Alpaca Financial Information
and Lifestyle Rewards
People are drawn
to the amazing alpaca for two reasons: Financial investment or
lifestyle upgrade. Or both. There are a lot of places you can
invest your money to try and grow it. Alpaca breeding is one of them.
And its generally just a whole lot more fun. You cant run
your fingers through the luscious softness on the side of the neck of
your stock portfolio. But you can stand in the shelter that you built
with your own hands as you watch the sun rise through the mist on a
frosty spring morning, alpacas milling about you, while you vaguely
remember once upon a long time ago seeing a sun something like that
through your cars windshield as you waded through six-lanes-wide
stopped traffic on the morning commute. Such are the lifestyle rewards
that go beyond the financial.
But the cool part is that, even though its more fun, you really
can make money at it. As with any investment, theres risk involved.
Its certainly not a sure thing. But the potential is strong. Its
a growing industry. There have been alpacas in the country for 20
years now, and the numbers go up every year. More animals, more breeders,
more farms, higher prices.
Bring the Highest Prices
A female alpaca,
because shes breeding stock that can make more little alpacas,
can sell from $8,000 to $40,000 depending on the qualities of her fleece,
conformation, demeanor, mothering skills and parentage. You can buy
an animal with lower qualities for a lower price and breed her
up to produce offspring that can sell for a higher price. We also
remind folks that when they buy that $15,000 to $20,000 female alpaca,
they are usually getting two or three alpacas in that purchase price,
as the girl will be sold pregnant and can come with a breed-back included
that will produce a third animal.
Boys On the
Boys usually sell
for less. A fiber boy who is not herdsire quality will go
from $1,000 to $2,000. With higher qualities of fiber and conformation
come higher prices: From $4,000 to $10,000 for a Junior Herdsire with
the potential to become a future breeder. If you have one with OUTSTANDING
qualities the price goes higher. If theyve put babies on the ground
the price goes up even more. Excellent proven alpaca herdsires can sell
for $20,000 to $50,000. Dont think of this as common. An alpaca
of this quality is hard to come by, hence the high price. Only the
best males are used in breeding, the top 10%, as we are all trying
to improve the quality of our own herd specifically and the North American
alpaca herd in general. So most males will not fetch huge prices. Nevertheless,
top-of-the-line ultra-elite herdsires can sell for hundreds of thousands
of dollars. In the year 2000 the top-selling male in the country went
for $200,000. In 2004, the highest selling herdsire auctioned for $500,000.
In 2005 it was $600,000. In 2006 it was $750,000 for half interest.
These astronomical numbers are not normal, certainly not readily available
to most folks and should not be expected, but they do show that the
alpaca market is growing and that smart people are getting involved
because they can make a return on that investment.
Alpacas were first
imported into the US in 1984. There were only a few owners in those
early years, less than two hundred. In the year 2000 there were two
thousand alpaca farms and ranches in the United States. Now, in 2006,
there are more than four thousand. More people create higher demand
for quality animals. More demand creates higher prices. The demand
stays high because more and more people are looking to change their
way of life. Maybe theyve sold a business to make that change.
Or maybe theyve bought property with their retirement earnings
and are looking for something to do with this acreage Ive
got. But they hear about alpacas and they come looking. And they
buy, just as we did.
You control your
own rate of growth. And your rate of risk, too. You can chase this as
far as your comfort zone allows. On the low end, you can buy just one
animal and pay someone to raise it for you (called agisting or boarding).
Thats how we started when we just owned a small tract home with
no room for livestock, yet still wanted to get involved in the alpaca
business. Or you can start with a couple of fiber boys and learn how
to care for them before taking on more animals. Some might just want
a few carefully chosen females to create babies that can be sold each
year, thereby keeping their herd size consistent. Others might keep
the majority of the crias born each year and steadily increase the number
of alpacas on their land with the goal of achieving a large herd at
some specific point in the future. And there are those who want to go
big and purchase a large herd right off the bat. Its all very
tailorable to ones personal goals and comfort level.
These are immensely
helpful to the alpaca breeder because you now run an agricultural business.
Even if you only have two animals, the IRS considers you a working farm
if you can show a profit in at least three out of every seven years.
And since you are a farm, you are able to file Schedule F and
claim any and all expenses that accrue each year. In fact expenses generated
by an alpaca operation can be used to lower any income from other sources
(such as a job) by deducting them right off the top. This can be REAL
handy at tax time.
include anything you spend on the farm: Breeding stock (alpacas), feed,
hay, seed, fertilizer, equipment (buckets, tools, tack, fence panels,
scales, chutes), hardware (nails, wire, rope, water hydrants, pipe),
vehicles (trucks, tractors, trailers), farm implements, fuel, fencing,
barns, shelters, work clothes (up to $4,000 per couple), repairs and
maintenance, breeding fees, vet costs, show fees, travel expenses, insurance,
office supplies (including computers), advertising and promotional costs.
In addition to
the write-offs from these direct expenses, there are extra tax
incentives in current law that allow large-expense items (capital
expenditures in tax lingo) to be taken all at once in the current
year rather than depreciated over succeeding years. Called Section
179 Deductions, these can assist in the write-off of very
large expenses (such as the purchase of alpacas or barns or vehicles)
that are used in the business. Up to $108,000 in a single year. Thats
a really big deduction. Very useful if you have a lot of income to offset.
But you have options.
If you dont need the big write-off this year, but wish to save
those expenses towards write-offs in future years, you can choose to
depreciate some of those big expenses. Depreciable property can
include such things as agricultural structures (barns, sheds, shelters),
fencing, farm machinery, equipment, vehicles and water wells. For instance,
the purchase of an alpaca can be depreciated over five years if youd
like. (Its nice to have the choice: Depreciate or not.) But heres
the beauty of it: After five years of depreciation that alpaca still
has its value. It can still breed for another ten or fifteen years.
Compare that with a car, where once depreciated as an asset, it no longer
holds much value. The car is worn out and broken, but that alpaca, just
coming into its prime, is still chugging on like the energizer
a Tax-Deferred Investment
A tax professional
might call this compounding your investment via tax deferment
to increase asset valuation or some such thing. Actually its
a really good thing. It means that you can breed female alpacas to make
more little alpacas and the government wont ask you to pay any
new taxes. You can grow the herd for years if you want and there wont
be any taxation on it even though the herd continues to grow in value
and be worth more each year. You wont have to pay anything for
the increased value of your herd until such time as you actually sell
an animal from it. Then, when an animal is sold, taxes are paid on the
income generated by that sale just as they would with any other business
transaction. Less all eligible deductions and farm expenses for that
year, of course. (See above for description of the many tax deductions
available.) Heres the good part: Any gains are taxed at the lower
capital gains rate.
Big fat tax disclaimer:
Please remember that we are not tax accountants, so be sure to check
with your tax professional to see how these many tax benefits can be
applied to advantage in your own personal situation.
When your stock
splits, you have twice as much of it thats still worth the same
amount. But when your pregnant alpaca gives birth to a beautiful female
cria, youve just doubled your original investment. Doubled
your income potential. Doubled your fun.
insure your stock portfolio against loss, but you can with livestock.
We recommend that anyone buying an alpaca get it insured with full
theft and mortality insurance. Its a way of lessening the
risk. Costs you 3% of the animals value to gain some peace of mind.
Once youve sold enough animals to make back your original investment,
you can scale back the insurance cost, either by lowering the claimed
value of each animal or by selectively choosing which animals from your
herd to insure.
an Historical Measure of Wealth
of the history of mankind, one measure of personal wealth has been the
size of ones livestock herd. Counting ones animals
has been a way of tracking personal accomplishment from the dawning
of civilization all the way up through this very morning when our neighbor
counted out his sixteen cows to see that all were well, as he does each
and every morning.
Perspective on Alpacas
It's not just a
new fad. Alpacas have been around for thousands of years. They are thought
to be perhaps the world's oldest domesticated animal, with records
going back 6,000 years. The recent imports into the United States, going
back just twenty years, are a mere drop in the bucket in comparison.
So any discussion about the long term worth of these animals
has to take into account their lengthy history in the world. Here are
a couple of examples of how the existence of these soft, fuzzy and generally
peaceful creatures has been the source of major economic change. Surprising
as it seems, our lovable alpacas have been involved in violent clashes
between cultures. And on the positive side, alpacas have also caused
serendipitous life-changing events that created whole new careers.
Global Economic History
In South America,
the early Incas considered their alpacas as reserved for Royalty.
The fiber considered so special in its luxurious softness that only
Kings and the Royal Family could wear it. The count of the Kings
herd being a measure of his power and wealth, eventually the entire
economy revolved around the alpacas. (Well, that and the fact that
the Incas were really brutal and slaughtered any other tribe that got
in their way. Oh, but I digress... back to the nice story about the
alpacas.) Later cultural changes allowed each family to raise their
own herd as their primary source of warm clothing and sustenance. With
the coming of the Spaniards came strife and conflict as the Conquistadors
attempted to subjugate the native people by destroying the Incan way
of life and their entire economic system. It seems the plan was to strike
at the heart of that economy by killing all the alpacas.
Beyond just conquering
the native peoples there was an additional benefit to the
Spanish explorers in exterminating the alpacas. Recognizing the qualities
of softness and warmth in the alpaca fiber as a keen source of competition
for their own herds of the then-newly-developed Merino Wool Sheep (the
first soft wool in Europe), they were motivated to eliminate the alpacas
for economic reasons: They wanted to corner the worlds fiber
market. Their attempt to wipe out ALL the alpacas nearly succeeded.
But the few remaining Indians retaliated by moving the even fewer remaining
alpacas high up into the Andes Mountains to hide them and keep them
out of reach of the marauding Spaniards. The herds that had once numbered
in the millions were now decimated and counted only in the thousands,
perhaps only hundreds. But the alpacas were saved. Grown back
slowly over time by native families, alpaca herds in the Andes regions
of South America now number in the millions again. More than three million
are grazing in Peru, Bolivia and Chile. And large mills process the
annual cut of alpaca fiber, producing high end clothing goods and forming
a major component of the western South American economy.
But that's not
the end of the alpaca's involvement in South American cultural clashes.
In recent years (throughout the 1970's and 1980's) there were again
deliberate attempts to assassinate the alpacas. This time by the Shining
Path Guerillas in their insurgency against the established governments.
As a way of forcing locals to take their side, the guerillas made it
part of their terror campaign to destroy alpaca herds in small mountain
villages. (A larger part was trying to kill civic leaders or any other
brave soul who stood up to them.) While these intimidation and extortion
attempts succeeded for a while, eventual backlash against such brutality
led to dissatisfaction with the group and the rebellion has since been
effectively quelled. The alpacas were saved once again.
in European Industrialization
now for a happy story. In the mid 1800s, at the heart of the
industrial revolution, the man who eventually became known as Sir
Titus Salt made a huge impact in the alpaca world by importing Peruvian
alpaca fiber to England and establishing an alpaca textile manufacturing
empire. Its a very interesting story, worth investigating on ones
own, but the short version is: He built an entire city based on the
alpaca and their wonderful fiber. Saltaire was his model community
built on the River Aire in West Yorkshire in central England to showcase
his massive textile mills and house all their workers. He developed
specialized machinery and processes for blending alpaca with cotton
and other fibers, forming a smooth and lustrous fabric that became all
the rage in the Victorian culture of his day. Creating this unique niche
for himself brought him to the forefront of the competitive textiles
trade and eventually earned him fame (including knighthood and a baronet)
and a huge fortune.
can read his story for yourself. His original biography was written
by his close friend Reverend Robert Balgarnie in 1877, ten months after
the death of Sir Titus. "Balgarnie's Salt" is downloadable
on the web for free as a PDF file. Did I mention that it's FREE.
(A paperback book with modern commentary added is also available for
purchase at the same web link):
a cool story. Would make a great movie. My favorite part is where
he happens upon some bales of alpaca fiber by accident in the wharves
of Liverpool, takes some home for testing, and sets in motion the magical
events that would change his entire life.
Here are some links
to Saltaire and to Sir Titus Salt:
History of Sir Titus Salt
History of Saltaire
Timeline of Sir Titus and Saltaire
info on Saltaire: Scroll down for short timeline of Sir Titus and
County site about modern day Saltaire
Contemporary Saltaire Village Website:
Interesting Artistic Note: The David Hockney Museum is located
in Saltaire, as he was a native of the nearby town of Bradbury (where
Sir Titus was once mayor). See links in above site.
We'd love to have you come visit the alpacas of Silver Thunder.
Please feel free to call or email and we'll be glad to arrange a visit
at a time that suits you best. C'mon over. You'll have a great time.
Thanks again for
Chuck and Nancy
great alpacas in Greeneville,
Bred and Hand Fed!
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page last updated 2/1/07