or
unaccountable results later, this qualitative addition was highly appreciated. These qualitative insights
were noted during the interviews with all experts and farmers that provided qualitative insights as they
are labelled in Table 7 and have been documented in an additional file for the purpose of being able
to clarify inexplicable differences in the quantitative data afterwards. Qualitative insights from farmers
and experts have been assessed on usefulness and importance based on the experience of the
researchers. No distinction has been made between insights from experts and insights from farmers
and it is all published in the same way. Reason for this aggregation of data is the fact that insights got
confirmed or repeated by experts and farmer which is a logical consequence seen their background.
They are part of the same sector and actualities and possible future events for one, also have influence
on the other.
35
4. Results
This chapter is still under construction as this master thesis is part of a PhD project. After publishing
this master thesis, more insect farmers will be interviewed as part of this PhD project and thus the
data collection will continue. This additional data will be added to the current datasheet which will
increase the reliability of the data. Hence, this publication gives a reliable overview of the situation in
the Netherlands.
4.1 Empirical perspective on financial feasibility
Table 10: Financial results for default scenarios.
5000@Risk iterations
a: standard deviation
b: replacement value
c: in case land and buildings are owned there is 5% calculated for depreciation of the buildings and 1,5% calculated for maintenance and
insurance.
* No costs or revenues for frass are taken into account in the stochastic model as it has no value at the moment of research.
The cost components of rearing and reproduction farms of T. molitor and some basic data on the
farming of H. illucens and L. migratoria are specified in Table 10. The costs are divided into variable
and indirect costs. The mean feed cost per tonne of reared T. molitor is €807 (SD: €257). These costs
represent the situation in which the feed is on the location where it is needed, so transport costs are
included. The mean for energy & water costs are €314 per tonne (SD €132). The total indirect costs are
built up out of labour with a mean of €1,225 and a SD of €261, pest control with a mean of €17 and a
SD of €7, costs for tangible assets whereby 10% of the replacement value is calculated for depreciation
Rearing T.
molitor
(n=3)
Reproduction T.
molitor
(n=2)
H. illucens
(n=2)
A. diaperinus
(n=1)
L. migratoria
(n=1)
Variable
Default
Default
Default
Default
Default
Revenues (€/tonne produce)
Sales price fresh
4,472
1,771
<3,500
n/a
40,000
Variable costs (€/tonne produce)
Feed
Energy & water
Total variable costs
Gross margin
807
314
1,121
3,351
94
45
139
1,632
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Indirect costs (€/tonne produce)
Labour
Pest control
Tangible assetsa
Depreciation (10%)
Maintenance & insurance (5%)
Land & buildingsb
Transport/fuel
Consultancy
Insurance
Accountancy
R&D
Others (e.g. waste, marketing)
Total indirect costs
Operating profit
Probability (Operating profit <0)
Cost price
1,225
17
265
132
429
149
2
30
39
n/a
11
2,300
1,051
3.1%
3,421
646
6
41
21
32
42
14
7
5
33
4
850
782
n/a
999
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
>3,500
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Technical data
#FTE/tonne produce
Assets (€/tonne produce)
Batches per year
0.04
2,680
4.8
0.03
411
6.3
0,15
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
36
costs (mean of €265 and SD of €221) and 5% for maintenance and insurance (mean of €132 and SD of
€111). For land and buildings, the same is done, but with lower depreciation on buildings and no
depreciation on land. The costs as presented in the table consist of either the costs payed for renting
the land and buildings, or costs for owning as described above. This results in a mean of €429 with a
SD of €142. For transport and fuel costs, the mean is €149 with a SD of €88. Consultancy, insurance
and the cost item ‘others’ are deterministic with values of respectively €2, €30 and €11 per tonne of
produce. The cost item insurance represents all insurances exclusive the long-term assets as this
insurance is already calculated deterministically based on the replacement values. None of the
respondents of T. molitor rearing farms had a budget or made costs on R&D. This cost item is involved
in the reproduction farms which will be discussed later.
Regarding the variable and indirect costs of reproduction farms, the mean feed costs per tonne
involved with the reproduction of T. molitor are €94 with a standard deviation of €34. The energy &
water cost item has a mean of €45 with a SD of €10 per tonne of produce. This results in a gross margin
of €1,631. The total indirect costs are built up out of labour with a mean of €646 and a SD of €105, pest
control with a mean of €6 and a SD of €1, costs for tangible assets have been calculated by taking 10%
of the replacement value for the total assets. These depreciation cost have a mean of €41 and SD of
€14. Furthermore 5% of the total replacement value of assets is accounted for maintenance and
insurance. The mean maintenance and insurance costs are €21 with a SD of €7. For land and buildings,
the mean is €44 with a SD of €16. The structure of this cost item is the same as for the rearing farms
that is discussed earlier in this chapter. For transport and fuel costs the mean is €42 with a SD of €18.
Consultancy, in contract to the rearing farms, has been given a normal distribution with a mean of €14
and a SD of 2. The same accounts for insurance with a mean of €6.62 and a SD of 1 per tonne of
produce. Accountancy costs have a mean of €5 with a SD of €2. The R&D costs have a mean of €33 and
a SD of €14. Lastly, the cost item ‘others’ in which is accounted for waste disposal and marketing (i.e.
website) comes to a mean of €4 with a SD of €1.
4.2 Variation in financial outcomes of T. molitor farming
Before discussing Table 11 a remark must be made. The two business models: rearing, and
reproduction, cannot be compared. The two business models are presented in the same tables, but
this is for lay-out purposes. It does not make sense to compare these two. It is like comparing a poultry
hatching farm with a poultry breeding farm. Two completely different business models.
Table 11: Simulation results for T. molitor farms
Rearinga
Reproduction
Outputs
Gross margin (€/tonne fresh produce)
Mean
5%
95%
3,352
2,912
3,771
1,631
1,529
1,741
Cost price (€/tonne fresh produce)
Mean
5%
95%
3,586
2,822
4,347
995
754
1,235
Operating profit (€/tonne fresh produce)
Mean
5%
95%
Probability (Operating profit <0)
886
66
1,719
0.031
780
579
983
n/a
37
Return on assets (ROA)
Mean
50%
289%
5000@Risk iterations
a: farm that rears T. molitor needs to reproduce them by itself or buy from a reproduction farm.
Table 11 outlines the simulation results of these two business models. Results show that the mean
price for the rearing companies is €4,472 with a 90% confidence interval ranging from €4,100 to €4,822
per tonne fresh T. molitor. The gross margin is calculated by subtracting the variable costs from the
revenue. These costs can be found in the Table 10. For rearing farms, the mean gross margin is €3,352
with a 90% confidence interval ranging from €2,912 to €3,771. The mean gross margin of the
reproduction farms is €1,631 with a 90% confidence interval 90% ranging from €1,529 to €1,741.
The cost price is built up by adding the variable and the indirect costs. The mean cost price for the
rearing farms is €3,586 with a 90% confidence interval ranging from €2,822 to €4,347. For the
reproduction farms this mean cost price is €886 with a confidence interval of 90% ranging from €66 to
€1,719. When subtracting the cost price from the revenue this results in the operating profit whereby
the mean of the rearing farms is €780 with a confidence interval of 90% ranging from €66 to €1,719.
This operating profit has a probability of 3.1% to have a negative value. For the reproduction farm the
mean operating profit is €780 with a 90% confidence interval between €579 and €983.
The calculated return on assets (ROA) is for a rearing farm 50% and for the reproduction farm 289%.
This performance efficiency indicator is calculated by dividing the operating profit by the total assets.
These latter two variables are not published in this report to guarantee traceability and anonymity.
The intensity of assets in relation to the operating profit is very low when compared to other
agricultural companies in the EU. The median values for the ROA of agricultural companies in the EU
ranges from -8.2% to 7.33% (Klepac & Hampel, 2017). This means that an investment in a T. molitor
farm, both for a business model that focusses on rearing or reproduction or both, the investment
renders well when compared to the average agricultural business in the EU. Especially for the
reproduction farms it is known that there is only limited technical machinery available on the market.
This limited availability can be accounted to the novelty of this business model. Entrepreneurs in
reproduction are pioneers and therefore have been left to inventing machinery themselves.
Respondents active in the reproduction of T. molitor admit they have difficulties valuing these assets.
A remarkable outcome was that there is zero debt involved in both, the rearing, and the reproduction
farms. Farmers finance their operations with own resources. One of the drivers for this strategy is of
course the risk and uncertainty that comes with a pioneering sector. First, (smaller scale) farmers are
hesitant to the involve external parties such as investors and banks. Second, investors and banks are
hesitant to be involved in this sector because there is almost no financial data available that they can
use for their credit risk analysis therefore, as stated before, there is need for reliable financial data
upon which a risk assessment framework can be built in order to lower this uncertainty. With an
increase of certainty it will be likely that this involvement of debt within the insect sector, especially
on farm level, will increase.
The results of the combined (rearing and reproduction) farms and the reproduction farms cannot be
compared to each other because of the different end product and the corresponding differences in
prices and volumes. Therefore, the data must be interpreted as stand-alone data. The same table is
used because the cost components and technical indicators at both farms are comparable.
38
4.3 Sensitivity analysis of cost items on operating profit in T. molitor farming
Table 12: Spearman rank correlation coefficient between ‘Operating profit and input variables.
Operating profit
Rearing
Reproduction
Input variable
Labour
-0.48
-0.79
Feed
-0.44
-0.26
Price
0.36
0.40
Depreciation
-0.29
-0.09
Transport & fuel
-0.12
-0.13
Land & buildings
-0.24
-0.10
Energy & water
-0.21
-0.07
Maintenance & insurance
-0.14
-0.05
R&D
n/a
-0.10
In this study the Spearman rank correlation coefficient is applied between the operating profit - and
the input distributions. The higher or lower (between 1 and -1) the correlation coefficient, the closer
the variance in the input variable is associated with the operating profit. In Table 11the correlation
coefficients can be found. If the coefficient is negative, the influence of the input variable on the
outcome is negative and vice versa. The variable with the most effect on the result of production for
the rearing farms as well as for the reproduction farms is the variable labour with a correlation
coefficient of respectively -0.48 and -0.79. Feed costs also have a significant influence on the operating
profit with a correlation coefficient of -0.44 for rearing farms. For reproduction farms the influence is
between moderate and weak (Akoglu, 2018) with a correlation coefficient of -0.26, this cannot be seen
as significant. The price on the other hand has a significant positive influence on the operating profit
with 0.36 and 0.40 for respectively the rearing and the reproduction farms. Depreciation of assets only
has a significant influence on the operating profit of rearing farms with a correlation coefficient of -
0.29. The reason for this difference of the influence of depreciation on the operating profit can be
accounted to the higher asset intensity of rearing T. molitor when compared to the reproduction farms.
One characteristic of reproduction farms is the number of cycles per year. Because of the relatively
short period of keeping the T. molitor eggs or hatched worms on the facility they can reach a high
number of cycles per year.
4.4 Qualitative findings from interviews
H. illucens
According to the respondents, H. illucens larvae are seen as the species with the highest potential to
play a role in the protein transition. Experts and respondents stated that the current cost price of one
tonne of H. illucens larvae approximately equals the sales price. In the Netherlands the rearing
companies use the larvae for pet food, fishmeal, and fish food. All respondents were convinced of the
potential of H. illucens to become the mainstream insect in upgrading low value waste streams into
high value protein. To close the loop these larvae are therefore more suitable then the other species
discussed in this report.
Respondents admit that the rearing and the reproduction of H. illucens is very knowledge / and labour
-intensive and therefore has a higher entry barrier which will prohibit the small-scale entrepreneurs
from adapting this species. In northwest Europe this trend can already be recognized. For example, in
39
the Netherlands, the vast majority of start-ups, is focussing on the rearing of T. molitor. The future
development of the rearing and reproduction landscape for H. illucens therefore is uncertain, the
current frontrunners are high-tech industrialized rearing and reproduction facilities backed by
investors that are hesitant with sharing information. Because of this closed-innovation valuable
insights and research is not available for entrepreneurs who want to set up a small scale farm. Other
factors of influence are probably the legislation regarding the rearing of H. illucens. In the Netherlands
one needs to ask for an exemption from the government to start rearing this species (artikel 2.3 lid 1,
2020). Besides, research on rearing techniques and optimal breeding and rearing conditions is yet
limited when comparing this to conventional agricultural farming techniques. Research will contribute
to knowledge and education which will cause entrepreneurs to look at the potential of this species
instead of looking at the challenges.
In the interviews the experts and farmers shared that the average sales price of fresh H. illucens is
approximately €3,500 per tonne. Whereby some respondents stated the price, in the future,
depending on the speed of the change in market circumstances, may mature at a level of
approximately €800 per tonne. The costs are about the same or higher than the price of €3,500. This
small or negative margin is caused by the business models of the actual farms which are mainly
focusing on innovation and research & development (R&D) to anticipate on the future. Efficiency in
production and cost price are not the variables where they focus on at this moment. Besides R&D, the
largest costs components are labour, feed and depreciation costs on assets (automation and
mechanization).
Experts state that from an idealistic perspective it does not make sense to feed materials to H. illucens
which could be fed directly to other animals or used for other purposes even, so they have a better
feed conversion ratio than pigs, cattle and poultry. If the larvae are used directly for human
consumption as a substitute for meat, feed materials like brewery grains and potato peels would be
fine. As feed for farmed animals or pets, larvae should be fed with waste materials farmed animals
T. molitor
Exact data and numbers are unknown but, in the Netherlands, compared to the other insects in scope
in this report, T. molitor is most common to be reared and reproduced. Experts explain this by the fact
that technically seen it is said to be easier to rear and reproduce T. molitor compared to for example
H. illucens. To continue the separation made earlier: two different business models were identified in
T. molitor farming: reproduction and rearing. On the reproduction farm the focus is on the
reproduction of T. molitor whereby the eggs or hatched T. molitor is the product that is the final
product. These products are sold to for example the rearing farms. The business model in which the
farmer is rearing T. molitor is characterized by the end product (fully grown larvae) which is sold to for
example companies that are processing T. molitor for feed, food, and pet food purposes. The input for
the rearing can either be constituted within the same farm by using a part of the reared T. molitor for
reproduction purposes or to buy the eggs or freshly hatched worms from an external supplier like the
reproduction farms. The division between these two business models can be observed throughout the
agricultural sector. A similar supply chain exists in the pig and the poultry sector. This segregation of
activities is characterising for knowledge-intensive business activities. Entrepreneurs get more room
for focussing on the particular activity and this will eventually increase the rate of innovation and
efficiency for both the business activities.
A future scenario discussed during some of the interviews was that the price would probably decrease
to around €3,000 to €3,500 per tonne. The motivation for this scenario was the increase in automation
and supply in combination with a difficult market combined limited demand growth.
40
A. diaperinus
In the Netherlands very few farms focus on the rearing of A. diaperinus. Experts and respondents of
the interviews state that selling prices are somewhat under pressure. There is an urgent need for
knowledge and research on the organisation of the chain. A. diaperinus, together with the other insect
species, is not only seen as a suitable substitute for the soybean in feed but also adds value on other
areas as lowering the carbon dioxide footprint and producing food and feed in an environmental
conscious way. In the Netherlands there is a lot of discussion about environmental issues regarding
the nitrogen problems involving a surplus of nitric oxide and ammonia which cause health problems
and soil enrichment. Insects are seen as the missing link to lower the footprint regarding these
compounds of nitrogen which are involved in the supply chain and the digestion of the conventional
feed, especially for cows. This crisis could function as a catalysator for the inclusion of insects in feed.
A cooperative model is widely preached. In this model different smaller farms cooperate to reach
higher volumes and a more consistent quality and quantity of their product.
A. domesticus/L. migratoria
A. domesticus and L. migratoria, species of the superorder Orthoptera, are especially suitable for
human consumption and as feed for reptiles and pets. In contrast to the other species in this research
A. domesticus and L. migratoria cannot be reared on waste streams that close the loop like household
waste. They are however more efficient in the production of proteins from low value products like
grass than the conventional livestock is. Nowadays this species is most used for human food purposes
or food for reptiles. Experts see a future for these species in human consumption.
41
5. Discussion, conclusion & recommendations
5.1 Discussion
The sequential method of the literature review followed by data collection from the field provides the
occasion for reflection. The data found in the literature review is not completely consistent with the
data collected in the field. The most likely causes of these differences between the literature and the
findings in the field are the different research contexts. For H. illucens we retrieved the sales price and
the cost price from the interviews. In case of H. illucens the cost price exceeds the sales price. In the
literature review only one sales price of fresh H. illucens was found. In the article of Hilkes and de Klerk
(2016) they published a sales price between €2,000 and €3,000 per tonne fresh. This is lower than the
sales prices we obtained in the interviews of €3,500 per tonne fresh. A possible explanation for this
difference could be the increase in publicity for this product which leads to more adoption and
therefore more demand. The source dates from 2016, therefore, market development could be a
possible explanation.
Regarding T. molitor rearing, Mancuso, Pippinato et al. (2019) publish a sales price of €10,850 and
€17,000 per tonne fresh produce, these prices originate from a Dutch insect farm dating from 2019.
Meuwissen (2011b) published a price of €15,800. Somewhat in the same range of Mancuso, Pippinato
et al. (2019). The stochastic model estimated the sales price to be around €4,472. Looking into the
source behind the source of Mancuso, Pippinato et al. (2019), the price they publish is likely to be a
price that consumers pay for the product. As stated earlier in this report. The volumes of product are
quite low in this sales formats and as stated in the article of Pippinato, Gasco et al. (2020), the smaller
the sales format, the higher the prices when calculated back to tonnes. That is also a possible
explanation for the difference in sales price between the sales prices found in the literature review and
the sales price from the stochastic simulation model. The feed, labour and building costs found in the
literature review from the article of Meuwissen (2011b) are respectively €1,090, €2,140, and €710 per
tonne of fresh produce. These costs from the stochastic model are respectively €807, €1,225, and €429
per tonne of fresh produce. It is difficult to account for these differences but since the source is dating
from 2011, one would assume these costs would have increased due to the nine years of inflation. This
is not the case. The most likely explanation of this reduction in costs per tonne of fresh produce is the
increase in productivity and efficiency. As the yield increases due to innovation and research. The costs
per tonne, if held constant, will decrease. This scenario would be a logical declaration for this, on the
first sight, unusual decrease in costs. Furthermore, the overall deviation of the literature review from
the data gained from the interviews can be explained by the fact that there are no articles in the
existing literature that focus on the financial feasibility of insect rearing and reproduction. The
consequence of the different contexts is that the focus is not on the operating profit. If, for example,
the nutritional value is the research context, there will be less emphasis on the revenue of the produce.
If the research context is waste recycling than prices for inputs can be determined but the eventual
produce is not suitable to be processed in or sold as feed and food. Besides, the data found in this
literature review is varying quite a lot on itself. Reasons for this are geographical differences and the
corresponding dissimilarities in local market characteristics. Regarding the output of the stochastic
simulation model: at the moment of publication this data is a reliable estimation. However, the extent
to which the financial results from the respondents is representative for other years is uncertain.
Nevertheless, looking at articles in the news of previous years, the year 2020 is not a year that can be
marked as an outlier with very special occasions and events.
42
Halfway the study period, when the literature research was almost finished, measures to prevent the
spreading of Covid-19 made it impossible for us to perform interviews face to face. Therefore, the
interviews had to be conducted via online video conversations or telephone. The interviewer as well
as the interviewee were most of the times not experienced with discussing financial data online, which
could have had influence on the results. Face-to-face meetings and eye contact could therefore have
led to deviant results, but this cannot be tested. There is more potential for empathy between the
interviewer and the interviewee in a face-to-face meeting compared to an online video conversation
(Curasi, 2001). Which could have had its effect on the results as discussing and sharing confidential
information needs a base of confidence and commitment.
Regarding the results it was remarkable that there is no debt involved in insect farming. One of the
reasons for according to the respondents in that creditors are hesitant with providing credit and no
unnecessary risks are taken with the uncertainty that is present within the sector. Besides the
remarkably low debt intensity, when analysing the results, it happened to be difficult to compare the
different businesses with different business models even comparing businesses with the same
business models was sometimes challenging, especially when looking at technical indicators like for
example the number of crates per square meter or the surface of the farm. Crates are not always equal
of size and regarding the surface there is room for interpretation about the exact meaning and
measurements. Also, farmers did not always have insights in the technical production parameters like
growth-rate of larvae, the nutritional value of the fresh produce, and the production per square meter.
Because of these challenges and the goal of the research, to analyse the financial feasibility of insect
farming, the researcher decided to exclude these technical parameters.
Farmers and (around 50 percent of the) experts have a somewhat diverging vision on the future. On
the one hand there are the small scale farmers who believe in their potential to grow and eventually
mature as insect farmers with medium production quantities (<150,000 tonnes/year). On the other
hand there are the experts who foresee a future for the high-tech industrialized farms that rear and
reproduce huge amounts of insects. The latter scenario will cause low cost prices which will make its
way to the market. The other 50% of the experts states the future scenario will lay somewhere in the
middle. With room for small scale farms operating in local networks that cooperate with each other,
and the larger industrialized farms who operate largely on their own. This divergent future foreseeing’s
between these groups is an in interesting outcome of the qualitative research. The origin of this
difference could not be traced or explained.
5.2 Conclusions
The objective of this research was to assess the financial feasibility of insect farming in the Netherlands
with the focus on H. illucens, T. molitor, A. diaperinus and A. domesticus. This objective has been
reached by making a subdivision of three sub-objectives.
From sub-objective (i): to review literature on costs and prices involved with the rearing and
reproduction of H. illucens, T. molitor, A. diaperinus and A. domesticus, it can be concluded that:
- The sales prices are depending on geographical location, type (i.e. feed or food) of the market,
and quantity sold. Sales prices were relatively low in countries where low operational costs
apply, compared to Western countries. Sales prices for produce for food were in general higher
than sales prices for feed, which could be ascribed to the higher required quality for food
production and the small quantities sold.
43
- A reduction in sales prices over time can be observed for H. illucens meal, which could be
explained by the increased competitiveness and a stable demand.
- Information on operational costs was available to varying degrees for the different species.
Differences on operational costs between species exist, for instance in labour costs where
different hourly tariffs were used which could be related to the mostly low levels of
mechanization of insect farms making it a labour-intensive process.
- Increasing levels of mechanization will reduce labour costs, and that the use of low value feed
substrates will reduce operational costs but eventual will not always benefit the revenue.
From sub-objective (ii): to collect the most likely, optimistic, and pessimistic cost and revenue data
from insect farms in the Netherlands., can be concluded that:
- There is a lot of potential on the processing side with the focus on several bioactive
compounds which can be extracted and processed into lipids, proteins and chitins which have
a great economical value due to their application in food, cosmetics, pharmaceuticals, textile
etc. Insect farming has also been considered to produce biofuel If these valuable by-products
can be extracted from insects, the potential added value will lead to major changes in the
viability of insect businesses.
- Market development has a big influence for the future of insect farming. There is a lot of
potential and the market is already anticipating on that. The market for reptile fodder is almost
saturated so the EU needs to open more options.
From sub-objective (iii): to analyse expected farm profitability, can be concluded that:
- At this moment the driving factor behind the cost price is labour. This high stake of labour can
be assigned to the high uncertainty which prohibits entrepreneurs form investing in
automation and the novel character of the sector. Entrepreneurs need certainty.
- Market development is seen as an important factor for future growth. This development will
provide certainty for insect farmers. At this moment sales channels are somewhat scarce.
When this certainty is assured, credit will be easier accessible and investments for automation
are more feasible and obvious. This will lead to a decrease of labour costs and an increase in
depreciation costs and costs related to insurance and maintenance of tangible assets.
- Regarding the rearing and reproduction of T. molitor the operating profit is respectively 1,087
and €781 per tonne of fresh produce (for reproduction calculated with potential harvesting
quantity when reared). For rearing farms the probability of operating under loss is 3.1%. In
order to be profitable the rearing farms needs a sales price higher than €3,451 and the
reproduction farm needs a sales price higher than €999. The return on assets calculated for
rearing farms is 50% and for reproduction farms 289%. For H. illucens, at the moment of
research, the costs exceed the revenues and therefore this farming model is not profitable on
a small scale.
Overall, it can be concluded that the extent to which insect rearing in the Netherlands is financially
feasible depends on the market development. When looking at the stochastic simulation results the
return on assets of 50% on T. molitor rearing and the 289% on T. molitor reproduction can be seen as
good and profitable returns. It must be taken into account that the asset intensity is quite low, which
results in a relatively high ROA. The ease in regulations is the key component in these market
development scenarios. Until this stage of maturity is not reached, there is a key role for the
44
government to invest in the insect value chain. Research and development needs to get the focus. The
government needs to play a role in this development by providing subsidies for research institutions
and entrepreneurs to increase knowledge and assure the safety of insects as a novel feed and food
source for the future.
5.3 Recommendations for further research
Throughout this report it has become clear that for the future large-scale production which means an
increase in output per farm and a decrease in the costs per tonne of produce, is a path that is almost
certain. The technical and financial consequences of this intensification are an interesting topic for
further research. Furthermore, there is an urge for more financial data related to insect farming and
insect production. Factual farm data is key to reach a stage of maturity with the sector. Entrepreneurs
need to learn from each other and that is why there is also potential for entrepreneurs that facilitate
the primary sector. Consultancy and accountancy will help improve financial matters. Besides,
subsidies or government incentives are there to promote economic and social policy. To support the
transition that will increase prosperity for the nation. It is important to assess the current situation of
the subsidy landscape and to look at the desired situation for the whole value chain. These government
incentives can make the difference between financially feasible and unfeasible. An interesting topic
for further research that can function as input for policy makers.
Aggregation of insects species: regarding the science it was remarkable that when insects as a novel
food or feed source were researched, all insects are frequently seen as the same. This while T. molitor
and A. domesticus differ from each other like pigs differ from poultry. In this kind of research, it is
important to focus on a particular specie. There is still so much knowledge needed. Therefore, to put
everything under insects is not wise to do.
The development of insect farming is a point of concern for the smaller family farms. There is going to
be, and there already is, a division between on one side businesses in which investors are involved and
on the other side the traditional family or SME businesses. The difference in funding and ownership
lead to a difference in vision and strategy which can be derived from the short- and long-term goals
they pursue. The question for the future is if the smaller SME’s where a lot of labour is involved can
compete with the high-tech industrialized businesses. As stated before a cooperative model between
insect rearing/reproduction farms is widely preached. In this model different smaller farms cooperate
to reach higher volumes and a more consistent quality and quantity of their product. This is an
interesting topic for further research in order to increase certainty and scale of supply which will trigger
innovation and adoption further down the value chain.
Regarding the data collection, the interviewer had no insights in the accountancy report of the
businesses so the extent to which the data is completely reliable is questionable. All financial data is
retrieved during the interview with the entrepreneur. If the entrepreneur consciously or unconsciously
shared data that did not correspond to reality this could not be checked by the interviewer. This could
lead to biased data and thus biased results which will decrease the reliability of the research. An
interesting topic for further research therefore is to validate the data found in this thesis with
accountancy report.
A potential interesting future revenue stream for insect farms is the selling of the residue which can
be used for fertilizing soil, which is called insect frass. The investigation of the fertilizing potential of
frass is increasing. Nowadays it is seen as a rest stream that is generated by insect farmers and is, in
45
the Netherlands, therefore part of the manure policy (RVO, 2020). When the benefits of insect frass
are proven and accepted throughout the supply chain it even may generate an extra side stream of
revenue. In the literature review only one source labelled the frass with a value (€690/tonne).
However, this was one of the two scenario’s they investigated and was not based on the reality. In the
other scenario they had to give the frass away for free. This latter scenario was, according to the
authors, seen as the most realistic one (Ites, Smetana et al., 2020). That is the reason why this second
scenario is taken into consideration within this literature research. There is a lot of research on the
technical feasibility of the potential of frass. An economic feasibility analysis would be an interesting
addition to science.
46
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I
Appendix 1: Interview variables for T. molitor and H. illucens farms
Technical Most likely Optimistic Pessimistic
Duration of production round
Emtpy for cleaning
Number of production rounds per year
Size of business (number of crates)
Number of FTE
Payed FTE
Family/non-payed FTE
FTE/ton
Size of business area
Number of crates per m2
Harvest per crate (kg)
Revenue Most likely Optimistic Pessimistic
Fresh
Quantity (kg)
Price €/kg
Frass
Quantity (kg)
Price €
Total
Direct costs (/ton) Most likely Optimistic Pessimistic
Purchase of larvae
Purchase of eggs
Feed
Carrots (franco)
Flour
Transport of feed
Energy & water
Others
Total €/ton
Saldo (per ton of per m2)
Indirect costs
Labour
Pest control
Tangible assets
Depreciation (10%)
Maintenance & insurance (5%)
Other assets
Depreciation (10%)
Maintenance & insurance (5%)
Rent of buildings and land
Buildings and land
Depreciation on buildings(5%)
Maintenance & insurance (1.5%)
Transport en fuel
Marketing
Insurance
Accountancy
PPE
Others (water authority taxes, sewage charges etc.)
Total €/ton
Result from production
Cost price (/ton)
Total gross margin
Financial obligations Year €
Payed interest and amortization
Lease
Others
Balance sheet
Equity
Long-term debt
Short-term debt
Total
To what extent would you like to invest?
ROA
... For insects to be a suitable alternative animal feed and for human consumption, insect farmers need to be able to produce large quantities of insects and insect-derived products and to have a steady production with sufficient quality. To be able to reach this level, insect farmers need to invest in capacity to offer satisfying quantity within costs that can compete with conventional animal feed used today, along with meat [139]. Increased availability of insect-derived products will lead to a decrease in prices [124]. ...
... These start-up companies often consist of unique characteristics like the way they are organized, the growth plan or the financing structure. In spite of this, over 60% of start-up companies go bankrupt within 5 years [139]. Bug Burger lists 68 insect start-ups in Europe that have disappeared for various reasons, one of them being bankruptcy [157]. ...
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