As the world’s most efficient protein generator, aquaculture is already an important means of food production, and with the output of capture fisheries remaining at static levels, it’s widely believed it's up to aquaculture to meet the rising global demand for seafood.
While the value chain has been rising to this challenge and is well-placed to provide larger volumes in the medium-term, on the horizon there is the growth-limiting problem of insufficient feed raw materials. After all, there are finite amounts of fishmeal and fish oil that capture fisheries can sustainably supply. Moreover, the growing competition for these marine ingredients and the volatility of supply due to environmental events such as El Niño is making them increasingly expensive.
With feed accounting for upwards of 60 percent of the total rearing costs in aquaculture, and the current diets being used by fish and shrimp producers at a higher price level per unit than for all other farmed livestock, there is considerable innovation now taking place in the aquafeed sector. This is targeted at reducing the industry’s dependence on feeds made from wild-capture fish,chiefly through the development of new raw material, explained Gorjan Nikolik, associate director of animal protein and seafood at Rabobank.
Speaking at the Aquaculture Innovation Europe conference, which took palce in London on 11 and 12 September 2018, Nikolik identified the three clear frontrunner platforms in the race for new or novel feed ingredients as algae, microbials, and insects.
There are other categories, but in terms of the business plans that Nikolik and his colleagues have seen and the capital that is being invested, this trio “will most probably drive the change in the formula” moving forward. He added that all three also look good on paper. A lot of agribusinesses are getting involved in the algae sector and from a banking perspective “These guys are probably where the smart money is,” he said.
“This makes sense. Algae are a good source of omegas, and this is the market that really is in short supply when it comes to things like salmon farming. So investment here is a good place to start," he said. “I don’t know how long it will take before the products in this [sector] really impact the market, but I don’t think it will take very long. The whole market is about one million metric tons (MT); so it’s not infinite. There are two or three big projects and some of them could add a couple of hundred thousand tons, so we are going to feel it within five years when they come online.”
Similarly, microbial technology is attracting a lot of “really big money” from a number of leading agribusinesses, he said. These companies are looking to fund projects with “very serious scale,” with the largest expected to be around 200,000 MT.
The microbial market, estimated at 5.5 million MT just for aquafeed, is potentially much larger than algae. However, the size of the plant required for production does present a barrier to entry.
“I don’t know how quickly this area will develop if a couple of hundred million dollars are needed to start production. But it is certainly one to observe,” Nikolik said.
Last but not least, the insect platform has perhaps treble the number of start-ups as the algae or microbial sectors, although it currently has far less involvement from the big agri-industrial groups.
“I don’t know why. Perhaps they are skeptical about the scaling-up capability. On the other hand, these [insect] companies have been masters of raising capital. I saw some very big numbers going into projects and on paper this is the most circular of all the three solutions – potentially using waste, whereas algae systems needs sugars and microbials most likely need a carbon source," he said. "But the other two show that there is a real cost advantage when done by big plants. I don’t see that for insects just yet. Let’s see how it works out, but it is still a very important category to look at.”
With so much innovation and so many new, very different businesses operating in the new ingredient space, Nikolik believes that once the first few ventures reach scale there will be a rationalization of the industry.
“I think that we are at the point of technological proliferation,” he said. “Most likely, the least-advanced companies – those that [only just] reached scale or didn’t capture the niche whereby the product is marketed with their ingredient – will have to exit the market. It’s then that we might see rationalization and a big increase in scale," he said. “This is the point we are waiting for. I don’t know when it will happen – maybe in the next five to 10 years. Nevertheless, the companies that emerge after that point will be stronger; they will be tested, they will have a larger scale of production. Then they will truly change the aquaculture industry.”
Nikolik said he further believes it is unlikely that the application of this scaled technology will end with the farming of aquatic animals.
“Aquafeed has been the focus of this innovation because it represents the highest per-kilogram feed costs of all animals. It is the lowest-hanging fruit, but after [aquaculture], it could be pet food or other animals," he said. "Overall, there is one billion MT of feed out there; that’s a big market to go after once the rationalization happens."
Photo courtesy of Steve Ausmus/Agriculture Research Service
