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Thursday, May 31, 2012

The Joy of Raising Crias

 The Joy of Raising Crias
At first glance, I thought that alpacas were cute, fluffy and a bit odd looking.  The more I looked at them, the more odd looking they were.  My husband James fell in love with them instantly. Me, the ever conservative, "is this the perfect move for us" person, was a little more hesitant. But, once we had our first cria on the ground, I was certainly hooked.  I can tell you that you definitely experience a gamut of emotions when your eyes first gaze on the new little creature call a cria (baby alpaca).
Our initial herd consisted of 8 females, five pregnant and 3 maidens.  Part of the excitement is wondering and watching the females grow and learn as they get ready for the birth of their cria.  It is great waiting to see if the cria is a boy or a girl, what color they are and what type of markings they may have as well.  Alpacas have only been in this country for 30 years, and just because you breed a black to a black or brown to a brown, you never know what color you will get.  There are 22 natural colors and you never know the end result until they hit the ground.

When waiting for the birth is is important to assemble what is know as a "cria kit" which contains items necessary to care for the cria upon its arrival. Items you will find in there are usually a stethoscope, nasal aspirator, towels, petroleum jelly, cria coat thermometer and iodine for the umbilical cord. Most crias' birth weight is usually between 15-18 pounds, though four babies last year tipped the scales at 25 lbs. 

Alpaca crias are up and about within 30 minutes or so.  Watching them stand for the first time is amazing.  Those long legs are very wobbly and the cria take a flop here and there, but in no time are up and looking for their first drink.  It is important that they receive the "first milk" within 6 hours of giving birth in order to absorb the colostrum to create their immune system. 

At our ranch we birth usually late May through August, spreading out the arrival of about 20-30 babies to make sure we can keep track of each one individually.  Are they spunky?  Is she gaining weight? Is the mother attentive?  About 95% of the time the answer is a resounding "yes!" but it is always good to keep watch. 

Most alpacas will have their babies between 10 AM and 2 PM with a few outliers here and there.  Sometimes human intervention is necessary to save the life of the cria or its mother.  Although most births proceed just fine, there is the occasional birth that needs help.  For some reason some are born early and have little or no chance of survival unless some extra things are done such as a supplemental feeding by humans in the case of a female with little or no milk.  If it is cold or snowy outside, we set our pens up in the garage and they stay "indoors" for a few days.  Sometimes as with humans the cria is not lined up correctly in the birth canal and you need to help and get everything in alignment.  But there is something really satisfying about being a part of helping a little cria survive and thrive.  Even in the rare cases you loose one you are sad but you know that you gave it your best. 

Alpacas make wonderful mothers and are quite protective of their newborns; in fact, the whole herd takes part in protecting each other.  The first few babies of the season are carefully watched over, followed and protected.  In a few weeks, by the time the 19th baby comes around, they may barely get noticed by the ladies in the field. 

The best time of the year is what we call the "witching hour".  In the summer, when we have 10-30 cria, they start running around at dusk, just as the sun begins to set.  They pronk, pay tag, bite ankles, neck wrestle.  The will do a slight gallop then spin out as they run as fast as they can across the pasture, the other crias bucking and rearing as they chase them through the fields.  After about 20 minutes, they find their moms, lay down and are ready for sleep.

Wednesday, May 30, 2012

Alpaca Farm Set-Up

 Alpaca Farm Set-Up

We have built two alpaca farms since getting into the business years ago, and visited many others along the way.  With over one hundred alpacas to work with every day, having the right set-up and layout is essential.  We found the fencing can be used as a tool if laid out correctly, and a frustration if things are not in the right place.

Every farm is unique, so you will have different requirements than we did living in the Rocky Mountains.  Draw out your plan in a couple of different scenarios to see what elements you like best.  Here are some important areas to consider when laying out your alpaca farm.

Key set-up elements on an alpaca farm

Type of fencing

You will want livestock field fencing is some form (4” x 4” or 2” x 4”) at least 4’ high to keep potential predators such as neighbor dogs, coyotes and fox out as well as keeping crias in.  We found electric wire is only effective when alpacas are first shorn. Otherwise, many are willing to climb right through.  We do have an electric wire on the perimeter fence for extra protection from mountain lions and bears.

If you will have guard dogs, keep in consideration how they will access each of the pastures without allowing alpacas to comingle.  For our set-up, we put a 10"-12" gap at each fence cross-section, just large enough for a dog to squeeze through.  In the stalls, we installed a swinging "doggie door" attached to the livestock hog wire fencing.  The dogs can access the different pastures, but the alpacas have not yet figured out the system.

As an additional security system, you may want to consider a guard llama as a protector.  We found that our two llamas are very alert and protective of the herd.  They can defend against coyotes and other predators.  However, not all llamas will be willing guardians and it is important to find the right match for your herd, ideally a gelded male who has been raised to protect livestock.


You cannot have enough gates.  If you are trying to push alpacas from one pasture to another, or trying to get to an alpaca quickly, the more gates the better. Six-foot gates allow our tractor to access all of our pastures.  We created a thoroughfare of 12' to allow our truck and trailer access to the back pasture. I would recommend having a grate or mesh on your gates as well.  Crias can climb through pens they shouldn’t be in and the males can stick their heads through, raise gates and cause problems.


We use “Kiwi” locks on our gates.  They are easy to open with one hand and a good way to keep your gates shut even if an alpaca is fiddling with the latch.


Availability of water is essential.  Automatic waterers are worth their weight in gold if you can afford them.  With our layout of 5 pastures and 4 stalls, we only need 3 waterers on the entire farm.  We were filling 6 troughs of water every day in the Summer.
If using troughs, use the shorter ones that are 12”-15” off the ground (usually 50 gallons).  Otherwise, the babies cannot reach them when they are low.
Install several water faucets near your outbuildings.  You will need them to clean your trailer, water your pastures and spray down your alpacas on a hot day.


You do not need anything fancy for a barn.  Alpacas are hardy and as long as they have protection from the sun when it is hot and the snow and wind when it is cold, they should be fine.  We used 12 x 24 loafing sheds for several years.  We now have a large barn with storage up above, but I have seen carports be just as effective in the hot sun.

We set our barn up in the middle of our pasture, so that we have a “wagon wheel” style layout.  This allows us to easily push alpacas from one pasture to another through the barn in a matter of minutes to rotate pastures.

Barn Flooring

The right kind of flooring is very important in allowing the urine to drain in the summer months.  We considered a cement floor for ease of clean-up, but realized it would become an ice-rink in the middle of winter with our climate. A solid dirt floor can become compact and won’t allow draining and /or will be very dusty and dry out the alpaca fleece.  So, we decided on  ¾” fines over 12” of pit run.  If you want more details on this, call James at 406-579-4055.

Pasture Layout

You will need several pastures for your herd, including one for the males, females plus a weaning pen.  Each will need some form of shelter with it.  For our temporary cria shelter, we divide the barn with panels so that the barn can be used, but the animals cannot get to each other.
We found it very helpful to be able to see every pasture from the house.  This allows you to keep an eye on pregnant females about to give birth as well as a male in the back who might be sick or hurt.  Also, consider how large trucks and trailers will easily get to your barn as well as turn around without tearing up your pasture. 


There are several types of very effective feeders available on the market.  We have feeders that we fill with 400 lbs of orchard grass hay.  I have seen some that will hold two 60-70 lb bales of hay with a 4” x 4” mesh (or hog wire) on top.  The right type of feeder will allow the alpacas to efficiently eat the hay. The wrong type can fill topknots and the back of the neck with hay as well as scattering the rest of it on the ground.

We also found installing gutters throughout the barn, 20" to 25” off of the ground for pellets is a great tool. This allows you to easily feed without setting out buckets to be kicked over as well as gives access to small bites without choking on the feed.

Runs and Stalls

We put two runs / stalls on each side of the barn.  They serve as a catch pens, breeding pens and holding pens for health checks. I would recommend somewhere between 12’ x 15’ to 15’ x 20’.  You may want to create different sizes for different needs. If you get them too big, you will be doing a lot of ineffective and unnecessary chasing.

In this picture, the automatic waterer is used for both stalls / runs as well as the pasture to the left.  For the pasture in the back, we keep the back stall open so that the herd in the back can access the same watering system.

Please contact us if you have questions or would like some suggestions in setting up your own farm. 

Tuesday, May 29, 2012

Giving Alpacas Injections

Giving Alpacas Injections

Giving injections often intimidated me in the past.  However, they are a necessary part for some issues of life and I out of necessity I had to get used to giving them.  This is not exactly a glamorous topic, but necessary to anyone who has just about any kind of animal, pet or livestock.

IM - Sites for Intramuscular Injections
SQ - Sites for Subcutaneous Injections
* - Sciatic Nerve

Intramuscular Injections (IM)

  1. Any large muscle mass will work.  We usually choose the shoulder or rump and rotating.
  2. Use 22 to 16 gauge needle. The thicker the drug, the larger the needle (smaller gauge is larger).  Use. 1.5” length needles.  We usually use the green 18 needles for almost everything.
  3. Avoid the sciatic nerve and neck region.
  4. The needle should be inserted all the way in to make sure you are in the muscle.
  5. If frequent injections are needed, rotate the muscles used to avoid soreness or ask if it is possible to switch to SQ injections.

Subcutaneous Injections (SQ)
IM injection sites

  1. These injections go in the layer between the skin and muscles below.
  2. Use a 22 to 16 gauge needle 1” to 1.5” long.
  3. The needle should be directed through the skin at a slight angle.  With practice, you can feel when you have gone through the skin.  This is where you inject the drug.  If you penetrate any deeper, you will be in the muscle.
  4. By grabbing the hair near the site of the injection with your left hand, (if you are right handed), the skin can be slightly elevated.  This makes it very easy to feel when you’ve passed through the entire thickness of the skin. 
  5. If there is a lot of resistance when pushing the plunger, you are probably still in the skin, not below it.

Hand Position Used to locate IM site on shoulder

Sunday, May 27, 2012

But its for free!

When sifting through the vast amount of information available on a specific topic, its hard to figure out why there is such variation in a product - especially alpacas.  So many colors, types, looks and opinions on the topic.

When people come to our farm, looking into the alpaca industry, we usually start out by sitting down and talking with them about what interests them in alpacas. Textiles? An ag business?  Family project?  There are many directions to go into when raising alpacas.

And then we get into the cost variation, ranging from $200 to $14,000 depending on who you want and what you would like to do with them.  Many who come to the farm have already researched and this isn't necessarily sticker shock.  However, the uncertainty comes in the "why".  How can there be such a range?  "I do not see any difference in these two alpacas in front of me that we are looking at."  After inspecting 10-15 alpacas, the eyes glaze over and they all look the same.

The reason there is such a difference in pricing is the result of a ratio of factors when evaluating one specific alpaca:  fiber structure, proven/ unproven, confirmation, color, fineness, coverage, curb appeal, lineage.    Many prospective buyers have looked online and found free - or nearly free - alpacas and wonder why mine are priced as they are.  The analogy I begin with is that there are many "free" cars out there, but do you really want them?  They could be of good quality, needing of rescue or the unfortunate circumstances of divorcees, widow/widower, moving, or some other issues that result in needing to unload their herd.  However, those alpacas with quality fiber will have a much higher value than a fiber animal.  Free alpacas rarely have any kind of resale value when they get only your farm.

I cannot stress to you enough if you are getting into the alpaca business for profit, purchase quality alpacas. Don't overpay, but know what quality they are.  What was once an "A" quality alpaca (male or female) 5 years ago is now a "C" animal and perhaps should no longer be in a breeding program.  Because of up breeding, creating higher & better quality animals each and every generation, the alpaca fiber programs nationwide are making huge strides in softer, finer, higher quality alpacas.

If you are purchasing pets or a farm project, by all means, take in rescue or low priced alpacas, love them as your pets and thoroughly enjoy them. If you are looking for great "inventory" for your business, go with the highest quality you can afford - balancing quality with quantity.  You will have a more marketable business by positioning yourself as best you can as within your business.

When buyers are looking at alpacas and trying to figure out why they are picking out one alpaca over another, we guide them based on what direction(s) they want to go.  The problem is overcoming the fact of feeling like they cannot understand the value of a particular animal.  We know that if we mislead them in any way, they may not know today, or tomorrow, but they soon will.  And in 6 months or whenever they get a good idea of the alpaca industry, if they feel we betrayed them, our business would be ruined.  This is a small community and if we are dishonest in any way, we will easily be called out in the near future.  That is why we always let people know - in our opinion - the good, the bad and everything we know about this animal in our experience.  We pride ourselves in being honest not only because it is the right thing to do, but the alternative would kill our business almost instantly. 

That said, find a mentor that you trust, that you can call on any time, years down the road.  Find someone knowledgeable as well as who understands what you are looking for.  If they are constantly pushing you in a direction that doesn't interest you - showing, textiles, whatever - find someone else to partner with. You are investing way too much to not want to be "married" to that relationship for a very long time.

Feel free to contact us anytime.

Is it a Llama? What is the difference between a llama and alpaca?

What is the difference between a llama and alpaca?

Suri Alpaca                  Huacaya Alpaca           Llama
Photo by Mo & Erv Lischke          
While the frequency of this question is becoming fewer and further between, we still receive this at least several times on any given outing - the county fair, at a holiday show, when we are at the vet...

No, alpacas are not llamas.  Alpacas & llamas are in the camelid family, but each serves a different purpose. Alpacas are a South American relative of the Camel. Closer relatives include the domesticated llama, the wild guanaco, and vicunas. This family of animals originated on the plains of North America about 10 million years ago. A common ancestor to the South American camelids migrated to South America about 2.5 million years ago.  Alpacas are actually genetically related giraffes as well as llamas.  With this, llamas and alpacas can still interbreed. Alpacas are hybrids of the vicuna and the guanaco 6,000 years ago, created as a prized possession by the ancient Incas because of the quality of their fleece, which was spun and woven into garments.

Alpaca - "Cowboy"

Llama - "Snuffy"

Llamas are about 300+ lbs, taller (4-4.5 feet at the shoulder) and are used for mountain packing or guarding livestock (often seen with sheep).  They have always been a beast of burden.   We shear our lllamas, but toss out their fleece.

The function and purpose of the alpacas if for its as fleece - soft, smooth, water repellent, hypo-allergenic. Alpacas are much smaller (120-180 lbs and 3 ft at the shoulder) and are solely used for their fleece. They are a flight animal and will not stand up for themselves.  We use llamas to help protect our alpacas from predators in addition to livestock guard dogs, Turkish Anatolians.

One of the easiest ways to tell a llama from an alpaca is the "banana ears" on a llama, which arch inwards.  Alpaca ears point straight out.  

There are approximately 250,000 alpacas within the United States. Alpacas generally live 15 to 20 years, with a few living up to 30 years of age. They stand 32-39 inches at the shoulder. At birth they weigh 10-17 pounds. An adult alpaca weights 100-190 pounds. The reproductive lifespan of a herdsire (stud) is from 4 to 16 years of age. Prime years are from 5-10 years old. The average growth rate of the coat is 5 to 10 inches per year. The average yearly weight of the shaved adult alpaca coat ranges from 8 to 10 pounds.

Guard Llamas Homeboy and Jumpshot

Llamas get a bad wrap for spitting on people.  Just like every dog has the potential to bite, so does a llama have potential to spit to protect him / herself when feeling threatened.  If you respect them, they are great creatures.  In 8 years, with a variety of llamas, I have never been spit on or threatened by a llama.  They are meant to be confident and bold.  That is what they have been brought up to do.  But give them some treats and a few scratches, they will love you like the rest of their herd.

Have questions, let us know on our website.

Friday, May 25, 2012

Checklist to Showing Alpacas

A Checklist to Showing Alpacas

Because of the large response to my previous blog regarding showing alpacas, I will continue the conversation a little furter, reviewing several areas and going into others a bit more in depth.

Alpaca Show Season is in full swing, and we thought some of you might like to learn a little more about showing alpacas. People often ask us what you do at an alpaca show. Our answer, “We put a halter on the alpaca, walk him into the ring, learn a lot, and have fun with other people who are as crazy about alpacas as we are!”

The first step is to find out where you can go to a show and when it will take place. The website has a list of all the upcoming AOBA (Alpaca Owner and Breeder Association) alpaca shows, information about them, and contact information to learn more. Some shows have their own websites with online entries. Even before you have alpacas, before you are ready to show your own, it can be a great learning experience to go to see a show.  You can get a real feel for the alpaca industry and see what it’s like to be an alpaca breeder by attending a show. In addition, many shows offer educational seminars and clinics designed for people who are new to alpacas

If you are new to showing your alpacas, we have a few tips.

Prior to the show:   Train your alpacas.  Not just on a halter, but get them used to loud noises, standing with you for 30 or so minutes and other people approaching fairly quickly.  You will be nervous enough with well-behaved alpacas, so if you can avoid having alpacas that still need lots of training it will be easier on you and the alpacas.  It can be helpful to teach your alpaca to stand still next to you first, and then teach them to walk on a lead. Some alpacas have a hard time standing still in the show ring. This can help with that problem. Once they walk well on the lead, take them into an unfamiliar part of the farm where they do not usually go. They will be concerned at first, but they will learn to trust you. This will really help at the show. Practice loading them into the trailer ahead of time. It’s never fun when it takes an hour to load because the alpaca has never seen a trailer. You want your alpaca to be familiar with having his/her fleece and teeth looked at, so work with them at home by having someone else pretend to be the judge and look them over.   We walk ours through city parks.  If they get used to that and learn to trust you, the standing in the showring will be easy.

Health Papers. Check the health requirements of the state where you are going. Make sure all alpacas are microchipped (and that you have the right microchip number in your records). We read the microchip numbers at the beginning of each show season. Some alpacas have a couple of microchips and sometimes you can’t find the microchip in one. Both situations can cause some problems so it is better to have this worked out before you get to the show. All alpacas have to be BVD tested. Keep lots of copies of their BVD results. Have your vet come out to the farm within the right time frame so that you can get any testing you need done and results back in time. For us, Bruscellosis tests can take up to 2 weeks. TB tests take less time but be sure that your vet has what is needed for the test, they may need to order more. If you are stopped, the officer will want to read your alpacas’ microchips so it’s best to bring your own reader. This can save you hours of delay time in case the officer’s reader cannot read your chip.  Have your vet call in advance to get the number and put it on the certificate of veterinary inspection.

What to Bring:
If the show has horse stalls where the alpacas cannot see out we usually bring a few lightweight panels so the alpacas can walk out and see each other.

  • Hay bag(s) and Hay
  • Water buckets
  • Feed, Minerals, Probiotics, Thermometer, Pellet
  • Show mats for the stall floor, if desired
  • Emergency kit with Banamine, Electrolytes, triple antibiotic ointment, eye ointment, etc.
  • Black Halters and Leads
  • Display and Banners
  • Marketing materials including flyers, brochures, tons of business cards, etc.
  • Zip-ties and something to cut them with
  • Fans, extension cords, and a power strip
  • Velcro, scissors, pocket knife
  • Show clothes (comfortable, close-toed shoes, black and white attire is traditional, black bottoms, white shirt)  You cannot wear a shirt with logo in the showring.
  • Safety pins or other number holder
  • Drinks
  • Paperwork - For show, hotel, maps, directions, health papers, schedule sheet
  • Alpaca Blankets
  • Duct Tape
  • Electric cords
  • Emergency Contact Sign
  • Extra Microchip, Injector, Reader
  • Flashlight
  • Trash Bags
  • Twine
  • Chairs / Table
  • Halters
  • Hand Sanitizer
  • Clip board
  • Rake / Shovel / Broom / Scoop
  • Zip Ties
  • Info Box
  • Kleenex
  • Dolly for transporting to and from the vehicle
    At the Show:
    Network. Meet as many people as you can. Give them your business card. You never know who might be your next best customer or best friend.

    If you have any alpacas that might be tricky, or let’s face it, difficult, it is best to know what upsets them. Some alpacas do okay for a short time but then get antsy. They have a short shelf life. Take those alpacas to the ring just before their class. Other alpacas are jumpy for a bit, then they settle down. With an alpaca like this you might walk them a while and wear them out before going into the ring. A third kind of alpaca is one who just plain doesn’t like showing. He/she might drool nonstop, or NEVER stand still in the ring, or take you on a rodeo ride in the ring as you attempt to show the judge their drop-dead gorgeous fleece. Sometimes alpacas even knock people down in the ring. (And by people I mean judges)Usually you know you have an alpaca like this prior to going to the show. If an alpaca really lets you know they despise the show scene then I recommend that you show the fleece and give the poor guy or gal (and yourself) a break. The limelight is not for everyone.

    In the Showring:

    I recently entered the showmanship class at a show on a whim. The other competitors in the class were very seasoned in showmanship. I made some mistakes, but I really learned a lot! Every time we enter the show ring, it is an opportunity to learn something, about our alpaca, out breeding program, or ourselves. Feedback from the judge is valuable so don’t forget to pay attention to the judge’s reasoning’s at the end of the class.

    Some of the things I learned in the showmanship class were to smile, smile, smile and to continually make eye contact with the judge. We are ALL nervous when we go into the ring, and most of us don’t smile a lot when we are nervous. But I learned that a smile really does go a long way with judges. They have a long day with lots of alpacas to see, and most people are NOT smiling at them. You smiling will also put you in a better frame of mind, and will help you relax. Also when you are feeling those butterflies in your stomach, take a deep breath. If your alpaca senses that you are uptight he/she will react to it. They truly will feel your nerves through the lead rope so let them feel your deep, relaxed breathing instead. It will help them to relax as well.

    Another thing I learned was important is eye contact. Keep steady eye contact with the judge, and pay attention to him/her and the ring steward who will be directing you where to go. Do not stand between the judge and your alpaca. You want the judge to see your fabulous alpaca, not you. Do not talk with your neighbor while in the show ring except after the class to offer congratulations after the ribbons are handed out. Remember to be a good sport. In this day of stiff competition, any color ribbon is something to be proud of. Today’s 6th place winner could take the blue ribbon at the next show.  Take the judge’s comments and utilize them as you make breeding decisions for next year. For example, if you continually hear comments about your animals not being as fine as those that placed ahead of you, then choose a herdsire for your females who will improve their fineness. Ask to see the fleece on the Champions and the Blue Ribbon winners. This will teach you a lot about fleece, and what to breed for. 

    While at the show, be sure to visit the various alpaca breeders’ booths, ask questions, and most important of all, have fun!  How wonderful to take a break from your daily life, and enjoy a weekend dedicated to these magical creatures that have enchanted us all. See you in the ring!

Thursday, May 24, 2012

Tax Benefits of Owning Alpacas

Tax Benefits of Owning Alpacas

Those considering entering the alpaca industry should engage an accountant for advice in setting up your books and determining the proper use of the concepts discusses in this brochure. A very helpful IRS publication, #225, entitled The Farmer's Tax Guide, can be obtained from your local IRS office. The goal of this discussion of IRS rules is to provide the guidelines for discussion with your accountants and financial advisers so that you can be more conversant in the issues of taxation as they relate to raising alpacas.

Raising alpacas at your own ranch, in the hands-on fashion, can offer the rancher some very attractive tax advantages, It alpacas are actively raised for profit, all the expenses attributable to the endeavor can be written off against your income. Expenses would include feed, fertilizer, veterinarian care, etc., but also the depreciation of such tangible property as breeding stock, alpaca barns and fences. These expenses can also help shelter current cash flow from tax.

Alpaca farm.JPGThe less active owner using the agisted ownership approach may not enjoy all of the tax benefits discussed here but many of the advantages apply. For instance, the passive alpaca owner can depreciate breeding stock and expense the direct cost of maintaining the animals. The main difference between a hands-on or active rancher and a passive owner involves the passive owner's ability to deduct losses against other income. The passive investor may only be able to deduct losses from investment against gain from the sale of animals and fleece. The active rancher can take the losses against other income.

Alpaca breeding allows for tax-deferred wealth building. An owner can purchase several alpacas and then allow the herd to grow over time without paying income tax on its increased size and value until he or she decides to sell an animal or sell the entire herd.

To qualify for the most favorable tax treatment as a rancher, you must establish that you are in business to make a profit and you are actively involved in you business. You cannot raise alpacas as a hobby rancher or passive investor and receive the same tax benefits as an active, hands-on, for-profit rancher. A ranching operation is presumed to be for-profit if it has reported a profit in three of the last five tax years, including the current year.

If you fail the three years of profit test, you may still qualify as a "for-profit" enterprise if your intention is to be profitable. Some of the factors considered when assessing your intent are:
  • You operate your ranch in a businesslike manner.
  • Montana Alpaca Farm.JPGThe time and effort you spend on ranching indicates you intend to make it profitable.
  • You depend on income from ranching for your livelihood.
  • Your losses are due to circumstances beyond your control or are normal in the start-up phase of ranching.
  • You change your methods of operation in an attempt to improve profitability.
  • You make a profit from ranching in some years and how much profit you make.
  • You or your advisers have the knowledge needed to carry on the ranching activity as a successful business.
  • You made a profit in similar activities in the past.
  • You are not carrying on the ranching activity for personal pleasure or recreation.
You don't have to qualify on each of these factors - the cumulative picture drawn by your answers will provide the determination. Once you've established that you are ranching alpacas with the intent to make a profit, you can deduct all qualifying expenses from your gross income.

If you are a passive investor, you are still allowed the tax benefits discussed below. The issue is whether you will be able to take the losses on a current basis. All the losses can be taken against profits or upon final disposition of the herd. The discussion from here forward presumes you are a cash basis taxpayer and you keep good records. Accrual basis taxpayers would also be allowed the same tax treatment, but their timing might be different.

First, the following items must be included in both a passive owner's and a full time rancher's gross income calculation:
  • Income from the sale of livestock
  • Income from sale of crops, i.e. fiber
  • Rents
  • Agriculture program payments
  • Income from cooperatives
  • Cancellation of debts
  • Income from other sources, such as services
  • Breeding fees
The following expenses may be deducted from this income. Please note, if you are agisting your animals, not all of these deductions may apply on a current basis:
  • Vehicle mileage for all ranch business (IRS publishes current rate)
  • Fees for the preparation of your income tax return ranch schedule
  • Livestock feed
  • Labor hired to run and maintain your ranch
  • Ranch repairs and maintenance
  • Interest
  • Breeding fees
  • Fertilizer
  • Taxes and insurance
  • Rent and lease costs
  • Depreciation on animals used for breeding
  • Depreciation of real property improvements such as barns and equipment
  • Ranch or investment-related travel expenses
  • Educational expenses, which improve your ranching or investment expertise
  • Advertising
  • Attorney fees
  • Ranch fuel and oil
  • Ranch publications
  • AOBA (breed association) dues
  • Miscellaneous chemicals, i.e., weed killer
  • Veterinarian care
  • Small tools
  • Agistment fees
Please note: For hands-on ranchers, personal and business expenses must be allocated between ranch use and personal use; only the ranch use portion can be expensed for such expenses as a telephone, utilities, property taxes, accounting, etc.

Once active alpaca ranchers have determined their net income or loss, it is included on their tax return as an addition to or a deduction from their ordinary income. Losses can be carried back for three years and forward for 15 years. To deduct any loss, you must be at risk for an amount equal to or exceeding the losses claimed. The "at risk" rules mean that the deductible loss from an activity is limited to the amount you have at risk in the activity. You are generally at risk for:
  • The amount of money you contribute to an activity
  • The amount you borrow for use in the activity
The passive owner's losses that are in excess of current income can be carried forward and taken against future income. In other words, the passive owner does not lose the deductibility of expenses, but the timing of the losses may be different.

alpacas for sale.JPGAll taxpayers must establish the cost basis of their assets for tax purposes. This basis is used to determine the gain or loss on sale of an asset and to figure depreciation. In determining basis, you must follow the uniform capitalization rules found in the IRS code. Animals raised for sale are generally exempt from the uniform capitalization rules, and there are other exceptions for certain ranch property. You need to become familiar with these rules.

Once you've established the cost basis of your various assets, you take a deduction for depreciation against your annual income. This process allows you to expense the historic cost of an asset to offset present income. The effect is to create non-taxable cash flow on a current basis. This benefit is especially attractive in an environment of higher taxes.

Alpacas in which you have cost basis can be written off over five, seven, or ten years if they are being held as breeding stock. There are several methods of writing them off, beginning with the straight-line method, which allows you to deduct one-fifth of their cost each year, except the first year, in which the code allows for only six months of write-off. There are also several accelerated schedules that allow for a larger percentage of the asset to be written off early. Alpaca babies produced by your females have no cast basis and cannot be written off, although they may qualify for capital gain treatment on sale.

Capital improvements to the active or hands-on alpaca breeder's ranch can also be written off against income. Barns, fences, pond construction, driveways, and parking lots can be expensed over their useful life. Equipment such as tractors, pickups, trailer, and scales each have an appropriate schedule for write-off. The depreciation schedule for each asset class varies from three years to 40 years.

There is also a direct write-off (expense) method known as Section 179 that allows a substantial deduction each tax year for newly acquired items that are normally long-term depreciable assets. While this is subject to several limitations, it is widely utilized by small ranches to accelerate expense, if that is appropriate for your tax situation. Owners currently in high tax brackets who are changing their lifestyle in the next several years to a lower income level often use it.

The original cost basis of an asset is reduced by the annual amount of depreciation taken against the asset. Other costs add to basis, such as certain improvements or fees on sale. The changes to basis result in the adjusted cost basis of the asset. Upon sale, excess depreciation previously expensed must be recaptured at ordinary income rates. The recapture rules are a bit complex, as are most IRS rules, but the IRS Farmer's Publication mentioned earlier explains them well.
Alpaca Herd in Pasture.JPG

When an asset is sold, for instance a female alpaca that was purchased for breeding purposes and held for several years, the gain or loss must be determined for tax purposes. If an alpaca was purchased for $20,000, depreciated for two and a half years, or say 50 percent of its value, and then resold for $20,000, there would be a gain for tax purposes of $10,000. In other words, your adjusted cost basis is deducted from your sale price to determine gain or loss.

Once you've determined the amount of a gain, you must classify it as either ordinary income or capital gain. The sale of breeding stock qualifies for capital gains treatment (excepting that portion of the gain which is subject to depreciation recapture rules). Any alpacas held for resale, such as newborn crias that you do not intend to use in your breeding program, would be classified as inventory and produce ordinary income on sale.

This discussion of tax issues omits a number of rules that could impact your taxes. Tax preference items, alternate minimum taxes, employment taxes, installment sales, additional depreciation, and other concepts of importance were not discussed. Whether we like it or not, this is a complicated world we live in: it often requires the assistance of professional accounting and legal assistance.

In summary, 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 off-setting your ordinary income from other sources with the expenses from your ranching business. Wealth building by deferring taxes on the increased value of your herd is also a big plus. It pays to keep your eye on the tax law changes instituted by Congress.