I have a wall that is covered in pegboard. I noticed dust coming out of two of the holes. I opened the board up and found very small worms that appear to be eating the insulation, or the paper on it. The wood around it is not soft or damaged as I haved poked the wood with an awl. They do not look like termite or carpenter ant larvae.The bugs appear brown with segmented bodies about 1/4 inch long with no discernable legs. Any guesses as to what they are?



I don't know if this should be an answer or not, but here goes.
I removed the pegboard wall (it's in a walk-out basement area and was used to hold the insulation against the exterior wall) from the affected area and this is what I found. It seems that, over the course of time, mice had stolen dry cat/dog food and stored it between the walls. Since it is near an outdoor area anything is apt to get in. After much research it appears that the little devils are pantry beetle larvae and they were feeding on the dry animal food stored by the mice. The next project will be to remove the pegboard and install some new insulation and clean the area up. I also plan to get some new cats to take care of the mice.