Investing into the growing industry of high-scale insect farming that has undoubtedly high potential is a case of high risk / high reward. The high reward comes from the growing and unexploited markets and the high risk from the limited knowledge and the undeveloped market environment. Here in this blog I list some of the most important questions that investor should ask and that the farmer must have clear answers that are supported with solid arguments.
In my perspective the one of the most important qualities for a high-scale insect farm is its flexibility. Because of all the uncertainty surrounding the industry the most important question is how the farm can adopt to changing legislation, trends and new scientific knowledge. All these factors increase the risk exposure of the insect farming companies. This main question is cut in to more detailed questions here below. The questions and the reasoning behind them are explained with higher detail in my thesis that can be found here: https://ilkkataponen.com/2015/05/20/thesis-supply-chain-risk-management-in-entomology-farms/
1. What species are you farming?
2. How many species are you farming?
3. What type of feed are you using?
The question number one is very fundamental question and sets direction for the farming company. As concluded in my thesis the biggest risk threatening the companies is a pathogen break out. The risks are especially associated with insect farming because the pathogens are still very poorly known. For this reason insect farms should choose their species to be one of the ones that are best known, or they should have extraordinary knowledge or resources related to the scientific research with the selected species. In my thesis I name the three most common species farmed today. The species are Tenebrio molitor, Hermetia illucens and Acheta domesticus. If a farm has selected species that are not one of this three the species should at least be present in the “Belgium ten”, a list of ten approved species by the Belgium authorities ( You can find the list here: http://www.afsca.be/foodstuffs/insects/).
Changing the insect species is not easy after building the infrastructure around the certain needs and choosing only one species is a risk for multiple reasons. The farm should be prepared for changing the primary species in order to avoid the following risks:
-It is possible that the selected species might not be in list of insects that are first allowed for use for human food and animal feed.
-If the species will not be one of most common ones to be used in the future the company will be left out from the growing knowledge of the most common species and from the growing logistics downstream.
-There is no knowledge of how any insect species will perform in very high volumes. It is possible that even the most promising species will turn up to be unsuitable for high-scale farming.
Same goes with the selected feed. Even if the selected species would be approved by legislation and the species would perform well in high-scale environment, it might be that the selected type of feed makes the end product remain banned. This type of situation might be ahead for example for the companies using biological waste.
4. Do you consider biological research important?
Companies are going to two different ways when it comes to biology research about the farmed species. Few bigger companies have multiple scientists with their teams working on building a better understanding on pathogens and what are the best and most efficient ways of farming. In the other end there are companies with no biological knowledge. It is essential to know the reasons behind the company’s selection between these two approaches. Is it so that the research is just waste of money, or so that the research will bring better quality, risk management and higher efficiency?
5. How have you prepared against pathogen breakouts?
There are multiple risks in insect farming, but the most dangerous one is a pathogen breakout. As mentioned before the knowledge about the insect pathogens is really basic and they pose risks that can in the worst case kill off entire colonies. According to Doctor Jorgen Eilenberg of University of Copenhagen, leading insect pathogens expect in the world, companies cannot with current knowledge prevent pathogens breakouts completely. It is undeniable scientific fact that the sufficient risk control against pathogen can only be reached by risk pooling and segregation of different functions.
If the farm uses same batch of feed for all of its insects, they are all located in a same space or if they use same AC- machinery the investor should be alarmed and ask how the farm can justify the ignorance towards the risk?