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Developing the Premier Colored Huacaya Alpaca Herd in the World

Alpaca Investing

Why Alpacas? 

ALPACA Benefits  

• Excellent national breed organization Alpaca Owners & Breeders Association 
• DNA Blood Typed Registry, Alpaca Registry, Inc.
• Supportive 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

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 animals. At a third of 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 aged 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.   

~   Alpacas   ~ 

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 an incredible potential demand, it is insurable, and it offers numerous tax advantages.  

First, alpacas exhibit all of the traits that make any investment attractive; they are scarce and 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 less than 50,000 alpacas in the U.S. (check with the alpaca registry for current numbers). Breeding stock has been in the U.S. since the mid 80s and prices have remained relatively stable since that time. Average prices on females range from a low of $7,000 for young weanlings to about $40,000 for a top quality female.  These prices vary a great deal with the best of the best bringing drastically higher prices.  One well-known Herdsire sold at auction in April of 2000 for $166,000 and another sold for $225,00 in October 2000!  In 2001 and 2002, the prices are continuing to increase on top males.  

Alpacas are no longer imported from South America, so 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 (Alpaca Owners and Breeders Association), the U.S. is poised to be a world leader in the alpaca industry. Because of the scarce supply, marketing efforts have been limited, and we have not even begun to create the potential demand for alpacas and alpaca fiber products. 

Alpaca fiber is finer than cashmere and exhibits many qualities that make it more desirable than any other fiber. Textiles made from alpaca fiber, often 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.   

Livestock has been a primary investment since the origins of man and has very little dependence on technology. An alpaca investment offers an excellent opportunity to diversify your portfolio in the new millennium. Alpacas are insurable against theft and mortality. Theft is also rare because nearly 100% of North American alpacas are registered using a DNA blood type system. Without registration, the animal would be practically worthless as breeding stock.    

Currently, the only conventional investments that allow the principal investment to be insured are savings accounts, CDs and bonds which often exhibit a 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.  For up-to-date tax laws check IRS publication #225 entitled The Farmers Tax Guide and consult with your accountant. 

Growth Scenarios - This is a scenario for a purchase of 4 females with no sales so for five years to show the growth potential.  In five years, a $38,000 investment (that you can finance over 4 years and utilize for many great tax advantages, has grown to $193,000 in herd value.  No taxes are incurred from this appreciation until animals are sold.  The 5 year raw fiber value doesn't factor in the increase in fiber value from processing it to the finished product state and launching a retail fiber operation.  At any point, stock can be sold for more income/cash flow.  

Let me know what you have in mind, and I will build a customized growth scenario for your plans.

In a nutshell - an investment in alpacas provides the following - 

• Female alpacas reproduce once a year 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. 

Be sure to check out our 3P Paca Partnership Plan to maximize your investment dollar, particularly if you want to invest now but don't have the facilities to get started.  

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.  

Alpaca farming raises more than hair
By Julie Sturgeon • Bankrate.com

Pssst, how would you like to rub noses with your next investment?

Nearly 2,000 Americans have answered, "I do," opening their acreage to alpaca farming.

Alpacas are members of the camel family, and closely resemble their llama cousins. However, this gentle animal's bone structure makes it useless as a pack animal and, outside Peru, no one particularly wants to dine on its meat.

The five-foot mammal's value lies in its soft, luxurious fleece, used in everything from garments to teddy bears.

Most of those raising these exotic livestock resemble Chuck and Helen Stewart. She was a pediatrician, in Larkspur, Colorado; he served as her office manager.

When the Stewarts first glimpsed a shaggy alpaca on The Today Show, they saw it as a loveable pet. But at prices equaling a year's college tuition, this wasn't a puppy-sized purchase. Affordability lay in starting a breeding business.

His accountant, however, knew nothing about the exotic livestock industry. His attorney was a small-farm ostrich rancher who told tales of expensive investments that stuck their heads in buckets and died too stupid to lift their heads from the water.

His banker also admitted ignorance, but was willing to front the capital in exchange for everything Stewart owned as collateral.

"There are millions of pigs, cattle and horses. An alpaca sets apart because of the initial cost. People who go into this must first commit the funds, then make the money," says fellow farmer Ed Friedman, an ex-attorney and real estate developer who now divides his time between a 52-head alpaca farm and his position as an adjunct faculty member who teaches entrepreneurship at Penn State University.

"There's something innate in humans that insists there is a way to make big money fast," says Bill Staton, chairman of Staton Financial Advisers LLC in Charlotte, N.C., and host of a seminar titled Wealth Building Strategies That Work.

"I'm not saying it's a scheme -- somebody can make money at it. But it's like Michael Jordan and basketball. He can't explain why he's such a profound basketball player. When you get out of your area of expertise, it spells trouble."

"This is an investment. You don't make it with money to pay the mortgage," Stewart warns.

To buck odds that have sent country folk to their financial ruin, city investors need a solid business plan, five years' of capital and a responsible mentor.

Profit: The good news
Alpaca profits today lie in breeding. Investors who want a quick return buy a pregnant female for $20,000, then sell her baby for $10,000 to other newcomers to the industry.

Those building more slowly hold female babies until they, too, are pregnant and worth their initial purchase price. The return on investment ranges from Stewart's 50 percent annually to 10 percent for those unfortunates with scrubby stock.

Others purchase an alpaca, then pay someone boarding fees to raise it. This option, Friedman says, reaps the smallest return.

All this breeding is leading toward a fleece market -- but not for 20 to 40 years, Stewart estimates. As secretary of the Alpaca Owners and Breeders Association, he points to literature claiming ranchers sell their fleece to artisans for $2 to $4 an ounce. Fiber thickness counts also influence price: get it too coarse and the price starts to slide.

The real hurdle, alpaca farmers say, is that neither the United States nor Canada has a large mill that commercially processes alpaca fiber from hair to sweater. That leaves domestic demand to a small cottage industry.

Shared shearing times flood this tiny market, driving the price down. Some alpaca farmers work around this by spinning their own fibers, knitting the sweaters and marketing the apparel on the Internet.

Not for the faint-hearted
Alpaca breeding stock costs are dizzying. An average pregnant female costs $22,000, according to the AOBA. Some sell as low as $12,500; superior stock commands $40,000.

Males retail between $7,500 and $25,000, although the highest quality studs have sold for more than $100,000. Prudent farmers might assume they can save by shelling out $1,000 to $3,000 for stud fees, but alpacas are social mammals. Solo living stresses them out until they die.

Ostrich veterans don't blink at such antes. Their industry saw breeding stock go from $70,000 a pair to $2,500 in a few years. But Stewart claims the alpaca association has licked this deflation nightmare.

For one, it introduced an animal registry and closed it to further importation to protect U.S. herd growth. This approach sidesteps fraud, which also tainted ostrich pioneers, by listing blood type and DNA data to ensure top-notch breeding claims are exactly what they purport to be, Friedman points out.

Second, alpacas reproduce slowly.

Currently, North America harbors 30,000 alpacas, 18,000 of which are females. The portion of females younger than the 18-month-old breeding age brings the quantity of potential mamas to 14,000. They'll produce 50 percent males and 50 percent females, which can't reproduce until mid-2003.

"We're not looking at mass production here," Stewart adds.

Other ongoing costs include:

Land: You need five acres to support 20 alpacas. The good news: they create a communal dung pile, so sanitation efforts are concentrated.

Equipment: Stewart only needed a rake, shovel, water buckets and wheelbarrow, but he couldn't resist purchasing a truck, too. Most farmers need a barn and fencing -- but the upgrade temptation meant Friedman sunk $165,000 into his structures. And even the stingiest investor pays for the convenience of lead ropes, harnesses and toenail clippers. AOBA estimates $12,500 in startup costs here.

Feed: Alpacas eat grass or hay to the tune of one bale per adult every eight days. A special alpaca feed containing vitamins, minerals and protein pellets runs $300 per year per animal.

Veterinary care: Friedman's bills set him back $25 per alpaca per month, including rabies vaccinations and deworming treatments. Stewart, on the other hand, budgets $35 per animal annually -- a figure that includes special requests to help with birthing complications. Unfortunately, alpaca anatomy isn't a required course in this country, so many farmers find the local vet is almost as ignorant as they. Speaking of expertise, shearing can require a professional touch from South American practitioners, if you can find one.

Insurance: Premiums that cover full mortality cost between 1 percent and 3.3 percent of an alpaca's value, paid up front annually.

Marketing: Set aside 8 percent to 10 percent of your budget for marketing purposes. Without brochures, Internet sites and hosted visits, you won't sell the livestock.

Education: AOBA dues run $125 annually, annual conference fees and travel costs can bite your wallet anywhere from $150 to $2,000. Attendance, however, increases the knowledge you need to survive the introductory stage.

Friedman estimates the average alpaca investor can break into the field for between $80,000 and $100,000. The risks include the fact that the animals can injure themselves or die unexpectedly, and a defect plummets a breeder's price value.

Stewart was forced to neuter one male and sell it as a fiber animal for $1,000.

"Without this fault, he was a $30,000 stud," he sighs.

Taking care of the taxes
Never invest in alpacas solely as a tax shelter, Friedman advises. But certainly expect to use this business avenue to write off expenses.

Farm losses offset income from other areas. An $180,000 loss in 2000 translated into a $65,000 tax shelter for Friedman.

Alpaca farmers also may appreciate the animals over five years, and the breeding stock enjoys a lower 20 percent long-term capital gains treatment.

Or, under section 179, you may write off newly acquired equipment that you put to use in 2001 up to $24,000. The truly savvy trade alpacas with a colleague without any tax implications, similar to a real estate 1031 exchange.

"Helen and I have been extremely successful," Stewart admits. "Part of it is luck, and the other part is we treat it as a business that takes work. You don't get rich quick on a legitimate business enterprise.

"You just have more fun with this one."    -- Posted: Sept. 5, 2001