Ohioans Flock to Alpacas as Investment Alternative
July 11 (Bloomberg) -- Barbara Wille doesn't have to go far to breed Crown's Bay, her prize black male alpaca, for a stud fee of $2,500. Ohio has more alpaca farms than any other state, so she just loads Crown's Bay into her minivan for a short trip.
``We always get stares,'' said Wille, 61, who raises 23 alpacas with her husband Ed, 66, on their farm in Valley City. ``He looks like a head on a stick to passing cars.''
The Willes say they have earned $200,000 since starting up in 1994 by selling the furry creatures, winning stud fees and housing 12 alpaca boarders for $3 a day. Investors industrywide are paying $5,000 to $1 million per animal, said Cheryl Laufer, 52, owner of Spirit Wind Alpacas of Newbury, Ohio. They're betting that alpaca fiber, softer than cashmere and warmer than sheep's wool, will become the luxury fabric of choice.
The combination of inexpensive grazing land, a failing manufacturing economy and the influence of several large farms has made Ohio the U.S.'s alpaca capital. The state has 435 farms with 8,000 of the animals, which are cousins of the llama and camel. About 12 percent of all alpacas registered in the U.S. are in Ohio, according to the Alpaca Owners & Breeders Association in Nashville, Tennessee.
``Alpaca farming provides us with the quiet lifestyle we wanted for our retirement,'' Barbara Wille said. ``It's a nice supplement to our retirement income.''
Even small-scale farmers can make returns of 30 percent to 50 percent over the lifetime of an alpaca, Laufer said. The animals live 15 to 20 years. They can be fully insured, and ranching tax laws allow the write-off of some expenses, said Laufer, a director of the Alpaca Farmers & Breeders Association, which represents the industry in Ohio.
``We're doing better with this than we ever did in the stock market,'' she said. ``It's the investment you can hug.''
South American Imports
Alpacas, which stand 5 feet (1.5 meters) tall and weigh as much as 165 pounds (75 kilograms), are native to Peru, Chile and Bolivia. They communicate with a humming sound, especially between mother and cria, the term for baby alpacas. The animals began to be imported to the U.S. in 1984, and some of the first ones from Peru ended up in Ohio.
Farming them isn't without risk. Mass production of alpaca fiber is still 10 to 15 years off. Profit now comes from selling animals to other breeders rather than selling the fleece itself, leading critics to call alpaca farming a type of pyramid scheme.
``Alpaca ranches are primarily small-scale operations, whose owner-investors may lack the expertise and resources to conduct independent investment analysis,'' professor Richard Sexton and teaching assistant Tina Saitone at the University of California, Davis, wrote in a September study titled ``Alpaca Lies? Do Alpacas Represent the Latest Speculative Bubble in Agriculture.''
Ruminants' Diet
Laufer's investment has paid off so far. She sold a young alpaca in January for $18,000. The cost of care for one year is about $380, according to the study. Alpacas are ruminants that eat orchard grass and graze. They don't consume as much as horses, so farms can put six to 10 alpacas on an acre, compared with one horse per acre.
Much of the popularity in Ohio can be traced to marketing done by Jerry Forstner, the 64-year-old owner of Magical Farms in Litchfield, the largest alpaca farm in the state. He got his start in 1993 after reading about the animals in USA Today. He sold his 40 horses to make room for alpacas, thinking they would become a better investment.
Forstner has bought cable- and satellite-television commercials and hosts an annual auction, the Magical Farms Breeders Choice. He spends as much as $500,000 on the two-day event, which draws more than 1,000 breeders from around U.S. with steak dinners, lectures and the sale of Forstner's pack.
The average price of an alpaca sold at the 2005 auction was $49,571. His black, two-year old male, Eternal Flame, sold for $361,000, and Shaquille, a gray male, sold for $310,000.
True Believers
Forstner says the business is among his most profitable investments, which range from a plastic-bag factory in Honduras and a box plant in Georgia to commercial real estate and 42 Lube Stop Inc. oil-change garages.
``Alpacas are my favorite business,'' he said. ``All of my other businesses have had a business cycle at least twice in 20 years. This hasn't had any.''
There is ``overwhelming evidence'' those prices won't last, according to the University of California study. As the number of alpacas in the U.S. increases, the price for wool and animals will drop, according to the study.
Farmers such as Laufer remain undeterred.
``Those of us who have gone into alpaca farming truly believe the market will develop,'' she said. ``In the meantime, we're having fun.''
``We always get stares,'' said Wille, 61, who raises 23 alpacas with her husband Ed, 66, on their farm in Valley City. ``He looks like a head on a stick to passing cars.''
The Willes say they have earned $200,000 since starting up in 1994 by selling the furry creatures, winning stud fees and housing 12 alpaca boarders for $3 a day. Investors industrywide are paying $5,000 to $1 million per animal, said Cheryl Laufer, 52, owner of Spirit Wind Alpacas of Newbury, Ohio. They're betting that alpaca fiber, softer than cashmere and warmer than sheep's wool, will become the luxury fabric of choice.
The combination of inexpensive grazing land, a failing manufacturing economy and the influence of several large farms has made Ohio the U.S.'s alpaca capital. The state has 435 farms with 8,000 of the animals, which are cousins of the llama and camel. About 12 percent of all alpacas registered in the U.S. are in Ohio, according to the Alpaca Owners & Breeders Association in Nashville, Tennessee.
``Alpaca farming provides us with the quiet lifestyle we wanted for our retirement,'' Barbara Wille said. ``It's a nice supplement to our retirement income.''
Even small-scale farmers can make returns of 30 percent to 50 percent over the lifetime of an alpaca, Laufer said. The animals live 15 to 20 years. They can be fully insured, and ranching tax laws allow the write-off of some expenses, said Laufer, a director of the Alpaca Farmers & Breeders Association, which represents the industry in Ohio.
``We're doing better with this than we ever did in the stock market,'' she said. ``It's the investment you can hug.''
South American Imports
Alpacas, which stand 5 feet (1.5 meters) tall and weigh as much as 165 pounds (75 kilograms), are native to Peru, Chile and Bolivia. They communicate with a humming sound, especially between mother and cria, the term for baby alpacas. The animals began to be imported to the U.S. in 1984, and some of the first ones from Peru ended up in Ohio.
Farming them isn't without risk. Mass production of alpaca fiber is still 10 to 15 years off. Profit now comes from selling animals to other breeders rather than selling the fleece itself, leading critics to call alpaca farming a type of pyramid scheme.
``Alpaca ranches are primarily small-scale operations, whose owner-investors may lack the expertise and resources to conduct independent investment analysis,'' professor Richard Sexton and teaching assistant Tina Saitone at the University of California, Davis, wrote in a September study titled ``Alpaca Lies? Do Alpacas Represent the Latest Speculative Bubble in Agriculture.''
Ruminants' Diet
Laufer's investment has paid off so far. She sold a young alpaca in January for $18,000. The cost of care for one year is about $380, according to the study. Alpacas are ruminants that eat orchard grass and graze. They don't consume as much as horses, so farms can put six to 10 alpacas on an acre, compared with one horse per acre.
Much of the popularity in Ohio can be traced to marketing done by Jerry Forstner, the 64-year-old owner of Magical Farms in Litchfield, the largest alpaca farm in the state. He got his start in 1993 after reading about the animals in USA Today. He sold his 40 horses to make room for alpacas, thinking they would become a better investment.
Forstner has bought cable- and satellite-television commercials and hosts an annual auction, the Magical Farms Breeders Choice. He spends as much as $500,000 on the two-day event, which draws more than 1,000 breeders from around U.S. with steak dinners, lectures and the sale of Forstner's pack.
The average price of an alpaca sold at the 2005 auction was $49,571. His black, two-year old male, Eternal Flame, sold for $361,000, and Shaquille, a gray male, sold for $310,000.
True Believers
Forstner says the business is among his most profitable investments, which range from a plastic-bag factory in Honduras and a box plant in Georgia to commercial real estate and 42 Lube Stop Inc. oil-change garages.
``Alpacas are my favorite business,'' he said. ``All of my other businesses have had a business cycle at least twice in 20 years. This hasn't had any.''
There is ``overwhelming evidence'' those prices won't last, according to the University of California study. As the number of alpacas in the U.S. increases, the price for wool and animals will drop, according to the study.
Farmers such as Laufer remain undeterred.
``Those of us who have gone into alpaca farming truly believe the market will develop,'' she said. ``In the meantime, we're having fun.''
posted by AlpacaBanker @ 6:52 PM
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