Benefit Cost Analysis: Insect Feed for Sustainable Aquaculture

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.


Appendix A Assumptions


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.


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.


Appendix B Benefit Calculations


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


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


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


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


Appendix C Cost Calculations


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


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


Appendix D Total Annual Benefits and Costs


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


Appendix E Discounted Annual Benefits and Costs


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


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