Monday, July 23, 2012

Why Alpacas - the Business of the Textile Livestock

Why do people in so many countries call alpacas “The world’s finest livestock business?”  For any business asset to be valuable, it must possess certain qualities that make it desirable.  Gold is scarce, real estate provides shelter, oil produces energy, bonds earn interest, stocks are supposed to increase in value, and diamonds symbolize love.  Alpacas share many of these same attributes.

Around the world, alpacas are in strong demand, and people pay high prices for them.  They are scarce, unique, and the textiles produced from their fleeces are known in the fashion centers of New York, Paris, Milan and Tokyo.  There are excellent profit opportunities and tax advantages available to alpaca breeders.  Historically, the alpaca’s value has sustained ancient cultures, such as the Incas of Peru.  Today, alpacas represent the primary source of income for millions of South Americans.  History has validated the value of the alpaca.

Livestock has been a traditional representation of wealth for many cultures around the world, long before financial stocks were sold on the New York Stock Exchange.  The richest families of ancient times counted their wealth by the size of their flocks of sheep or herds of cattle.  Today, wealth as a result of livestock ownership is not as common, but opportunities do exist for profitable farms and ranches.  Tending to a graceful herd of alpacas can be an exciting way to earn a source of revenue and live a rewarding lifestyle.

Since 1984, alpacas have appeared, almost simultaneously, in several countries where they had never been seen before.  The U.S., Canada, Australia, New Zealand, England, and many other European countries have all acquired the foundation animals for national herds.  There are even beginning herds in Japan and South Africa, among others.  What makes this animal so desirable?  The bottom line:  alpacas can be both profitable and enjoyable.

Finally, alpacas are easy to transport, which makes it easy to move them from one location to another.  They have a relatively long and trouble-free reproductive life span, and alpacas can be fully insures against loss.


Alpaca breeders come from many walks of life.  Entire families, young couples, retired couples and business adventurists.  There are even city dwellers who have discovered the option of boarding (or agisting”) alpacas, thereby giving them an operational alpaca business while still retaining an urban career. 

Alpaca Supply and Demand

The market for alpacas has been moderated by the effects of relatively slow herd growth.  The total population of registered alpacas in North America accounts for fewer than 150,000 alpacas.  (For current statistics of the Alpaca Registry, Inc., see http://www.alpacaregistry.net/statsitics.htm.).  Supply of alpacas will continue to be limited in the near futures for a number of reasons:
  • Alpacas reproduce slowly.  A female generally breeds for the first time between 18 and 24 months of age, is pregnant for 11 to 12 months, and almost always only has one cria per year.
  • Many breeders retain their offspring to build their herds.
  • The limited size of the national hers in each country outside of South America will restrain growth to a small degree.
  • The U.S. and Canadian registries are both closes to further importation, which will further moderate North American herd growth.

Alpaca Values

The value of alpaca fleece and finished products made from that fleece is the economic underpinning of the future market for alpacas.  Alpaca ranchers sell their fleece in a variety of ways including raw fiber, washed and carded fiber, yarns, and finished products, with lucrative margins.  Profits or fiber production vary based on each farm’s model for fiber sales. 

Factors that influence individual alpaca prices include color, conformation, fleece quality and quantity, age and gender.  Well-conformed alpacas with superior fleece characteristics sell for higher prices. 


Tax-deferred wealth building is another “alpaca advantage.” As your herd grows, you postpone paying income tax on its increasing value until such time as you begin selling the offspring.  Most breeders elect to sell all or some of the annual offspring production for practical reasons, such as recovering their initial cash flow, acreage and building limitations, and time constraints. 

Alpacas are also fully insurable against theft and mortality.  Insurance can be purchased for your stock regardless of age.  Average insurance rates are 3.25% of the value of the animal, or $325 for every $10,000 of insurance.

The ARI Factor

The Alpaca Registry, Inc. (ARI) is a database housing the genealogy, blood typing and ownership records of alpacas in North America and those of a few alpacas outside this area.  When purchasing an ARI-registered alpaca, the buyer is assured of being provided a correct history of that alpaca based on DNA blood typing. 
In general, ARI-registered alpacas make up the vast majority of the U.S. herd and sell for a considerable premium compared to non-ARI registered alpacas.  New alpaca breeders should take note of the value provided by the ARI registration process and should factor this into their research and purchasing decisions.


Hands-On Alpaca Ownership

There are essentially two ways to own alpacas.  The first approach is to simply purchase the animals and begin raising them.  The second approach is to purchase the animals and place them in the care of an established breeder - called agisting.

Financial Observations

  • The major tax advantages of alpaca ownership include the employment of depreciation, capital gains treatment, and if you are an active hands-on owner, the benefit of offsetting your ordinary income from other sources with expenses from your ranching business. (See Tax Consequences of Owning alpacas section of this article below.)
  • The financial return using the agisted approach, should you elect to board your animals, is also very good.  There are breeders who would be happy to discuss agisting alpacas on behalf of prospective owners.
  • Quality, color, gender of offspring, and strength of the overall industry could influence results positively or negatively.
  • It is important that you make a purchase decision using assumptions that reflect your personal tax and financial situation, as well as your own assessment of the alpaca industry.
  • Financing terms are available from some breeders and range from a few months to two years or more.
Creating A Herd

First, determine your goals for alpaca ownership.  Pets? Family project? Showing? Business?  These are not necessarily exclusive of one another, but may put you on different financial paths.  Once you’ve decided on your goal, the path to alpaca ownership will be more easily defined.

Alpaca Purchase Contracts

Every purchase should require a written contract when acquiring an alpaca.  Contracts will specify the financial terms involved, animal delivery, soundness of the animal, cria birth guarantees and other items necessary for a transfer to you.

Many alpaca owners who have been involved in the alpaca lifestyle have found it both personally and financially rewarding.  Please recognize, however, that owning alpacas involves significant financial risks, as does any business start-up.  Your ultimate success will be determined by your own ability to market your animals; your fiber and finished goods; your employment of available resources within the alpacas industry; your communication skills; and your ability and willingness to provide top-notch customer service that results in a good reputation.  Although I’ve overviewed techniques that many people have used to make alpaca breeding a profitable business venture, it is, of course, impossible to guarantee the ultimate success of any business.