Table of Contents
- How much does an Alpaca cost?
- What is an alpaca good for?
- Where would I go to buy an Alpaca?
- What does it cost to start an alpaca business?
- What are the investment and retirement income aspects of an alpaca business?
- What are the business aspects and tax benefits of raising alpacas?
- Where can I get more information about alpacas?
How much does an Alpaca cost?
The answer to this question, like the answer to so many questions in life, is: "It Depends"
Many factors influence the cost of an alpaca. Examples of the factors affecting the costs include:
- Whether the alpaca is registered with the Alpaca Registry
- Whether the animal is of "breeding" quality or is of "pet" or "fiber" quality.
- Show awards
- Whether the animal is a male or a female
- Whether the animal is a Suri or a Huacaya
- The age of the animal
- The health history of the animal
Generally speaking, registered animals are much more expensive than non-registered animals. Breeding quality animals are more expensive than "pet" or "fiber" quality animals. Show winners increase the value of the animal. Males can range in value from $500 for a pet quality male to upwards of $100,000 for a championship herdsire. (Recently, Dom Lucilio, a fawn hyacaya male sold for the staggering price of $400,000.) Females in the breeding quality vary in price from $8-15,000 to the $40-50,000 range. Animals costs increase from birth until about 4 or 5 years, then remain flat for 8-10 years and then decline to little or no value. A robust, healthy animal is more costly than one that has a less than desirable health record.
What is an alpaca good for?
Again, "It Depends"
Obvious answers first:
Pet quality animals are good for pets. They are gentle and can be taught to do lots of interesting things. Children love them and they love children, as well. I feel the same way about raising alpacas. They are gentle creatures that hummmm. Another enjoyable aspect of raising alpacas is that you can walk among them and not always have to watch your step (also good from a family view point).
Fiber quality animals are used to produce fiber for the alpaca fleece industry. At present time, the alpaca fleece business is limited to specialty spinners and weavers and a fleece co-op.
Breeding quality animals are used to produce more alpacas. Generally, breeders are trying to improve the quality of the alpaca in the United States by breeding the best males (award winners, great conformation, dense, fine, full coverage fleece) to the best females possible. The breeders try to identify weaknesses in the female and then try to find a male that is strong where the female is weak. Breeders also attempt to breed for color (with some but not a great deal of success)
But, most importantly, here in the United States, the animals are not used for food.
Where would I go to buy an Alpaca?
THE MAIL ORDER WAY: It's not quite the Sears-Roebuck Catalogue or J.C. Penny's sale circular, but it is somewhat similar. Get a copy of Alpaca Magazine from the Alpaca Owners and Breeders Association or at Borders or Tractor Supply Company or on-line Scanning through the Alpaca Magazine will show hundreds upon hundreds of ads for alpaca sales.
The high tech way: Many alpacas can be purchased over the Internet. Hundreds of web sites offering Alpacas for sale are on the Internet. Try searching on "Yahoo" or another search engine and you can spend hours and hours and hours looking at Alpacas for sale. Additionally, there are numerous Alpaca auctions run on the Internet. (I have no experience with the Internet auctions or Internet sales.)
THE OLD FASHIONED WAY: What we recommend is to visit a lot of farms in your general area. Most likely, each and every farm you visit will have animals for sale. The benefit of buying locally is that the local breeder will be able to assist you with any questions, issues or concerns you might have after the sale is made. The seller offers free post sale support in almost every situation I have heard of. Local farmers dealing with local farmers is the old fashioned way.
THE PUBLIC AUCTION: We purchased our alpacas at auctions sponsored by Star Events. Alpaca auctions are held throughout the US at various times in the year. I would highly recommend the public auction method for several reasons:
- Clearly, the auction sale is a great way to assure that you are purchasing the animal at market price for that animal. The bidding process continues until the auction winner is the high bidder--just prior to that, at least one other person wanted the animal at the last price he or she bid.
- Terms are published before the sale. We purchased some of our animals for cash; some were purchased at 0% interest with four equal payments during the following year.
- All animals at the auction are pre-sale certified by a vet and have current vaccinations, etc.
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What does it cost to start an alpaca business?
Once again, it depends:
In general, costs can be considered some what like the IRS considers costs--investments and operating costs. The listing below is not all inclusive but is somewhat indicative of the magnitude of costs that you might expect:
INVESTMENTS:
- LAND: Land values vary widely throughout the United States. For purposes of this analysis, assume that 5 to 10 alpacas can be raised on one acre of reasonable pasture. Here in Pennsylvania, the number is more like ten than five, whereas drier, mountainous areas like Colorado, New Mexico and Utah might be more like 5 per acre
An alternative to having land is to have your animals "agisted" at a nearby ranch. Many new alpaca owners start this way.
- ANIMALS: The cost of the animals is a principal variable in the costs to start-up and operate an alpaca ranch. The number of animals, age, sex all can contribute to the overall animal investment costs.
- SHELTER: Alpacas can do with a three sided shelter, without much in the way of frills or fancies. The ability to have an area to care for newborn babies and to deal with the occasional sick alpaca is very desirable. Some literature indicates that the minimum shelter is 8 square feet per animal; I believe that that would be quite crowded. I'd figure on the order of 10 to 12 square feet per animal to be safe.
- POWER: Power is not absolutely mandatory for the alpaca, but it sure makes life much, much easier if power is available at the shelter.
- WATER: Water needs to be available at all time. Alpacas must have access to fresh, clean water. Alpacas love warm water in the winter and cool water in the hot summer. Although heated water buckets work, we have found it to be much easier with the heated, automatic waterers.
- FENCING: Fencing is a major investment cost for the alpaca business. Fences run from a low cost of $2-3 per lineal foot to $20 or more per lineal foot, including gates, etc. The fences must be sturdy enough to deal with the predators that are in your area
Here in Pennsylvania, our biggest threat is a pack of wild dogs or coyotes. We have a fence that is called "no climb fence", 5 feet high that is made of wire on locust posts at 8 foot center to center. We considered but rejected placing an electric wire at the top and bottom of the fence. Our fence cost $5.50 per foot installed--the most recent quote was for $6.50 per lineal foot installed.
- SCALE AND OTHER EQUIPMENT: A scale is a mandatory purchase since frequent weighing of the animals gives a general trend regarding the animal's health. A good digital scale costs on the order of $700.00 +shipping. Technidyne is a supplier. Other items include hay feeders, waterers, buckets, grain feeders, first aid kit, cria birthing kit, feed storage bins, hay storage, fans, and a myriad of other items. Vet Tech 300 Platform Scale
.
OPERATING COSTS:
Principal operating costs include:
- Food: Figure about $1 per animal per day
- Insurance
- Mileage
- Water
- Power
- Repairs and Maintenance
- Rental and Lease Expenses
- Advertising
- Legal fees
- Agistment fees
- Dues to associations
- Education and training (Seminars and the like)
- Labor
- Waste Management
- Vet fees
- Stud fees
- Costs to show animals
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What are the investment and retirement income aspects of an alpaca business?
The alpaca industry in the United States today is a breeding industry, as contrasted to the South American alpaca industry that has a booming fiber industry as well as the use of the alpaca for food. The alpaca industry in the US can be likened to a growth industry in other business adventures, in that as time passes, the herd growth compounds itself. AOBA has a model that shows herd growth (starting with 5 females and two males) to over one hundred animals in ten years.
When one invests in the alpaca business, one should consider a long term investment, rather than a get rich quick scheme. Return on investment will likely be negative for the first few years. Many people establish a business plan that looks to be at a break even point at year five. After year five, the business starts to show a profit based on the sale of animals.
A large number of alpaca owners use the above models to plan for retirement income. For example, in our case, we started our business about five years ago, approximately 5 years from Jim's forecasted retirement date. Our plan has our herd growing to approximately twenty animals. At that time, we hope to have recovered our original investment and maintain our herd at about twenty animals as long as we are continuing to flourish in the alpaca lifestyle. We conservatively estimate that to maintain our herd at twenty animals, we will need to sell 8-12 animals per year.
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What are the business aspects and tax benefits of raising alpacas?
First and foremost, breeding and raising alpacas is a business.
For example, our farm is quite small (5 1/2 acres). Our business startup costs (barn fence, water, power, phone) was a little less than $20,000 (due to my work, I was unable to do any of the work myself so all was subcontracted). The cost for the animals is a clearly controllable cost but can be significant. The operating costs, in my opinion, are quite reasonable, being not a whole lot more than the operating cost of a family pet.
Marketing the product involves a substantial cost. Thus far, I have several hundred dollars involved in this rudimentary web site. Membership in AOBA and two local alpaca breeders organizations cost $500 or so per year. More aggressive marketing costs will be incurred as we start going to shows and start advertising in various publications, etc.
The tax advantages of the alpaca business are enormous. (Please note that neither of us are accountants or work for the IRS.) We recommend that people should consult with an accountant that is intimately familiar with the tax rules associated with farming operations.
For the novice and inexperienced, IRS Publication 235 is specific to the tax implications of the farming business. Like most IRS documents, there are many, many requirements to be met and many variations on the theme. Examples include: Are you in business to make a profit or for a hobby? Do you have capital at risk? Do you materially participate in the business?
Income streams include but are not limited to the income from the sale of livestock, income from the sale of fibers, income from agistment fees, income from various government grants and agriculture program payments, income from sale of waste products, income from seminars, and income from breeding fees. Offsetting these incomes are deductible (sometimes, but not always--see rules) expenses: mileage, income tax return prep fees, feed,. labor, repairs and maintenance, loan interest, breeding fees, insurance, rent and lease costs, depreciation on animals, depreciation on real property improvements, advertising, travel expenses, attorney fees, educational expenses, vet care and on and on.
This last year, there was a deduction that is available to breeders that involves $100,000 for investments (Section 179 of the IRS Code). Investments over $100,000 are subjected to accelerated depreciation. After that, the Alpaca depreciates at a 5 year rate, fences depreciate at a 7 year rate, automobile costs are deductible, ....on and on. I'd suggest the use of an accountant or study hard like I did. I used Turbotax Premiere this year and then had the return reviewed by a local accountant that specializes in farm taxes.
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Where can I get additional information regarding alpacas?
If you have additional questions, please feel free to contact us. We love to "talk alpacas" with everyone! If you have a question that we cannot answer, we know many knowledgeable people that will be able to help.
The most active place to find out additional information is the Internet. See About Us for several useful links; following the links there will open up the entire internet. The link to Alpaca Owners and Breeders Association (AOBA) is probably the most useful because it will open up hundreds upon hundreds of websites to look at. Yahoo has several groups that you might also join. Discussion in the "alpacasite" group on Yahoo averages 100 or so e-mail discussion items on a daily basis.
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Revised: 07/07/07.