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Market Commentary: January 2023 – Are Bugs a Buy?

Are Bugs a Buy?

January 2023

By Robert F. Taylor, CFA

If we have learned anything since March of 2020, it’s that the world is changing. After years of low inflation and low interest rates, we seem to be entering a period of higher inflation and higher rates. In a low interest rate/easy money environment you can buy the market and just hang on as it soars. However, when interest rates rise and money gets tighter, tactical, stock-by-stock investing becomes more important. Our challenge as investment analysts and portfolio managers is to identify interesting ideas and themes that reflect a changing world, hopefully capitalizing on changes by investing in companies developing new ideas. One such theme is the idea of utilizing insects as a protein source.

People tend to think of bugs as pests: things to be swatted, squashed, and avoided at all costs. However, due in part to the increasing global demand for protein as well as concerns about the environmental impact of traditional animal agriculture, there is growing interest in the prospect of insects as a crop.

Many insects are high in protein, with some species containing over 50% protein by weight. In comparison, beef and chicken contain approximately 20-25%. Insects are also a good source of essential amino acids and have a high feed conversion efficiency, meaning they can convert feed into protein more efficiently than livestock. Crickets, which we will refer to throughout this article for a consistent comparison, require six times less feed than cattle to produce the same amount of protein and are rich in iron, zinc, calcium, and B vitamins.


Insects also have a relatively low cost of production. They can be raised on a variety of feedstock, including food waste, and do not require the same level of infrastructure and resources as traditional livestock – it is even possible to produce them in an urban environment. Insects can be raised in smaller, controlled environments, reducing the risk of disease transmission and the need for antibiotics. This means that the cost of producing insect-based protein is likely to be lower than traditional sources.

The increasing global population is placing a higher demand on food, which in turn places a strain on resources. Agricultural land covers about 38% of the global land surface – about one-third of this is used for crop production, and the remaining two-thirds consists of meadows and pastures for grazing livestock. Crickets require 12 times less land than cattle, and a study conducted by the European Union initiative PROteINSECT showed that one hectare of land (about 2.5 acres) can produce about 150 tons of insect protein per year. Soy planted over the same area produces only about one ton per year.* Furthermore, the environmental impact of harvesting protein from insects is much lower than traditional sources, with a smaller carbon footprint and fewer greenhouse gas emissions. Insect farming offers a promising alternative to traditional farming practices and has the potential to become a sustainable and scalable source of protein.


From a business standpoint, the market for insect-based protein is growing rapidly (though off a low base) and is expected to expand at a 42% compound annual growth rate (CAGR) over the next several years. Insects can be used as fertilizers or as feed for livestock, pets, and aquaculture. Don’t forget about human consumption – despite the initial “yuck” factor that many Westerners may feel about the idea of eating insects, it’s estimated that worldwide over two billion people consume insects as a regular source of protein. This means that there are multiple revenue streams for companies producing insect-based protein, adding to the investment potential. Examples include:

  • EnviroFlight, a subsidiary of Darling Ingredients (Public, Ticker: DAR) produces sustainable insect ingredients derived from Black Soldier Fly larvae for manufactured animal feed and petfood.
  • Archer Daniels Midland (Public, Ticker: ADM) in partnership with French startup InnovaFeed is building the world’s largest insect protein facility in Decatur, Illinois.
  • The Aspire Food Group (Private) manufactures a variety of food products made from crickets.
  • (Private), an online seller of cricket flour and brownie mixes. We attempted to secure some of their cricket flour brownie mix for an office-wide taste test, only to find that the product was sold out and unavailable!

The potential for insects as a protein source is significant. Investing in this area, while decidedly speculative at this point, presents an opportunity to take advantage of the growing demand for alternative sources of protein. Insects are highly efficient at converting feed into protein, have a low cost of production, and require much less feed and land to produce a given amount of protein compared to traditional livestock, making them a more sustainable and environmentally friendly alternative. For cynics, we would offer a gentle reminder of the early opportunities presented by personal computers, online booksellers, and electric vehicles.

We continue to scan the markets for investable themes and ideas that reflect a changing world, and expect to gain exposure to the most promising themes. We look forward to reporting on such themes in the coming year.


* “Insect Farming Is Taking Shape as Demand for Animal Feed Rises” MIT Technology Review August 20, 2014

Shannon Dermody

Shannon DermodyTEST

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