This is an inconsistent bug. Many people have reported their fish traps ceasing production after server restarts and after using the bait.
After the 7 July patch I had three fish traps stop working, I replaced them and the new ones worked for a fortnight and then stopped. I replaced them again and they have worked ever since.
I play on an official PvE server and since that last replacement, fish traps refill with fish without ever needing the insects or fat grubs. I cautiously tested the baiting of traps on one of them - put in handfuls of insects - it did indeed make unappetising fish from a queue but also continued to fill with other fish. Long after the insects had gone it continued to fill with random fish. I later put fat grubs in there and it queued exotic fish to be made, but still continued to fill with random fish.
this inconsistency doesn’t make it any easier for Funcom to figure out why their code is breaking for some people and not others.
Here is my experience: I have had this issue with most of my traps. I think that it is related to the insects, meaning that once you have used insects in a trap it can get stuck in that mode and thus will only provide more fish when you put in more insects. I use 2 of my traps for fishing with insects and the others I just keep as they are and this seems to works fine.