benefit cost analysis: insect feed for sustainable aquaculture
DESCRIPTION
BCA conducted on environmental, social, and economic factors affecting the implementation of a project to utilize insects as a source of protein for fish farms in South AfricaTRANSCRIPT
Running Head: BCA: Insect Feed for Sustainable Aquaculture in South Africa 1
Benefit Cost Analysis: Insect Feed for Sustainable Aquaculture in South Africa
Iver Marjerison
Marylhurst University
BCA: Insect Feed for Sustainable Aquaculture in South Africa 2 Executive Summary
The Insect Feed for Aquaculture Sustainability Project (IFAS) is a
hypothetical project that is being suggested as a means to improve efficiency and
sustainability of the 14 rainbow trout farms located in the Western Cape province of
South Africa. Although technological innovation and infrastructural improvements
in the area have vastly increased the efficiency of these farms, they still rely on
conventional fish feed that comes at a high cost economically, environmentally, and
socially.
The currently used fish feeds consist of an estimated 44% fishmeal, with the
majority of this fishmeal being sourced from small open ocean fisheries. With global
human population rising, there has been a significant increase in the demand for
fish, which has resulted in fishmeal prices more than doubling in the last decade
(World Bank, 2013). Along with the economic strain, the energy intensive sourcing
of wild fish to fuel aquaculture causes a myriad of sustainability concerns. IFAS’s
proposed solution is the utilization of insects as an alternative to fishmeal due to
their efficient energy conversion, high protein levels, and capability of recycling
waste.
Although there are a wide range of potential costs and benefits to the
utilization of insects as fish feed, this Benefit Cost Analysis (BCA) focuses on the
three aspects projected to be most significant in terms of social, environmental, and
economic sustainability. Benefits analyzed include: food waste recycling, reduced
nitrogen pollution, reduced Co2 emissions, and feed cost reduction. Costs include
the implementation cost, the feed consulting cost, and the difference in annual
production. Due to there being very few aquaculture systems currently utilizing
insects, there is very little research on their long-‐term effectiveness, making the
evaluation of the full range of potential benefits and costs of this implementation out
of the scope of this project.
This BCA has drawn information and estimations from a large amount of
different sources. Primarily data regarding the Western Cape’s rainbow trout
production has been drawn from reports from the Aquaculture Association of South
BCA: Insect Feed for Sustainable Aquaculture in South Africa 3 Africa (AASA, 2009). Information regarding the cost and efficiencies of insects as a
replacement for fishmeal is based on reports from AgriProtein Technologies, a
company based in South Africa that specializes in insect meal to be used as livestock
feed (Agriprotein, 2014a). While data used to determine the effects of insect
utilization on fish production, pollution, waste recycling, and emission reduction has
been drawn from reports by the United Nations Department of Food and Agriculture
(FAO) and independent peer reviewed scientific studies (Hilarie, 2007) (Newton,
2009). It should be noted that calculations used were based on global aquaculture
data that may not apply specifically to South Africa. Based on the 15-‐year time
horizon with a discount rate of 5.75% the BCA estimate showed a Benefit Cost Ratio
(BCR) of 2.395 with net benefits of $5,576,763.39. The initial costs associated with
transferring the aquaculture systems to the new feed resulted in a negative net
benefit of $7904.32 in year zero, with the benefits accumulated giving a payback
period of one year.
The positive BCR of this project reflects the massive potential benefits that
insect feed utilization by aquaculture systems in the province would have, and
because of this should strongly be considered by the rainbow trout farming industry
as a means to improve efficiency. Encouragement of this project by local regulatory
bodies could work to improve regional sustainability, while coinciding with the
FAO’s (2013) most recent urge for countries to implement insects into their food
systems. Due to the current gaps in the data making many of the presumed benefits
are unable to be monetized properly, but it is assumed that further research on the
topic will reveal significant additional social, economic, and environmental benefits
associated with the use of insects as livestock feed.
BCA: Insect Feed for Sustainable Aquaculture in South Africa 4
Introduction This BCA on the Insect Feed for Aquaculture Sustainability project analyzes
the various costs and benefits associated with the regions farms replacing half of
their current fishmeal with insect meal. Rainbow trout farming makes up the largest
portion of South Africa’s aquaculture production, with the majority of these farms
located in the Western Cape province with an estimated 14 farms producing 550t of
fish annually (AASA, 2009). Over the years technological advances have made these
systems increasingly resource efficient, with an average Feed Conversion Ratio
(FCR) of 1.5 (AASA, 2009).
Based on this FCR the region’s farms input 825t of fish feed annually. This
formulation of fish feed in the region varies slightly, but is estimated to be 44%
fishmeal (Hereinafter referred to as FM) with the remaining being made up of a
combination of vegetable oils, maize, wheat, vitamins, and minerals (PGWC, 2010).
The fishmeal, which makes up a large percentage of the total fish feed, is generally
made up of 75% or more small open ocean fish that are either sourced by
commercial fisheries specifically to be used as fish meal, or are indirectly sourced as
by-‐catch (FAO, 2013a). The FM is by far the most expensive and resource intensive
aspect of current fish feed production and its methods have long been questioned in
terms of their efficiency (MCI, 2014). By sourcing wild fish in order to feed farmed
fish, these systems often times are able to financially benefit in the short run, but
accumulate massive external costs that make them inefficient in the long run (FAO,
2014). The issue that has drawn international attention to the topic of FM has been
the steady increase in prices. The global average price of FM has more than doubled
over the past 10 years alone (World Bank, 2013). Currently 70-‐90% of fish farm
expenses come from the cost of fish feed, and with this growing price many farms
find it difficult to financially compete.
These economic issues compounded with the energy intensive nature of FM
production has gotten many organizations searching for more a sustainable way to
BCA: Insect Feed for Sustainable Aquaculture in South Africa 5 feed livestock, including the recent encouragement of the use of insects as a form of
livestock feed. The FAO (2013) released a comprehensive study in 2013, identifying
the potential of insects as feed, and encouraging their implementation into food
systems. The reason for this is that insects are extremely efficient energy converters,
require very little natural resources, grow quickly, are rich in protein, and are able
to recycle waste. This means that insects are able to feed on organic waste products
such as manure and food scraps, converting them into protein that can then be used
as an input to feed livestock. Although this method is being internationally
recognized for it’s sustainability benefits, there have been very few cases of large
scale implementation, largely due to the lack of industrial sized insect farming
operations to cultivate the insects. AgriProtein is the premier company in this
market that has their facility based in South Africa where they are able to take in
110t of waste and create 7t of high protein insect meal (as well as special insect oil
concentrates and fertilizers) daily (Agriprotein, 2014a).
The economic focus of this analysis is on the change in expenses for the
farms, as well as the difference in production quantity of fish annually. This analysis
also identifies and monetizes the primary environmental and social implications.
The benefits that will be analyzed deal with the Co2 emissions associated with FM
production, and IM production and it’s ability to recycle food waste, and reduce
nitrogen pollution from livestock manure. Costs associated with this project deal
with the farm personnel switching feed formulations and the required feed expert
consultation to ensure the new formulations are calculated efficiently.
Literature Review The potential value of this proposed project was given recent international
attention by the FAO in their report Edible Insects Future Prospects for Food and
Feed Security (2013), that highlighted the unsustainable practices of current
livestock rearing, and the impressive potential that insects may have as a feed
source. The report pointed out the energy conversion ratio for insects is nearly 2:1
compared to 10:1 for beef. This ratio points out the efficiency of insects as food
BCA: Insect Feed for Sustainable Aquaculture in South Africa 6 converters, following up with the fact that the feed required for insects is often
times organic waste that can be deterred from landfills.
Due to the current lack of research and scientific literature on the specific
topic of insect feed usage in aquaculture, I have collected data from multiple
scientific facets for this proposed projects that are able to be combined to give an
estimation as to the economic impacts that the proposed plan would have on the
regions fish farms, the environmental impacts of FM reduction and IM utilization,
and the social impacts associated with the proposed project.
Economic Impacts
The economic information that relates to the global current price and
projected increases in FM are based on the Bank’s (2013) report “Fishing to 2030”.
This report outlines current global price trends, and makes projections for prices up
to year 2030. The report explains that some of the key factors attributed to the
sharp global increase in price are due to the increasing global population and the
resulting demand for farmed fish, as well as the over fishing of many areas resulting
in decreased available wild fish stocks. Research conducted on IM production was
based largely one of the sole companies in the world currently producing IM on a
large scale, Agriprotein Technologies’, and their official website, reports, statements,
and CEO interviews (2014a). Based on the comparison of these prices the literature
reveals an obvious decrease in cost of IM compared to FM.
Data collected regarding the potential impact of IM on annual fish yields was
taken from the study published in the Journal of World Aquaculture Society
(Hilaries. 2007) which conducted a 9 week experiment using different ratios of IM
as a replacement for FM in aquaculture trout. This experiment concluded that there
was only a slight FCR increase in the fish that were fed 50% IM. However the
accuracy of the utilization of this data is questionable based on this study only being
conducted over a 9-‐week period, while the trout in the projects proposed trout
require 64 weeks to grow. The FAO’s online feed resource Feedipedia (2015), also
supplied a wealth of relvent information estimating impacts of IM use in trout farms
being a similar slight decrease in yield. Although site specific research would need
BCA: Insect Feed for Sustainable Aquaculture in South Africa 7 to be conducted to best determine the effects that the implementation of IM will
have, these studies and reports show that a decrease in weight gain from the use of
IM is probable.
Environmental Impacts
According to the FAO (2014) current FM production relies largely on the
sourcing of small open ocean fish, which largely refers to low trophic level fish such
as sardines and herrings. According to research done by Dr. HIllborne at the
University of Washington’s School of Aquatic and Fishery Sciences, the commercial
harvesting of these fish are responsible for .07 to .36 tons of carbon per ton of live
weight fish (Hilborne, 2011). This carbon footprint can then be directly applied to
the production of FM in regards to sourcing, but fails to bring into account other
aspects of FM production such as the energy intensive requirements for the
processing of the fish meal. Other environmental impacts associated with the type of
fishing required to source FM include the depletion of wild populations of fish, and
the resulting marine ecosystem damage (FAO, 2014). Unfortunately, a full-‐scale
report of each of these costs and benefits associated with FM production was out of
the scope of this analysis.
The data regarding the environmental impacts of IM usage are limited by the
lack of companies producing the product and livestock systems utilizing it as feed.
Based on current estimates by the IM producer AgriProtein (2014a), on a daily basis
the company is able to recycle an estimated 100t of organic waste, and in turn
produce 7t of IM. According to the company the majority of this waste comes from
uneaten food scraps from hotels and restaurants and animal manure. The food
waste is the majority of the waste that the company recycles, and therefore is a key
component to the environmental impacts of IM. Research done on food wastage for
this project was based on the FAO’s Food Wastage Report (2014b), which
conducted a global account of food waste, and it’s associated environmental, social,
and financial values. This comprehensive study outlined numerous impacts and
effects that food waste have, however the majority of these were unable to be
accurately applied to the small regional scale of this project. The research for this
BCA: Insect Feed for Sustainable Aquaculture in South Africa 8 analysis focused on the reports economic data, which put food waste globally at an
estimated 1.3 billion tons annually, with an economic value of the waste estimated
at $696 billion.
Another enviornmental impact analized for this project is based on the
Sustainability of South Africa’s Livestock (2013) report which indicates the majority
of current infrastructures lack the ability to efficiently cycle the nutrients in the
regions livestock waste. This improperly treated waste results in wide spread
environmental issues, with nitrogen pollution being identified as one of the most
detrimental by the European Environment Agencies 2013 report evaluating the
topic. The high concentrations of nitrogen in animal manure are able to leach into
waterways as well as contaminate soils. Lens (2004) in his book Resource Recovery
and Reuse in Organic Solid Waste Management conducted a comprehensive study
outlining these different variables and estimated the cost of nitrogen between .09
and .16/kg. The EEA (2013) concluded a similar value of nitrogen at .29/kg. The
potential role of IM in mitigating this environmental impact is outlined in the study
conducted by Lewton (2004). This study done on black soldier flies breeding on
cattle manure could effectively recycle nutrients, and concluded that the amount of
Nitrogen (along with other potential pollutants) can be reduced by 50-‐60%.
Methodology and Data The scope of this analysis is based on the 2009 report by the Aquaculture
Association of South Africa, which estimated total fish production of the province’s
14 rainbow trout farms at 550t annually with a farm gate value of $4.82/kg. Based
on AASA (2009) and FAO (2014a) the assumption was made that the average FCR of
these farms is currently 1.5, which results in an annual use of 825t of fish feed. Of
this total amount, it is assumed based on FAO (2014a) feed formulation reports that
44% of the fish feed would be made up of FM (364t). Current research on the use of
insects to feed rainbow trout indicates that 50% of the FM can be replaced with IM
with only a slightly negative effect on the FCR (Hilarie, 2007). Based on this data, the
proposed project assumes that 22% of the total 825t of fish feed will be made up of
IM, resulting in the usage of 182t of both IM and FM annually. The estimates for FM
BCA: Insect Feed for Sustainable Aquaculture in South Africa 9 are assumed to be $2000/t (World Bank, 2013). The price of IM is taken directly
from the local producers current price listing and assumed to be $1400/t. The time
horizon for this BCA is based on 15 years, due to the extreme variables effecting
future supplies of FM and IM production limiting the ability to accurately estimate
further into the future. The discount rate is based on the South African Reserve
Bank’s (2015) current rate of 5.75%.
Food Waste Recycling
The benefits calculated for food waste in this analysis focus exclusively on
the economic value of the wasted products based on the 2014 FAO report that
estimates the value of global waste calculated to $535.38 per/t. The amount of food
waste that is recycled per ton of IM used is based on AgriProtein’s (2014) estimate
that every single ton of IM is responsible for the recycling of 15.7t of total waste. Of
this waste it is assumed, based on company estimates, that 59% is food waste. The
14 farms assumed annual usage of 182t of IM was calculated to recycle 2,857.4t of
waste, with a total of 1,685.87t being from food waste.
Reduced Nitrogen Pollution
The value of nitrogen pollution reduced by this project is based on the
assumption that every single ton of IM is responsible for the recycling of 15.7t of
waste. Of this waste it is assumed, based on Agriprotein’s estimates, that 36% is
livestock manure. Of the assumed annual usage of 182 of IM by the farms, this
results in the recycling of 1028.67t of manure annually. This amount of animal
waste was then converted to dry weight, based on the semi-‐solid to dry weight
manure conversion ratio of .25. This dry weight is assumed to contain 44g/kg of
nitrogen based on the EPA (2013a) estimate for for sheep manure, which according
to Meissner (2013) make up the majority of the regions livestock. This amount was
then assumed to be reduced by 55% by the insect recycling based on Newton’s 2005
study results. The reduced amount of nitrogen pollution was then monetized by the
EEA’s estimated total cost of nitrogen valued at $.32/kg.
Reduced Co2 Emissions
BCA: Insect Feed for Sustainable Aquaculture in South Africa 10 The benefits of the projects reduction in Co2 emissions focuses exclusively
on the carbon footprint associated with current FM production. By replacing 50% of
the current 364t of FM used with IM, the annual FM usage will decrease by 182t.
Based on FAO (2014) estimates 75% of this FM is sourced from small open ocean
fish. The estimated Co2 emissions for this type of commercial fishing (Hillborne,
2011) are between .07 to .36t per ton of live weight. For this analysis the average of
this is used, .22t of Co2 per ton of live weight. The monetization of the reduced Co2
emissions is based on the EPA’s (2015) Social Carbon Cost, which is currently
valued at $61 per ton of Co2.
Feed Cost Reduction
The value of feed cost reduction is based on the difference in price associated
with the replacing of 50% of the farms current FM with IM. Of the assumed 364t of
FM used annually valued at $2,000.00/t, the project would replace 182t with IM
valued at $1,400.00/t.
Implementation Costs
The implementation costs associated with this project focus on the estimated
amount of time that workers on the farms would need to spend in order to adjust
their current systems to the new feed formulation, and familiarize themselves with
slight variations in their supply chain logistics. Of the projects 14 farms, it is
assumed that 3 workers on each farm would need to dedicate a total of 14 days each
on the implementation and familiarization of the new feed formulation. This data is
based on an interview with a aquaculture consulting firm and their estimations
(Frese, 2015). Based on aquaculture worker salary estimates contained in a report
by the BFAP (2012) it is assumed that the daily wage for these aquaculture workers
is 80R. These numbers were calculated based on the current USD exchange rate of
$.083.
Production Costs
Production costs for this project are based on the projected decrease in
productivity associated with replacing half of the current FM with IM. The
assumption is that the FCR of these aquaculture systems will increase by .284,
BCA: Insect Feed for Sustainable Aquaculture in South Africa 11 decreasing the annual production of rainbow trout. This FCR increase is based on
Hilarie's 2007 study which found that replacing 50% of FM with IM would result in
an increase in FCR of .04 every 9 weeks. This is then compounded based on the
current growing season for rainbow trout in this region at 64 weeks, based on AASA
(2009) reports. This assumed decrease in efficiency results in the annual production
of the systems being 462.44t, compared to the previous 550t. The difference in
production was then monetized based on the AASA (2009) estimated farm gate
value of $4.82/kg.
Feed Consulting Cost
The feed consulting cost is based on the estimated amount that the farms will
have to spend on consultation from a feed formulation expert in order to ensure that
the proper ratios of nutrients and protein are met with the new IM based fish feed.
The cost is based on an interview conducted with an aquaculture specialized
consulting firm (Frese, 2015) that estimated each consultation would cost $2,000.
The assumption is that the consultation could be conducted on one of the 14 total
farms in order to determine the proper application and feed formulation. The
consulting company suggested that this type of consultation would need to be
carried out initially, and then annually for the following three years to ensure that
the feed formulation is maximizing efficiency. This results in a total of four
consultations required for the proposed project.
BCA Findings The BCA data below shows the results of the proposed Insect Feed for
Aquaculture Sustainability Project on the 14 rainbow trout farms in the Western
Cape province of South Africa. The results show that the implementation of this
proposed project would be economically, environmentally, and socially beneficial to
the region over a 15-‐year time horizon. The project’s total discounted benefits are
$9,574,330.54 and discounted costs are $3,497,566.61, resulting in a BCR of 2.395
with net benefits of $5,576,763.39. The initial implementation and cost of consulting
result in a negative net benefit during year zero, however following that, each year
BCA: Insect Feed for Sustainable Aquaculture in South Africa 12 reflects positive net benefits. The only continuous cost is the resulting decrease in
annual fish production, which is grossly offset by the compounded annual benefits.
Policy Analysis For this particular case the project itself is a policy instrument, which seeks
to incentivize the market through an assumed increase in efficiency. This project
aims to incentivize aquaculture companies to source more environmentally
sustainable feed (insects) by showing them the potential financial benefits
associated with switching over to a feed formulation that utilizes IM. This would
BCA: Insect Feed for Sustainable Aquaculture in South Africa 13 reduce the areas reliance on conventional FM, in turn reducing the demand for the
highly energy and resource intensive process of sourcing wild fish to produce FM.
This type of market based incentive approach would differ greatly from current
environmental policies aimed to limit wild fish harvesting, which rely on command
and control style policy instruments.
The primary target for intervention for this project is resource conservation,
and since the current fish farming industry consumes such an alarming amount of
resources this target is quite broad. Primarily this projects strategy would focus on
the reduced usage of FM, subsequently reducing the amount of wild fish required for
its production. This strategy more indirectly targets the habitats and marine
ecosystems that are destroyed during the commonly used bottom trawling method
of this commercial fishing (MCI, 2014).
The addressees for this specific project are the 14 rainbow trout farms based
in the Western Cape Province of South Africa. However, the operations of these
farms are quite standard for the industry, meaning that this project could
potentially provide information relevant to conventional aquaculture operations in
most parts of the developed world. The regulation area is technically the Western
Cape province, however conventional FM is often times sourced from
internationally waters complicating the actual regulations of this project and it’s
impacts.
Primary and Secondary Criteria
Cost Effectiveness and Economic Efficiency
By proposed plan to utilize IM in aquaculture systems promises to decrease annual
fish feed expenses which is estimated to account for 70-‐90% of aquaculture systems
total expenses. The only negative financial implication is seen initially due to the
cost of implementing the new feed formulation. In terms of efficiency there is also
the estimated reduction in annual fish production, resulting in less value of their
harvested fish, however the benefits grossly outweigh this cost.
BCA: Insect Feed for Sustainable Aquaculture in South Africa 14 Fairness
The project is proposed to encompass all of the trout farms in the province in order
to reduce the potential conflicts that can arise from competition between the farms.
This cooperation between the farms will also work to mutually benefit each of the
farms involved as they can split the cost of the expenses associated with formulating
the need fish feed.
Dynamic Efficiency
The project focuses on the utilization of IM to reduce the regions dependence on FM,
but does so in a way that promotes innovation and further research to be done. By
only reducing the farms FM use by 50% the systems are able to continue operation
in a fairly similar manner, while at the same time being made aware of the potential
financial benefits associated with the far cheaper IM replacement.
Dependability
Currently the infrastructure for insect farms is quite limited, but it is growing. This
means that on a large scale the dependability of sourcing insects for fish farms could
be difficult at this time. For this specific project this is not an issues as the worlds
most advanced producer of IM is based in the targeted region, however application
of this projects findings in other regions could prove problematic for this reason.
Flexibility
The projects proposed replacing of current FM with 50% IM is based on current
research findings that suggest this to be the maximum amount of IM that can be
used well insuring continued successful yields of fish. However, after this initial
implementation the farms could easily adjust their percentage of IM in order to
better adapt to their own systems nutrient and financial requirements.
Political Acceptability
The political acceptability is another unique consideration for this project. For this
projects region of South Africa, the use of IM as feed in aquaculture systems has
been approved along each portion of the supply chain. However, the application of
BCA: Insect Feed for Sustainable Aquaculture in South Africa 15 the research and findings of this project in other regions could be problematic. For
example, in the United States currently there are guidelines regarding insect usage
as livestock feed, but there are limited policies regarding large scale insect farms
(FDA, 2014).
Conclusion Based on the findings of this analysis it would be socially, environmentally,
and economically beneficial for the 14 rainbow trout farms in the Western Cape
province to adopt the IFSA project. This analysis revealed that the only negative
costs would be encountered during year zero of implementation, with the project
becoming profitable by the end of year one. The project would benefit not only the
business aspects of the farms, but would also provide environmental and
agricultural benefits for the entire region. For this reason it is recommended that
local policy makers and agricultural interest bodies act to incentivize and encourage
the adaption of this project in the area.
On a wider scale, the adaption of the IFAS project in these provinces could
potentially act as a flag ship program to show the financial efficiencies and
sustainability benefits associated with the use of insect meal as feed for aquaculture
systems. This would also help achieve the objectives laid out by the South African
Aquaculture Associations (2009) urging aquaculture systems in the region to begin
looking for innovative methods to find more sustainable feed inputs. On a more
global scale the implementation of this project would directly relate to the FAO’s
(2013) recent recommendation that local food systems begin utilizing insects as a
food source, and would put South Africa on the cutting edge of this movement.
Limitations
The data used to conduct this BCA was drawn from a large collection of
research and literature that differ greatly in both time period and geographic
relevance. The collecting of such a wide range of information is due to the current
BCA: Insect Feed for Sustainable Aquaculture in South Africa 16 lack of research and studies that have been conducted on the emerging field of
insects as livestock feed. Currently large-‐scale operations for insect meal
production, as well as livestock farms that utilize the fishmeal have simply not been
in operation long enough to gather significant data from. There are also the
widespread impacts associated with the reduction of FM use and utilization of IM
waste recycling in terms of economic, social, and environmental sustainability that
were simply out of the scope of this project. As previously mentioned this project
also benefits from focusing on a region with the most technologically advanced
producer of IM in world, in many other regions their may be large price increases
associated with transportation, sourcing, supply, and storage.
Recommendations for Future Study
This BCA focused on the farming of rainbow trout which have scientifically
been suggested to lend themselves to the use of IM, however further research on the
utilization if IM to feed other species may vastly improve the potential value of
insects as a source of fish feed. Another aspect of fishmeal that this analysis did not
discuss is the use of fish oil as a primary component in conventional fish feed.
Similar to FM, fish oil production also requires massive amounts of wild caught fish
and is energy intensive to process. There are currently proposals and research being
done on the production of an insect based oil that could replace the need for this fish
oil, further reducing the need to exploit wild fish sources, while increasing the
potential benefits for the production of insect based fish feed supplements.
BCA: Insect Feed for Sustainable Aquaculture in South Africa 17
Appendix A Assumptions
BCA: Insect Feed for Sustainable Aquaculture in South Africa 18
BCA: Insect Feed for Sustainable Aquaculture in South Africa 19 Assumptions
Values Units Source Notes
Time Horizon 15 Years
Longest time window of accurate data available. Based on World Bank’s 2013 report.
Discount rate 5.75%
South African Reserve Bank MPC, 2015 Current interest rate in South Africa
Base year 2015
Total rainbow trout farms 14
In the Western Cape Province-‐Based on Aquaculture Association of South Africa reports.
Fish feed usage 825 t AASA, 2009
Current annual production with Estimated Feed Conversion Ratio of 1.5
Reduction in percentage of fish feed as FM 22%
Replacing half of the previously used 44% FM with IM.
Farm gate value of rainbow trout $5.82/kg
AASA, 2009 Farm gate value of rainbow trout.
Current cost of Insect Meal $1400 Per t
Agriprotein, 2014a
Projected cost of IM by local producer.
Current cost of fish meal $2000 Per t
World Bank, 2013
World Bank calculation on global average cost.
Benefit Elements
Values Notes
Food Waste Recycling (annual) $902,581.00
Accounting exclusively for the estimated economic value of wasted products.
Reduced Nitrogen Pollution (annual $1987.20.00
Accounting exclusively on the nitrogen reduced from recycled animal manure by IM production.
Reduced Co2 Emission (annual) $2,440.00
Accounting exclusively for the Co2 emissions associated with sourcing of wild fish for FM production.
Reduced Feed Cost (annual) $107,200 Based on current estimated costs of IM and FM.
BCA: Insect Feed for Sustainable Aquaculture in South Africa 20
Benefit-‐Cost Ratio 2.395 Net Benefits $5,576,763.39
Cost Elements Values Notes
Implementation Cost $3,904.32
Involving the worker time spent adjusting to the new feed formulating.
Production Cost $422,039.00 Accounting for the difference in annual fish yield.
Feed Consulting Cost (four occurrences) $2,000
Based on aquaculture consulting estimates required to implement new feed formulation efficiently.
BCA: Insect Feed for Sustainable Aquaculture in South Africa 21
Appendix B Benefit Calculations
BCA: Insect Feed for Sustainable Aquaculture in South Africa 22
Food Waste Recycling Assumptions Values Units Source Annual fish feed usage 825 t AASA, 2009 Percent fish feed as IM 22% Half of previous FM Annual IM usage 182 t Calculated Waste recycled per single t of IM use. 15.7 t Agriprotein, 2014a Annual waste recycled 2,857.4 t Calculated Percentage of waste as food waste 59% Agriprotein, 2014a Calculations Values Units Annual food waste recycled 1685.87 t Calculated Value of wasted food $535.38 Per t Calculated Cost of Benefit Values Total Food waste savings $902,581.00 Annually
BCA: Insect Feed for Sustainable Aquaculture in South Africa 23
Reduced Nitrogen Pollution Assumptions Values Units Source Annual Fish feed usage 825 t AASA, 2009 Percent fish feed as IM 22% Half of previous FM Annual IM usage 182 t Calculated Waste recycled per single t of IM used 15.7 t Agriprotein, 2014 Annual total waste recycled 2,857.4 t Agriprotein, 2014 Percentage of total waste as semi-‐wet animal waste 36% Estimate Dry weight 25% of wet Calculated Nitrogen 44g Per kg dry EPA, 2013a Total Reduce nitrogen 55% Newton,(2005) Nitrogen total estimated internal external cost $.32 Per kg EEA, 2013 Calculations Values Units Source Annual semi-‐wet animal waste recycled 1028.67 t Calculated Annual dry weight recycled 257.2 t Calculated Annual nitrogen treated 11.3 t Calculated Annual nitrogen reduced 6.21 t Calculated Annual nitrogen reduced-‐ kg 6,210 kg Calculated Nitrogen total estimated internal external cost $.32 Per kg Calculated
Cost of Benefit Values Value of nitrogen reduced $1987.20 Annually
BCA: Insect Feed for Sustainable Aquaculture in South Africa 24
Reduced Co2 Emission Assumptions Values Units Source Annual fish feed usage 825 mt AASA, 2009 Percentage of fish feed made up of fish meal 22% Caluclated Previous percentage of fish feed made up of fish meal 44% FAO, 2013 Percentage of FM made up of open ocean fish 75% FAO, 2014 Tons of Co2 emitted per ton of live weight open ocean fish .22 mt Hilborne, 2011 Social Cost of Carbon $61.00 Per mt EPA, 2015
Calculations Values Units Annual reduction of FM usage 182 mt Calculated Annual reduction of Co2 emitted 40 mt Caluclated
Cost of Benefit Values Total social carbon costs offset $2,440 Annually
BCA: Insect Feed for Sustainable Aquaculture in South Africa 25
Reduced Feed Cost Assumptions Values Units Source Annual Fish feed usage 825 t AASA, 2009 Amount of FM 22% Of fish feed Calculated Amount of IM 22% Of fish feed Calculated Previous amount of FM 44% Of fish feed FAO, 2014 Cost of fish meal $2,000.00 Per t World Bank, 2013 Cost of IM $1,400.00 Pet t Agriprotein, 2014a
Calculations Values Units Annual IM used 182 t Calculated Annual FM used 182 t Calculated
Cost of IM used $254,800.00 Annually Calculated
Cost of FM used $364,000.00 Annually Calculated
Total cost of IM and FM $618,800.00 Annually Calculated
Previous annual FM 364 t Calculated
Total cost of previous FM used $726,000 Annually Calculated
Cost of Benefit Values Reduced cost $107,200 Annually
BCA: Insect Feed for Sustainable Aquaculture in South Africa 26
Appendix C Cost Calculations
BCA: Insect Feed for Sustainable Aquaculture in South Africa 27
Implementation Cost Assumptions Values Units Source Wage of aquaculture workers 80R Per day BFAP, 2012 USD exchange $.083 Per 1R Current Exchange Total farms 14 AASA, 2009 Workers involved with implementation 3 Per farm Frese, 2015 Time spent implementing new system 14 Days Frese, 2015
Cost Values Total cost of Implementation $3,904.32 One time
Production Costs Assumptions Values Units Source
Annual fish feed used 825 t Calculated Feed Conversion Ratio with 50% of FM replaced with IM 1.784%
Calculated
Feed Conversion Ratio with no FM replaced 1.5%
Hilarie, 2007
Farm gate value of rainbow trout $4.82 Per kg AASA, 2009 Annual fish produced with 50% of FM replaced with IM 462.44 t Calculated Annual fish produced with no FM replaced 550 t AASA, 2009 Difference in fish produced-‐t 87.56 t Calculated Difference in fish produced-‐kg 87,560 kg Calculated
Cost Values Cost of production $422,039.00 Annually
BCA: Insect Feed for Sustainable Aquaculture in South Africa 28
Feed Consulting Cost Assumptions Values Units Source Consultation for formulation analysis-‐ initial $2,000
Fish Farming Consultant Frese, 2015
Follow up analysis $2,000
Fish Farming Consultant Frese, 2015
Analysis needed annually for 3 Years
Cost Values Total cost of feed Expert $2,000 4 Occurrences
BCA: Insect Feed for Sustainable Aquaculture in South Africa 29
Appendix D Total Annual Benefits and Costs
BCA: Insect Feed for Sustainable Aquaculture in South Africa 30
Benefits
Year Food Waste Recycling
Reduced Nitrogen Pollution
Reduced Co2 Emissions
Reduced Feed Cost Total Benefits
2015 $-‐ $-‐ $-‐ $-‐ $-‐ 2016 $902,581.00 $1,987.20 $2,400.00 $107,200.00 $1,014,168.20 2017 $902,581.00 $1,987.20 $2,400.00 $107,200.00 $1,014,168.20 2018 $902,581.00 $1,987.20 $2,400.00 $107,200.00 $1,014,168.20 2019 $902,581.00 $1,987.20 $2,400.00 $107,200.00 $1,014,168.20 2020 $902,581.00 $1,987.20 $2,400.00 $107,200.00 $1,014,168.20 2021 $902,581.00 $1,987.20 $2,400.00 $107,200.00 $1,014,168.20 2022 $902,581.00 $1,987.20 $2,400.00 $107,200.00 $1,014,168.20 2023 $902,581.00 $1,987.20 $2,400.00 $107,200.00 $1,014,168.20 2024 $902,581.00 $1,987.20 $2,400.00 $107,200.00 $1,014,168.20 2025 $902,581.00 $1,987.20 $2,400.00 $107,200.00 $1,014,168.20 2026 $902,581.00 $1,987.20 $2,400.00 $107,200.00 $1,014,168.20 2027 $902,581.00 $1,987.20 $2,400.00 $107,200.00 $1,014,168.20 2028 $902,581.00 $1,987.20 $2,400.00 $107,200.00 $1,014,168.20 2029 $902,581.00 $1,987.20 $2,400.00 $107,200.00 $1,014,168.20 2030 $902,581.00 $1,987.20 $2,400.00 $107,200.00 $1,014,168.20
Costs
Year Implementation
Cost Production
Cost Feed Consulting Cost Total Costs 2015 $3,904.32 $-‐ $2,000.00 $5,904.32 2016 $-‐ $422,039.00 $2,000.00 $424,039 2017 $-‐ $422,039.00 $2,000.00 $424,039 2018 $-‐ $422,039.00 $2,000.00 $424,039 2019 $-‐ $422,039.00 $-‐ $422,039.00 2020 $-‐ $422,039.00 $-‐ $422,039.00 2021 $-‐ $422,039.00 $-‐ $422,039.00 2022 $-‐ $422,039.00 $-‐ $422,039.00 2023 $-‐ $422,039.00 $-‐ $422,039.00 2024 $-‐ $422,039.00 $-‐ $422,039.00 2025 $-‐ $422,039.00 $-‐ $422,039.00 2026 $-‐ $422,039.00 $-‐ $422,039.00 2027 $-‐ $422,039.00 $-‐ $422,039.00 2028 $-‐ $422,039.00 $-‐ $422,039.00 2029 $-‐ $422,039.00 $-‐ $422,039.00 2030 $-‐ $422,039.00 $-‐ $422,039.00
BCA: Insect Feed for Sustainable Aquaculture in South Africa 31
Appendix E Discounted Annual Benefits and Costs
BCA: Insect Feed for Sustainable Aquaculture in South Africa 32
Discounted Annual Benefits and Costs Year Total Benefits Total Costs Discounted Benefits Discounted Costs Annual Net Benefit
0 0 7904.32 0 7904.32 -‐7904.32 1 $1,014,168.00 $424,039.00 $959,024.11 $400,982.51 $558,041.61 2 $1,014,168.00 $424,039.00 $906,878.59 $379,179.67 $527,698.92 3 $1,014,168.00 $424,039.00 $857,568.41 $358,562.34 $499,006.07 4 $1,014,168.00 $422,039.00 $810,939.40 $337,466.82 $473,472.57 5 $1,014,168.00 $422,039.00 $766,845.76 $319,117.56 $447,728.20 6 $1,014,168.00 $422,039.00 $725,149.66 $301,766.02 $423,383.64 7 $1,014,168.00 $422,039.00 $685,720.72 $285,357.93 $400,362.78 8 $1,014,168.00 $422,039.00 $648,435.67 $269,842.02 $378,593.65 9 $1,014,168.00 $422,039.00 $613,177.94 $255,169.76 $358,008.18 10 $1,014,168.00 $422,039.00 $579,837.29 $241,295.28 $338,542.01 11 $1,014,168.00 $422,039.00 $548,309.50 $228,175.20 $320,134.29 12 $1,014,168.00 $422,039.00 $518,495.98 $215,768.52 $302,727.46 13 $1,014,168.00 $422,039.00 $490,303.52 $204,036.42 $286,267.10 14 $1,014,168.00 $422,039.00 $463,643.99 $192,942.24 $270,701.75
Present Value $9,574,330.54 $3,997,566.61
BCA: Insect Feed for Sustainable Aquaculture in South Africa 33
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