Alpacas are great to raise for many reasons. In addition to the financial benefits, alpacas are peaceful, gentle animals that are much easier to raise than most other livestock animals. At a third the size of a llama and weighing less than many large dogs, they are easy to handle. They are also very efficient grazers and their padded feet are gentle on the earth. A small herd can be raised on a couple of acres and are acceptable in many residential areas. They are also one of the least aggressive animals on the planet and even breeding-age males are kid safe. Alpacas offer a quality lifestyle for people of all ages and physical ability and are great to share your life with.  

Benefits

• Excellent national breed organization Alpaca Owners & Breeders Association (AOBA)
• DNA Blood Typed Registry, Alpaca Registry, Inc. (ARI)
• Supportive fellow breeders
• Family-focused lifestyle
• Safe even with small children
• Environmentally friendly
• Perfect for small acreage
• Easy to handle by anyone
• Easy daytime births
• Inexpensive to maintain
• Scaleable business model to meet all levels of involvement and goals
 
The World’s Finest Livestock Investment

Why are alpacas considered to be the world’s finest livestock investment? For a number of reasons, alpacas are one of the best investments, livestock or otherwise, available today. You are investing in a commodity that has strong current demand and incredible potential demand that is insurable and offers numerous tax advantages (see Tax Advantages section).

First, alpacas exhibit all of the traits that make any investment attractive: they are scarce and they are in high demand. Historically alpaca values have remained constant and have made major contributions to the national economy of Peru, as well as several other South American countries. Currently, there are approximately 100,000 alpacas in the U.S. (check with ARI for current numbers). Breeding stock has been in the U.S. since the mid 80’s and prices have remained relatively stable since that time. Actually, prices have increased considerably over the past 10 years, making alpacas an even better investment.  Average prices on females range from a low of $7,000 for young weanlings to about $30,000-40,000 for top quality females.  Prices vary a great deal with the best of the best bringing drastically higher prices.  A lot of the very high prices come out of auctions and for well-known (marketed) breeders, known to produce the best fiber and conformation in an animal that is possible at this point in time.  One well-known Herdsire, Dom Lucilio. sold at auction a few year ago for $400,000.  Then Snowmass’s Invincible sold at auction in Feb. 05 for $580,000!  And in 2006 a half interest in Crescent Moon’s Legacy sold for $750,000!!!  Those are unique prices, and most animals are sold to new breeders for prices in ranges between $10,000 and $40,000 per animal, depending on gender and age, and of course, genetics, fleece characteristics and conformation and show performance evidence of their value.

Alpacas are no longer imported from South America.  The Registry (ARI) closed that quite awhile back so that domestic growth will depend on the animals already in North America. Demand is also high in Canada, Europe, New Zealand and Australia.  With support from an excellent national organization (AOBA and ARI), the U.S. is poised to be a world leader in the alpaca industry. Because of the scarce supply of alpacas in the US, marketing efforts have been limited, and we have not even begun to create the potential demand for alpacas and alpaca fiber products.  It is, however, increasing each year by leaps and bounds.

Why the interest in alpaca fiber?  Alpaca fiber is exquisite!  It is as fine or finer than cashmere, has no lanoline and nothing like lanoline that has to be removed, and therefore no odor. Yet it is naturally water repellent and stain resistant.  It is a hollow fiber and therefore has greater insulating properties than any other similar product, and it is therefore lighter than other similar fibers.  The finest alpaca fibers are silky soft and not at all scratchy against bare skin.  The courser fibers (from legs, belly and chest) make beautiful rugs. Many garments are now made from alpaca.  If you check garments in catalogues, you will see that many companies now offer garments made from alpaca and describe them as super soft, light, and durable. Textiles made from alpaca fiber, sometimes referred to as “angel threads”, are known throughout the fashion capitols of the world. The AOBA fiber co-op is working hard to ensure that we will be able to create and fulfill commercial demands with domestically produced fiber.  

As an investment livestock animal, alpaca offers an excellent opportunity to diversify your portfolio in the new millennium. Alpacas are insurable against theft and mortality for a mere 3.25% of the insured value.  However, loss is rarely, if ever, due to theft because nearly 100% of North American alpacas are registered using a DNA blood type system, since without registration the animal would be practically worthless as breeding stock.  Furthermore, there is no place to sell animals except to other valid breeders.

Currently, the only conventional investments that allow the principal investment to be insured are savings accounts, CDs and bonds which often exhibit a considerable lower return on investment. Passive business partners also  benefit from some tax advantages. Probably the most important benefit is that the value of your alpaca herd compounds tax free until you realize actual income from the sale of your stock. In this way, it offers many of the benefits that are so valued in IRA investing.

The tax advantages from raising alpacas are very attractive.  Purchased stock are generally depreciated over five years.  Everything from equipment to fencing, to vehicles and barns, are set up on the appropriate depreciation schedules.  Expenses associated with ownership are deductible from any income received.   Tax advantages vary based on whether you are an active or a passive investor and whether you operate your farm as a business or hobby, with the complete and greatest benefits going to actual ranchers/farmers. For up-to-date tax laws, check IRS publication #225 entitled The Farmers Tax Guide and consult with your accountant.

An investment in alpacas provides the following:

• Female alpacas reproduce once a year (11.5 month gestation), providing continual herd growth.  A female cria can easily be worth as much or more than her mother.
• Initial investment in your stock can be depreciated over 1-5 years on your taxes.
• In addition to the standard depreciation, alpaca purchases after September 11, 2001 for the next 4 years qualify for the economic stimulus package.
• All related expenses can be written off on varying schedules.
• Your investment can be insured against theft and mortality for 3.25% per year.
• You can finance for up to 4 years at low interest, leveraging other people's money as your herd grows.
• You can sell animals for income.
• You can generate additional unlimited income from the sale of alpaca products.
• You can generate additional income by offering services such as stud services, transportation, shearing, business planning, marketing, brokering, etc. 

As with any investment, it is important that you consider the risks and potential returns involved, your current and future financial needs, and the tax consequences.  Then develop a business plan that works for you and your family.  A good business plan helps you think through IN WRITING where you want to go and how long it will take to get there.

Other Alpaca Facts

Alpacas are camelids and closely resemble their llama “cousins” (“llama” is a Spanish word. The Spanish double L (“ll” ) is always pronounced as a “y”, or as “yamma”, not lama)  Unlike the llama, however,  the alpaca’s bone structure makes it useless as a pack animal and, outside of Peru, no one particularly wants to dine on its meat. In the US we do not eat them, which actually appeals to many people even more.  To be able to raise livestock solely for their fiber and not to eat them simply “sits right” with many people. For us this is true too.

The alpaca’s value lies in its soft, luxurious fleece, used in everything from garments and teddy bears to rugs.  As mentioned above, the finest fleece is as soft as cashmere, and the coarser fleece is perfect for making felted products, batting, hats and rugs. The many products possible are only limited by our collective creativity. The fiber is hollow, allowing for greater insulating properties than wool, and it has no lanolin that needs to be removed like wool does.  It therefore is naturally odor-free.  In fact, alpacas smell simply divine!  Even their waste, or “beans”, have little-to-no odor.  Another good alpaca fact is that they poop in poop piles rather than randomly all over the pasture, making scooping it up so much easier.  Furthermore, there is no high nitrogen content like there is in the waste of many farm animals that can burn plants if not composted.  In fact, there is no nitrogen in the alpaca bean at all; they simply add organic matter to the soil and in turn improve soil structure and tilth. Alpaca beans, therefore, can be put directly onto and tilled into soil and plants without the risk of burning seedling roots. 

Most folks raising these “exotic” livestock are in their 50’s and 60’s and looking toward retirement. They’ve accumulated a little nestegg investment money and have reached an age where they have wondered what will they do next, during retirement, that will allow them to continue to be actively engaged in life, yet not in a manner as hectic or demanding as their rat-race careers had been.  Alpacas have been the answer to many, many such people, and each and every one that we have met has said that it’s the best thing they could have ever done.  Alpacas add tremendously to the quality of life, in ways that could never have been anticipated, irrespective of their financial benefits -truly “frosting on the cake”!  For active “retirees”, raising alpacas is a wonderful way to live – particularly so when the ranch is located in reasonable proximity to an urban area for shopping, theater, movies, concerts, art, opera, or other amenities.  For younger families, the lifestyle is similarly perfect for raising children (or their parents’ grand-children).  Children LOVE alpacas, and the little crias (kree-ahs, or babies) are so inquisitive (so are the adults, actually!), they will come right up to a child’s nose and gently “sniff”, much to the delight of the child and adult.  While alpacas generally aren’t too keen on being hugged, there are many that don’t mind at all having their necks stroked with the back of the hand in a downward motion, and the crias sometimes almost seem to enjoy the embraces of children and adults. We have some crias that run up to us for their daily hugs and “conversation”!  All and all, they quickly endear themselves to the family, regardless the size or age (alpaca or human!).  Remember, alpacas are social mammals. They are HERD animals and must live with at least one other. Solo living stresses them out until they die.

Alpacas don’t require a lifetime of livestock experience either. In fact, they don’t require any experience with livestock at all, just a desire to do so. The care of the alpaca is so simple, just about anyone can do it.  The basic care requires feeding hay and supplements twice a day, providing fresh and abundant water every day, checking the poop piles to make sure no parasites are evident (and taking fecal samples to the vet if there is something unusual), giving them periodic worming medication, trimming their toenails every 3-6 months, scooping poop every day or so, and making sure the crias are properly inoculated.  Usually births are in the morning and without incident.  If you watch the soon-to-be mom, you can catch the birthing process.  It’s always prudent to try to do this in case of any problem.  Problems can be as simple as a cria not presenting properly. The feet should come out first, then the head. If a cria is not oriented correctly in the birth canal, it can require human intervention. If you have not received any alpaca neo-natal training, or are not comfortable with your assistance skills, call the vet immediately!  It typically takes about 15 minutes for the birth to complete.  If it lasts more than 30 minutes, call the vet!   If you are experienced and have attended a neo-natal clinic (offered periodically somewhere in the US), you may wish to reach into the mother and push the baby back and turn it into proper position so that it can move out properly.  Sometimes that merely means moving an elbow that is stuck.  It is important to have practiced this at least once in a neo-natal wet lab prior to doing it yourself so that you don’t further injure the mom or cria.  When in doubt, call the vet!  There is a kit called a “cria kit” available that you might want to purchase to assist you in a birth.  Go online for more information and contact your local alpaca organization or AOBA to find out when and where classes for birthing and other alpaca care are being offered. 

Alpacas as an Investment: 
Alpacas may look like loveable pets, but at prices equaling a year's college tuition, this is not like a puppy purchase. Affordability lay in starting a breeding business.  There are millions of pigs, cattle and horses out there across the country.  Alpaca is still rare and does not populate quickly. People who go into this business must first commit the funds, then they make the money.  It’s not a “get-rich-quick” scheme.  It takes several years on average before you are able to make a profit – that is, if you are strictly a breeder and not selling products.  Perhaps you would begin by selling products before you have animals to sell.  Either way, you should find a good mentor to help you start out, in addition to the capital outlay.  You’ll probably find your mentor in the person you buy your alpacas from, or at least that breeder should offer mentorship to all client/buyers.  If you have another alpaca mentor, that’s fine too. Once the decision is made to go into this business, the prospect for profitability is a good one, and good enough that thousands of “retirees”, or soon to be, have invested their hard-earned savings into the alpaca business.  Of the few who have gotten out of the business have not done so because of the alpaca, but rather for unforeseen personal circumstances, none that could have been foreseen. 

So, about that investment, it takes a sizeable initial investment to get going.  Alpaca breeding stock costs can seem dizzying. An average pregnant female costs $18,000-24,000.  Some females sell as low as $9,500; and superior stock commands $40,000.  The average alpaca investor can break into the field for between $18,000 and $100,000.  That assumes one pregnant female (agisted with a herd) at the low end, to five good pregnant females at $20,000 each, or 5 fairly good pregnant females at $18,000 each and one good male at $10,000 as a Herdsire.  The lower the quality of female, the higher quality of sire needs to impregnate her and the higher the breeding fee for that (at least $1500, more typically $2000+ each time). 

If you really want to be a competitive and good breeder, be very wise with your first purchase!!!  We cannot over-emphasize that point.  This is your foundation!  Get yourself off to a good start with solid breeding females, bred to high quality males.  If you don’t, be prepared to play the catch-up game with what’s already out there that you will be competing against at shows and may never catch up with.  The big ranches (we say “ranches” in the Southwest, while it seems those in other locales say “farms”) have exquisite alpacas already that you cannot hope to win against if you don’t select your foundation wisely.

Males retail between $5,000 and $25,000, although the highest quality studs have sold for more than $400,000-750,000, as mentioned earlier. Prudent ranchers can save $1,000 to $3,000 in stud fees paid to someone else by breeding correctly to produce their own herdsires. 

Risks/Recommendations: 
The risks of alpaca ownership include the fact that the animals can injure themselves or die unexpectedly, which is why it is prudent to insure them for at least the amount of your initial investment. 
Make sure that before purchasing you research pedigree (bloodlines – ask you mentor which are good), and always examine an animal in person to check for conformation, good bite (teeth should align with upper dental pad. Overgrown teeth can mask a good bite and be hard to evaluate by the inexperienced, so make sure you have someone with experience to help you assess an animal.).  If she is pregnant, know who the sire is and his background, and if possible, examine him and his offspring on the ground.  NEVER, NEVER buy an animal online without seeing it first!!!  You must be able to examine the animal by hand and sight.  Defective animals are gelded (if male) and sold as fiber or pet animals in the range of $500 to $3,000. AND, never sell or buy just one animal!   Alpacas are herd animals and must have a companion.
 
Defects can be a bad bite (over or under), leg issues (several – check books for these), lack of crimp (also several variations on that - check books to learn more), coarse fiber, lack of “character” in fiber (typically, nicely bundled in matchstick-like columns that give it “architecture”). 

Resources: 
See some of the writings of Julie Skinner of Snowmass Alpacas.  She’s been a very successful and hugely knowledgeable breeder (for the past 25 years - not to mention very nice and generous with her knowledge!), and written extensively about fiber characteristics.  Also read Eric Hoffman’s comprehensive tome(s) and Dr. Norm Evans’ book on nutrition and health.  If your budget allows for more books, Mike Saffley’s books contain valuable and historical information as well.  There are countless other good books out there which should be purchased as your budget permits.

Profit: 
The good news: Alpaca profits today truly lie in breeding so that animals are available to sell to new breeders, AND in striving to improve each generation so as to produce a North American alpaca herd that comes to be known for the best fleece in the world. While it is important to sell to new breeders, it is equally important to mentor them to ensure that they are well-equipped with enough information and support to also succeed.  The success of each and every one is the key to success of this industry as a whole.  But about profit, it can happen more quickly if a breeder purchases pregnant females and sells them after they have produced offspring, keeping the offspring and selling the moms in order to purchase another pregnant female fairly close to delivery.  Doing that brings about babies and future profits more quickly, but may be too hectic and impersonal a strategy for many.  Most folks wait the year and a half for a female to mature and be ready for breeding and then sell her, or sell her mom rebred and keep the breeding-age offspring.  There are many approaches, but selling pregnant females is more lucrative than selling products or breeding services.  That said, if you have a really good herdsire, you can make a pretty good income over the course of a year selling breeding fees at $1000-$3000 each.  Breeding fees for the “famous” studs can run $5,000-$10,000 each!  Not many a “young” breeder can afford those fees, but sometimes it can be worth it to breed directly to the superstud instead of one of his offspring.  Keep in mind that you never know what the genetic shuffle will render, and it is risky nonetheless. 

Lesson: 
Always buy and breed the best you can afford so that you get the best alpaca born that you possibly can, whether female or male.  Half of the babies born will be boys, so if you are going to have a boy, have a great boy who can be a future herdsire!  Otherwise you’re wasting a lot of your hard-earned money!  The return on investment can range from 50 percent annually on a good return, down to only 10 percent for those who buy cheap and end up with “scrubby stock”.  It takes numerous generations to breed out the scrubby characteristics and replace them with desirable characteristics, assuming you can ever do it and catch up to what’s out there already.  This is one business where you want to do it well from the start, just have pet-qualilty alpacas.  That’s fine too, and extremely enjoyable to owners as well.  We have friends who do just that and they love their alpacas and take them to fairs and parades, teaching everyone about the wonderful alpaca.  Everyone enjoys that immensely and it’s great marketing of the alpaca.  Alternatively, you could focus on selling products and do well with that. Online sales of all products have done very well over the past decade or so, and the sales of alpaca products has done very well.

Processing: 
All this breeding is leading toward a fleece market -- but not for another 20 years or so, depending on how quickly the national herd really does grow.  We’re at 100,000+ plus now, but will need at least 1,000,000 alpacas to support a fleece industry in our country.  Some literature claims ranchers can sell their fleece for $2 to $4 an ounce. Fiber thickness also influences price: the finest fiber is the most valued.  Coarser fiber is not as pricey.  However, there is now a good use of coarser fiber with the production of “Texas rugs”.  The rugs are absolutely beautiful, naturally water-repellent, stain resistant, and seem to shed dirt.  Even the lightest ones look clean after continued use on the floor.  With that change in the use for coarse fiber, the animals that have grown to be 8-10 years with coarser fiber now are worth keeping because of the possibilities to use coarse fiber for products.
 
The real hurdle has been that neither the United States nor Canada has had a large mill that commercially processes alpaca fiber from hair to sweater. That leaves domestic demand still a small cottage industry.  However in the past 5 years, mills have developed and are popping up across our country and Canada, providing alpaca breeders with a local means (not Peru) of processing their fiber, and the prospect for a large national mill closer than had expected.

Land:
One acre will accommodate 4-5 alpacas, or 20 alpacas in five acres and 40 alpacas in 10.  As long as the animals have adequate nutrition and several hundred feet of running space, the alpacas do very well.  The babies LOVE to run and pronk, racing each other up and down the pens, so give them lots of space to do that if you can.  Adequate nutrition may be met without green pasture if you don’t have it (called “dry lot” feeding) in the form of good grass hay and supplements (see Norm Evans book).  We see even better results with the fiber formula. There are many small ranches on less than 20 acres, common here in the Desert Southwest, and we produce many beautiful, nationally competitive Color Champions here.  The renowned Dom Lucilio came from a very good ranch in New Mexico, which says alot about the high quality found at the smaller ranches in this state. 

Equipment: 
Most ranchers need a truck with a 6’ bed, a barn or 3-sided shelter, fencing, buckets for feed and water, and poop shovels and rakes.  Barns run about $50K plus, fencing $15K to $30K, depending on how much fencing is installed.  AOBA estimates $12,500 in startup costs, including leads and halters and the basics.  That would assume shelter and fencing of some sort is already in place. Panels and gates for erecting stalls within perimeter stall fencing would be some of the costs included in the $12,500 since halters, leads, medicines, buckets & supplies would not account for very much.  The cost of these items rose in 2007 with gasoline/fuel prices shooting skyward, which in turn is increasing the cost of transportation of all goods and hence prices of all goods and services.  So, it is hard to estimate what the actual start-up costs would be today, but $15,000 would not be unrealistic. 

Feed: 
Alpacas eat grass or hay (Orchard, Timothy) to the tune of one bale per adult every eight days or so, or 1.5%, more or less, of body weight per animal per day. A special alpaca feed containing vitamins, minerals and protein pellets runs about $300 per year per animal.  Dr. Norm Evans formula is a popular pellet supplement.
Veterinary Care:  Average bills run about $25 per alpaca per month, including vaccinations and deworming treatments. Birthing complications or injuries are above that and can run into the thousands since there is no “health insurance” for livestock. Unfortunately, alpaca anatomy isn't yet a required course for vet students in this country, so many ranchers find the local vet is almost as ignorant as they. However, many vets are becoming well-versed in alpaca, and there probably is at least one in every sizeable city.  Some local alpaca organizations have paid to send their vet to educational courses to educate him/her, which has proven quite successful.  In New Mexico, our alpaca breeders’ association has financed the education of one of our vets serving a large number of ranches.  He has become very knowledgeable in alpaca care.  The knowledge base across the country is growing by leaps and bounds every year.

Shearing: 
Shearing typically requires a professional from South America, and they tour in groups throughout the shearing season across the USA.  Some people have taken classes offered at large conferences to learn to shear and then purchased the necessary shearing equipment (running about $300) to do the shearing themselves, or at least on their show animals.  There are more and more US shearers popping up as the national herd grows, but it can be hit and miss with their techniques or skill level, with more than an acceptable amount of “second cuts.”  As a head’s-up to those who think they can jump on this band-wagon business, it is imperative that second cuts not occur as that means lost fleece, which means lost product, which means lost revenue to the alpaca owner. Alpaca owners, for obvious reasons, will not tolerate second cuts!  The true skill lies in not knicking the animal, yet getting close enough to the skin to shear off (in one swoop), as much fleece as possible.

Insurance: 
Premiums cover full mortality and cost approximately 3.25% of an alpaca's value, paid up front annually.  Some companies, like Wilkins, will allow you to pay quarterly.  It can get very expensive with a large number, but once you reach a “herd” level, the price is per herd rather than per individual animal. 
Marketing:  Set aside 8 percent to 10 percent of your budget for marketing purposes. Without brochures, internet websites, and ranch visits, it’s hard to sell livestock.

Education: 
AOBA dues run $125 annually. The AOBA magazine is separate and runs about $40 per year.  Annual conference fees and travel costs can cost anywhere between $150 to $2,000, depending on travel costs and number of days, etc.. Attendance, however, increases the knowledge you need to know at the introductory stage and is really imperative to understand the nuances of being a breeder.

Tax Consquences: 
It would be unwise to invest in alpacas solely as a tax shelter, but once invested, do expect to use this business avenue to write off expenses.  Farm/ranch losses offset income from other areas.  The benefits are different for the full-time breeder vs. the “hobby” breeder.  The benefits for those who agist and are serious about becoming full-time ranchers are greater than “hobby” breeders who merely agist alpacas and do not show evidence of trying to acquire a ranch of their own.  Check with an accountant known to work with alpaca ranchers who have knowledge of section 179 and the Farmers Tax Guidfe, #225), obtained at your local IRS office.  Because laws are complicated and change frequently, we recommend consulting with a licensed CPA for further details on income tax advantages.  From personal experience, as agisting alpaca breeders, we have been able to depreciate our animals over the past three years and have been able to deduct our expenses against personal income.  Expenses that we have been able to deduct have been: Mileage for all alpaca business; seminar costs; agisting fees; medical/vet costs; insurance on the alpacas; marketing and publications, equipment costs (our new truck), and purchasing alpacas.

Part of the success that’s been had with alpacas is luck (having girls born instead of boys, for example), and the other part is treating the business seriously and working at it.  You don't get rich quick on a legitimate business enterprise.  However, with alpacas, it sure is a fun one with countless benefits from these magnificent animals.  Just being in their presence does wonders for one’s spirit, and listening to their gentle hmmmmm is always so soothing to one’s soul.  It’s a hard business not to love! 

Upcoming Events........

Great Western Alpaca Show, April 30 & May 1-2, 2010, Denver, Colorado

Convergence Albuquerque, July 18-25, 2010.

New Mexico State Fair Alpaca Show, September 26 & 27, 2010

See you there!!!