Economics  It is often said around the world that alpacas are “The world’s finest livestock investment”.  The worldwide demand for alpacas and their fiber has been strong and has continued to steadily increase as the word gets out on these wonderful creatures and their natural treasure.  The alpaca supply is extremely limited.  After being introduced into this country in 1984, there are now only around 25,500 alpacas in the United States owned by approximately 2,200 people (Jan ‘00 data).  The population growth rate is extremely slow;  a female has only one offspring per year.  The population growth rate in this country was previously driven by the import of alpacas from the Andes mountains of South America (the native home of the alpaca).  These imports effectively ceased in March of 1999.  On this date, the Alpaca Registry, Inc. (ARI) restricted its registration process to only those offspring of alpacas already in the ARI database.  Imported alpacas from South America have lineage outside of the database, so this closure means alpacas imported after March 1999 could not be ARI registered.  ARI is the only nationally recognized registry for alpacas in this country.  Non-ARI registered alpacas have very little value in the market therefore the economics driving the importation of alpacas was removed and imports have been effectively eliminated.  This closing of the registry has served to substantially limit the alpaca supply.  Prices have been very stable for at least the last 10 years with female crias selling for around $10,000, weanlings for about $15,000 and pregnant females running from $15,000 to over $30,000 for superior quality show animals.  The Registry closing has added additional stability to the alpaca market and prices have responded accordingly.

High demand, coupled with such a severely restricted supply, warrants the high prices commanded by these animals.  It is common for the female offspring of an alpaca to sell for the same price or more than an investor or breeder paid for the dam.  Imagine another asset which increases in value at such a pace!  A.L. Paca’s Farms has enjoyed annual returns of 30 to well over 100 percent on our alpacas over the years.  Tax advantages have served to make our investment even more lucrative (please refer to the section on taxes).

Of course, prices will not stay at their current levels indefinitely.  Currently, we have a breeders market as the total fiber yield remains well below the supply requirements of a commercial fiber market.  Perhaps ten years from now, the transition from a breeders market to a fiber market will begin to seriously evolve.  During this decade or so, the alpaca industry will continue to work towards creation of a large scale demand for this highly valued fiber.  Through this effort, future economics can remain nearly as attractive as we are experiencing today.

Taxes  (For specific information on tax issues consult a tax advisor familiar with the treatment of livestock used for breeding purposes.)

Many individuals have stated the tremendous tax benefits derived from alpaca ownership is one of the main incentives which drew them into the alpaca business.  A typical alpaca breeder depreciates (takes off of their earned income) a male or female alpaca used for breeding purposes (considered a capital asset) over a five year time span.  Moreover, Section 179, Expense Treatment of a Capital Asset, can allow for a maximum of $19,500 of the asset’s value to be depreciated as a business expense item in the first year the capital asset is acquired.  Income obtained from the sale of an alpaca used for breeding purposes can fall under the eligible rules for capital gains income.  Income derived from the sale of capital assets is subjected to a lower tax rate than regular earnings.  Feed, veterinary care, and most other costs incurred in the raising of alpacas, although minimal, can be deducted as either an expense or capital item.  The beneficial tax treatments extended to the owner of an alpaca herd serves to further increase the overall attractiveness of these animals.

Insurance  Life insurance is available for alpacas!  This means your investment in alpacas can be insured for a reasonable yearly premium.  Insurance is available from several insurance underwriters.  We currently use Wilkins as our insurance provider.  You will need to call them to get exact rates, however, last year we paid 3.25 percent of the insured value of the alpaca as a yearly premium.  There was no deductible at this rate.  For alpacas which were less than 90 days old, higher rates took effect.  Significantly lower rates are often available for larger herd sizes.  Check with your selected insurance provider for current rate information.

Board  If you plan on boarding your alpacas, you can estimate the cost be about two to three dollars per day.  A.L. Paca’s Farms charges a nominal fee of three dollars and fifty cents per day for the first alpaca boarded then two dollars and seventy five cents per day for every one thereafter.  There is no minimum boarding period; an alpaca can be boarded by the day.  Discounts are given for alpacas which will be here on the farm for awhile.

Veterinary Care  Veterinary care is usually minimal.  Every month an alpaca is de-wormed (around one dollar) and once a year an immunization shot is given (about three dollars).  Pregnant females are tested monthly or so in the first three to four months of pregnancy, then bimonthly, for progesterone level; an indicator of continued pregnancy (approximately twenty dollars). 

An occasional ultrasound might be given as further assurance of pregnancy.  Toenails need trimmed every six months to one year or so; a relatively easy and painless process.  Sometimes teeth need yearly maintenance.  Nearly all of this work can easily be done without the need of a vet.  A.L. Paca’s Farms offers free, unlimited training to our customers.  We will gladly show you how to care for and train these beautiful and gentle animals.