On the Economics of Farming BSF | Thinking Outside the Boxby Terry Green on 08/28/17
One could easily get the impression perusing the internet that harvesting Black Soldier Fly (BSF) larvae on a commercial scale grown off food scrap waste is akin to spinning straw into gold as in the well-known fairy tale, Rumpelstiltskin, in this case however recovering valuable animal feedstock in the form of high quality protein and lipid-rich larvae. This blog reviews some of the challenging economic issues concerning farming BSF on a commercial scale.
Under optimal conditions larvae grow off food scrap with a bioconversion ratio on a dry weight basis (larvae:waste) in the range of ~ 0.25 to 0.30 (see, for example, Scaling Up BSF Production | Theoretical and Practical Effect of BSF Bin Space Surface Area and Food Scrap Load Rate on Larval Yield and Commercial Black Soldier Fly (BSF) Production in 2016 | Where Are We Today?). This in combination with a high lipid (~ 30 to 35%) and protein (~40 to 45%) dry weight content rivaling that of soy and fish meal has led some entrepreneurs to assert that larvae can be grown off food scrap in large plant facilities and sold at a profit as a fish meal substitute in animal feedstock formulations (see, for example, All Natural. Sustainably Grown, EnviroFlight, LLC - A Leader in Sustainable Animal and Plant Nutrition, Agriprotein Repairing the Future, Protix Raises $50m in Largest Insect Farming Investment on Record, Ynsect Raises $15.2m Series B for Robotics-Enabled Insect Farm to Replace Unsustainable Fishmeal, AgriProtein Raises $17.5m to Build Second Waste-to-Insect Protein Factory and License Tech and Using Larvae to Convert Food Waste into Animal Feed).
There is no shortage of waste on which one can grow and harvest larvae. Furthermore, from an environmental perspective it makes sense to divert as much of the nutrient value of the waste as possible into insect biomass (see Recycling Biodegradable Wastes? | Take Your Cue from Mother Nature and Black Soldier Fly Larvae | An Earth Friendly Feedstock?). Even so, the assertion that larvae can be raised off food scrap waste and sold at a profit as a means of sustaining a plant facility is worth examining in greater detail.
Consider the economics and challenges in operating a large scale plant facility. Start with the fundamentals involved in farming BSF off food waste. Based on the average moisture content of food scrap waste (~ 80% water), the scientific principles embodied in the Law of Conservation of Energy, and accounting for the moisture content of larvae (~50%) self-harvesting free of the waste on reaching their prepupae stage, a plant facility must process approximately 20 tons of food scrap under optimal conditions to produce one ton of dried larvae (see Scaling Up BSF Production | Theoretical and Practical Effect of BSF Bin Space Surface Area and Food Scrap Load Rate on Larval Yield and Scaling Up BSF Production| Integration of BSF Workstation Elements). It must furthermore be able to sustain these optimal conditions in processing waste while harvesting prepupae on a continuous basis without downtime uninterrupted year round.
To scale up production one must plan on investing in a plant site, acquire equipment able to handle the production goals of the plant facility, and budget for labor and operating costs. For a plant facility to sustain its operations under current business models, these built-in costs must be offset by income primarily generated through the sale of larvae harvested by the plant facility.
So a very important question in analyzing the economic viability of a plant’s operation hinges on what revenue stream might be realized by selling larvae as a commodity protein-rich feedstock supplement. This is a pretty straight forward calculation. Fish meal, the principle source of animal feedstock protein presently sold on the commodity market, sells for about $1000 to $2000 per metric ton (dry weight) (see Index Mundi). Food scrap pickup and dumping fees generally range between about $50 and $100 per metric ton in the recycling industry. So under the best of circumstances gross revenues, assuming a revenue stream for pick up dumping fees could be collected on waste in combination with the sale of dried larvae (and assuming a market is established in buying larvae produced at the plant facility), can be calculated to be somewhere around $3,000 and $4,000 per metric ton dried larvae per 20 metric tons (wet weight) food scrap processed. This calculation assumes, of course, that larvae can be sold at the same price as fish meal on the commodity market, something not yet proven to be the case.
But wait a second! Net income for a plant facility on which the plant’s economic viability depends is gross income less operating expenses incurred in managing a plant facility. Expenses include, for example, the cost of raising one MT of dry weight larvae for every 20 MT of food scrap waste (wet weight) processed, the cost incurred in drying larvae for preservation of the harvest, shipping, marketing, labor, acquisition and operation of equipment, facility maintenance, utilities, servicing debt, etc.! Add up these operating costs against the revenue stream to be realized through the sale of larvae as a commodity protein feedstock supplement and the economic challenge in sustaining a farming operation based on the sale of larvae can be seen even under the best of circumstances to be quite formidable.
You can do your own calculations and decide for yourself if this makes sense. I think however that it is time to acknowledge that the challenge of sustaining a large scale industrial production facility over the long term based on business model focusing on larval sales alone is operationally unattractive and dubious at best.
Like any new technology, it takes time to work through the obstacles standing in the way of building a viable business model. The emphasis on selling larvae as a commodity protein supplement captures only a portion of revenues which could be realized. Why not look more broadly at other potential income generating byproducts which might better offset capital outlay and costs incurred in operating a plant facility?
One obvious and significant byproduct of interest in this regard is the leachate fraction, the liquid fraction recovered from the waste while larvae grow off of the waste they are fed. The composition of the leachate fraction from food scrap waste varies somewhat depending upon the nutrient characteristics of the waste fed larvae, and its residence time in draining free of the larval bioreactor. Some nutrients in the leachate are converted into insect biomass, and some get processed by microbes growing on the same waste on which the larvae feed. The interplay and chemical modifications in solutes passed between the two, and the cycling of waste ingested and passing through the larva’s gut excreted as “frass” back into the waste, can be drained and separated from the waste as leachate. It is a complex mixture of solid, amorphous and liquid byproducts (see below, Figs. 1, 2 and Table 1).
Fig. 1. Larval processing of food waste leachate and evidence of biochemical transformation of leachate into new byproducts of signficant market value. Upper panel, unprocessed nutrient rich leachate collected from food waste unexposed to larvae atop which are growing mats of fungi; Lower panel, the same leachate transformed into polyphenolic byproducts (including the commercially valuable pigment, melanin), humic substances, struvite colloids and insect amorphous frass of considerable value in the agricultural industry upon presentation to larvae. Copyright (c) 2017, Terry Green, All rights reserved.
Fig. 2. Gas chromatography analysis of volatile fatty acids in leachate fraction of food waste demonstrating presence of short chain fatty acids in the leachate ingested by larvae having antimicrobial activity (butyric acid in particular), and other beneficial effects upon incorporation into animal feedstocks. Copyright (c) 2017, Terry Green, All rights reserved.
For large scale field applications, aerial spraying could be done applying as little as 2 gallons per acre. Since the dilution of leachate can be as much as 20 to 50 fold, possibly higher with some plants, even if sold at an extraordinary $68 per gallon, a strong case (given proven results on its application) could be made as to its marketability. At this cost, the benefits to a commercial farmer in realizing a 10 to 20% increase in crop yield while keeping their annual expenses for fertilizing a field in the typical range of somewhere between $200 and $600 per acre is very compelling.
Another potentially significant market for the sale of leachate might be in fortifying feedstocks fed to ruminants. It is known that adding nitrogen (NPN, nonprotein nitrogen) derived from animal manure to feedstocks fed ruminants can be beneficial in stimulating their growth and well-being because the nutrients improve the growth and diversity of anaerobic byproducts formed in their rumens. Farmers have known for some years that mixing animal manure with feedstocks can offset the cost of expensive additives they otherwise must add to animal feedstocks used in growing and maintaining high outputs in their farm animals (see, for example, Poultry litter as a feedstuff for ruminants: A South African scene, Use of Poultry Litter, Manure and Feed in Livestock Systems, and Studies on the use of dried poultry manure in ruminant diets in Syria).
The specific use of animal manure, especially raw manure, as a source of NPN in feedstocks in most parts of the world is however strongly discouraged. In many countries this practice is banned because of the fear of transmission of pathogens causing salmonellosis, mastitis and botulism, and concern over the transmission of bovine spongiform encephalopathy (BSE, mad cow disease into the food chain. In this regard, an alternate source of NPN, that in the leachate obtained from larvae grown off food scrap waste, mixed with animal feed, could circumvent this problem. Thus if proven beneficial as a feed additive the leachate fraction obtained as a byproduct while farming BSF off food scrap waste could be marketed as an additive in animal feedstocks at a price that is competitive with that of current NPN feedstock supplements.
A similar case could be made for marketing the leachate fraction as a feed additive based upon the observation that short chain volatile fatty acids, common in the leachate fraction, fed to animal livestock, improve their growth rates and overall health (see, for example, Effect of Butyric Acid on the Performance and Carcass Yield of Broiler Chickens, Butyrate in poultry, and Better Gut Health Enhances Animal Performance).
In addition, extracts of BSF larvae exhibit antimicrobial activities against methicillin-resistant pathogens (see, for example, Detection of antimicrobial substances from larvae of the black soldier fly, Hermetia illucens (Diptera: Stratiomyidae) and Purification and characterization of a novel antibacterial peptide from black soldier fly (Hermetia illucens) larvae). It is not presently known whether the same antimicrobial activity is in the leachate. Whereas antimicrobial activity appears principally recovered from larvae, since some larvae die off and recycle as waste undergoes degradation while farming larvae in bioreactors, it is possible that antimicrobial activity could be sloughed off and carried into both the leachate and spent waste fractions generated while farming larvae off waste. If present, this opens up the opportunity of marketing the leachate, possibly some of the spent waste, as a supplement in feedstocks in suppressing the growth of methicillin-resistant organisms in livestock fed methicillin-fortified feedstocks.
Another alternate income stream that could be developed through the sale of leachate, and spent waste recovered from farming larvae off food scrap waste, is in applying these byproducts in the remediation of hydrocarbon and metal contaminated soils. BSF leachate, and the spent waste fraction, are both rich in soil microbes, polyphenolics, humic substances and heavy metal chelating agents which could be applied to contaminated soils in accelerating the restoration of environmentally contaminated soils back to a healthy state in much the same way as has been done with compost leachates in recent years (see Treatment of Oil Sludge Contamination by Composting, Compost’s Role In Hydrocarbon Remediation and Bioremediation. Cleaning soil and water contaminants with the pollution busting microbes of compost). Increased microbial activity induced through the addition of leachate and/or spent waste to such soils is a well understood method of effectively oxidizing and fragmenting organic polymers, aromatic byproducts, and such, rendering them nontoxic.
Because there is clear evidence that the leachate fraction, in particular, affects the growth of plant roots and accelerates vegetative growth ( see, for example, Black Soldier Flies & Food Scrap |Putting the Leachate to Good Use and Black Soldier Fly Processed Food Scrap | Foliant and Soil Applications), and because one way of detoxifying contaminated soils is to induce the growth of plants on the premise that the root systems will take up contaminants and carry them into vegetative growth where the contaminants can be removed with cutting and disposal of the vegetative overgrowth (see, for example, Final Report: Metals Soil Pollution and Vegetative Remediation, Upper Arkansas River, Leadville, CO, Superfund Removal and Innovative Uses of Compost Erosion Control, Turf Remediation, and Landscaping), the prospect of marketing leachate and/or spent waste to contaminated soil as a beneficial agent in the remediation of soils is worth considering in reviewing prospective market opportunities in this area.
Yet another valuable byproduct that could be marketed while farming larvae grown off waste is the chitinous exoskeleton which the larvae generate and shed as they progress through the first six instars of their life-cycle. Chitin, added to soil, is known to suppress nematode activity (see, for example, Suppression of plant parasitic nematodes in pastoral soils amended with chitin, Effect of chitin compost and broth on biological control of Meloidogyne incognita on tomato (Lycopersicon esculentum Mill.), Role of Chitinase in Plant Defense and Nematode Management in Tomatoes, Peppers, and Eggplant). Anti-nematodal activity associated with the treatment of soil with chitin byproducts is believed to be because the chitin induces microbes in the soil to produce chitinase which destroys eggs laid by nematodes in the soil which otherwise hatch resulting in the infestation and damage of valuable agricultural crops susceptible to nematode damage.
Chitin in various stages of depolymerization, and chitinase, in BSF leachate, and spent waste, could account for some of the beneficial effects of amending the leachate and/or spent waste in soil, especially in enhancing the growth rate and yield of plants susceptible damage by nematodes. Leachate and spent waste could be easily tested for anti-nematodal activity. If these byproducts proved efficacious in controlling nematodes on a commercial scale in large scale field trials, they could be marketed as novel nontoxic albeit effective and safe anti-nematodal agents to household gardners, nurseries and commercial farmers.
BSF leachate, and spent waste, may also be a rich source for the discovery and isolation of new antibiotics. Its value in this regard should not be underestimated. Many antibiotics have been discovered and purified from soil. The many microbes competing against one another for nutrients in decaying food scrap waste, and BSF larvae competing for the same nutrients, suggests that there is a good possibility of isolating new antibiotics of significant value from both the leachate and spent waste recovered as byproducts in a larval farming operation.
Chitin, and hydrolysates of chitin, short chain volatile fatty acids, and defensins all exhibit anti-microbial activities. These products have already been identified and demonstrated in samples recovered from BSF larvae growing off food scrap wastes (see, for example, Purification and characterization of a novel antibacterial peptide from black soldier fly (Hermetia illucens) larvae, Detection of antimicrobial substances from larvae of the black soldier fly, Hermetia illucens (Diptera: Stratiomyidae) and Antibacterial activity of larval extract from the black soldier fly Hermetia illucens (Diptera: Stratiomyidae) against plant pathogens).
A concerted effort in screening and cataloguing the range and types of antimicrobials present in the BSF leachate and spent waste fractions could thus be of considerable value and might lead to the discovery of additional marketable byproducts that could be sold in generating revenues needed in supporting a larval farming operation.
Another valuable byproduct in BSF leachate is melanin, a polyphenolic compound that can be easily isolated and which has been used as a redox component in the fabrication of biological batteries (see River Road Research Awarded A Patent For Melanin Production). Melanin is a strong blue light absorber, and is used in many other commercial applications including, for example, its incorporation into lens used to screen out blue light, as a sunscreen blocker and coloring pigment in cosmetics, and in ameliorating the effects of ionizing radiation on tissues is well-known (see Melanin nanoshells for protection against radiation and electronic pulses). Melanins cannot be easily synthesized and costs as much as $300 to $600 per gram depending upon the quality of the isolated product. Crude BSF leachate could therefore be marketed to manufacturers interested in isolating it from the leachate fraction in meeting market demand for this specific byproduct.
Aside from all of the above, compost recovered from spent waste associated with farming BSF off waste could be sold as a soil amendment as an additional source of revenue in supporting a plant’s overall operations. The market for compost is already well-established.
Lastly, there are several variations on the business model in farming BSF larvae off wastes which could be explored in building a sustainable business model less dependent upon investing large amounts of capital in scaling up and operating a single centralized industrial plant facility. Since BSF larvae can be grown relatively inexpensively on a modular scale in portable “Propagation Bioreactors” (PBRs) fabricated from commercially available totes and agricultural bins (BR2s) (see Propagating BSF Using “Box in a Box” Propagation Bioreactors), rather than investing capital in building one very large plant facility and carrying the full burden of operating a large scale plant facility, a company farming BSF could focus on building and designing simple layout plans for the assembly of smaller decentralized production plants capable of producing larvae on a scale in the range of 5 to 10 metric tons of dry larvae per year per unit farm.
In this model the company would therefore specialize more on layout design, flexibility and simplicity in operating modular plant facilities that could be installed and operated on relative small farms and sites, and organize co-op wholesale pooling, marketing and sales of harvested larvae by farmers operating the small plant facilities through licensing contracts. Farmers engaging in farming BSF off local agricultural wastes would be free to sell portions or all of the larvae they harvest to the co-op managed by the company in a business relationship that works for all interested parties.
The advantage to the company would be that it gains a revenue stream by providing expertise, selling modular equipment, and design support for farming BSF on a scale that is manageable and simple enough to implement on local farms and sites in decentralized locations. In this model small plants could therefore be built closer to where wastes is available, reducing collection and transport costs in hauling waste to a single centralized plant facility.
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