Alpaca who?

"Planning fro Profit" is a huge success

2006-12-07T13:38:00.000-08:00

The seminar was a huge hit with the attendees. We enjoyed the company of 36 alpaca ranchers from accross the midwest. There were folks from as close as Pennsylvania and as far away as Louisiana and Minnesota. We shared a variety of experiences, good food, great wine and a passion for the alpaca industry.
We plan to hold the next "Planning for Profit" seminar in late February.

Planning for Profit

2006-11-25T19:40:00.000-08:00

Well, we had another beautiful day today here in northeast Ohio and I spent it getting ready for our Planning for "Profit in the Alpaca industry" seminar next weekend. The weather here can be a bit unpredictable this time of your so all of the alpacas will be penned in the riding arena-a mammoth structure that will block all of the elements but will provide all of the room and light needed to conduct the alpaca classing and fiber evaluation segments of the program.
Alan Jude and I have agreed to give a free breeding to any one of our herdsires and Nick Pici (CPA) for the Dolan Group will offer free tax planning advise to the attendees.
This is going to be a fabulous, one-of-a-kind program, good fun, great food and a chance to learn from successful farmers. Perfect for beginners.
Well, back at it.

Giving Thanks on Thanksgiving

2006-11-23T16:53:00.000-08:00

What a great day for sitting back and taking stock of all the blessings I and may family enjoy.
We had a beautiful sunny 55 degree day here in Ohio. My daughter was coming in from North Carolina and the whole family was soon to assemble at the house for dinner. In addition, we just got word that our niece's health has improved and surgery has been averted. While I was walking back to the barn to feed the alpacas, the sun was warming me and thoughts of my family, friends, good food came to me in a rush.
It was one of those extraordinary moments when you simply "get it."
What a family...what a country... what a life!

Planning For Profit in the Alpaca Indusrty

2006-11-21T07:59:00.000-08:00

In October, Alan Cousil, Jude Anderson and I began talking about the concept of a "Planning For Profit" seminar and realized that an educational offering focused on the essential elements of successful alpaca farming is long over due.

I have partnered successfully in owning alpacas with a group of CPA's who have researched the tax planning issues extensively. Their expetise combined with my experience as a senior manager of a $3.2 billion financial institution lends a unique perspective to the discussion of farm financial management.

Add to that the breeding, selection and show experience of Alan and Jude, and you have the makings of a phenomenally impactful education experience.

We're really looking forward to the weekend.

2006 Alpaca Auction Prices

2006-09-22T13:38:00.000-07:00

I've heard a number of people lately lamenting that there are too many auctions these days resulting in depressed alpaca prices. While I do agree there are far more auctions and more lots within each auction today than there were a few years ago, I don't agree with the notion that the number of auctions is resulting in depressed prices. As an industry, we have always enjoyed the "demand side" economic benefits of too few good animals to fill the demands of of our breeding programs.

As a young industry, we must be cautious of allowing the ebbs and flows of auction prices to flavor our outlook for the industry. Over the past few years, there have been a number of record setting sales. This activity, although wonderful for the sellers and titillating to those considering entry to the industry, is not as good for the industry as the posting of consistent and stable sale prices.

If anything, auction prices are driven by the quality of animals being offered. This is as it should be! If prices are at all disappointing, it's because there are too few elite animals available for auction lots.

At all of the auctions I have attended, price has been commensurate with quality. The animals with the best fleeces, confirmation, color and bloodlines have brought the highest prices while those of lesser quality have brought the lowest. This is a good thing! It shows that the alpaca market is efficient in that quality is rewarded by price.

In reviewing the Celebrity Sales auction results for 2006, the average price ranges show signs of stability in that they mirror the results from prior years. If one eliminates the high priced animals from the calculation, the averages remain well within acceptable ranges.

A summary of the results is as follows:

Date /Auction /Avg Price /High
9-06 /Eastern Extreme /$29,000 /$165,000
7-06/ Parade Of Champs /$42,500 /$205,000
5-06 /AOBA /$32,000 /$100,000
4-06 /Futurity/ $42,000/ $150,000
2-06 /Snowmass/ $59,000 /$500,000
1-06/ Am. Choice /$28,000/ $ 85,000

It will be interesting to see how the auction side of the industry will evolve as we move forward. As the number of high quality alpacas in the domestic herd increases, I believe a bifurcation will occur wherein elite and production alpacas will be sold at separate auctions.
My humble opinion.

The Value of Breeding For Quality

2006-09-20T18:51:00.000-07:00

We have a medium fawn girl out of 4P Pachacuti who has everything one could desire in a producing female such as fleece density and coverage, confirmation, heavy bone and a vigorous constitution. the only thing lacking in this girl is fineness. We had her bred to MFI Glacial storm in an attempt to improve on the fleece characteristics of the cria. On June 19, 2006, she gave birth to a beauthful medium brown femal and at this point, it looks like we've accomplished what we intended. Of course we can never measure how much of the outcome was "engineered" by our astute planning (an outcome for which I am happy to take ful credit) and how much was the random act of nature but the result has convinced me of the value in always acquiring the best feamles one can afford and breeding them to the very best herdsires available. There are no short-cuts.
My purpose here is not to promote a particular herdsire. Rather, it is to support the value of breeding selections based on the use of progeny testing.
As we looked at the phenotype of Glacial Storm offspring and their micron counts, we deterimed that the pairing of our Schnookums and GS had the potential to achieve our breeding goal.
I can say, I've never seen a fleece like this on an alpaca before. At an early age, she shows outstanding high frequency crimp, stapling and luster. In addition, she has inherited all of her dam's strength and vigor.
She'll definately be hitting the show ring in 2007. We' expect great things from her.

The Finer Points of a Business Plan

2006-09-20T18:44:00.000-07:00

My web site contains a page addressing the value of writing a business plan and gives a detailed outline. In addition to my web site, there are many other practical references for preparing a business plan. The following is a brief summary from How to Really Create a Successful Business Plan October 2000 By: David E. Gumpert

Keep in mind that after the first two items, the titles of the subsequent sections can vary. But every business plan should cover the subjects addressed in this overview:

Cover Page

On the cover page goes the name of your company, its address and phone number, and the chief executive's name.

Table of Contents

This should include a logical arrangement of the sections of your business plan, with page numbers.

Executive Summary

This is the heart of the business plan. It is so important to both the preparation and final effectiveness of the plan.

The Company

The business plan must provide basic information about your company: its past, present, and future. If it's a start-up, about the evolution of the market. Information is necessary as well about your company's current status. And what is it's future strategy? What are its goals and what actions are required to achieve its goals?

The Market

This is your assessment of the customer groups you've targeted, other customer groups you might pursue, the competition, and marketing efforts thus far. Is the market growing, how fast is it growing, and what evidence do you have that it is interested in your product or service?

The Product/Service

Here is where you describe your product and/or service and what makes it special and attractive. What are the components of the product/service? How much do you charge? What services don't you provide? What kind of warranties or guaranties do you provide and what are its particular provisions?

Sales and Promotion

This is your assessment of how you intend to carry out your marketing plan--how you'll reach your customers and sell to them. Do you have an in-house sales force or will you use direct mail, or contracted telemarketers to sell your product/service? What kind of public relations do you have planned? Will it be done internally or will you hire a public relations firm?

Finances

Here is where you detail your past results, if there are any, and your expectations for the future. This section should include cash flow projections, profit-and-loss statements, and balance sheets. All the figures should be cast in traditional accounting format.

Keep in mind. . . The order of the subjects listed here is not random; they are given in order of importance. It is no accident hat information about markets comes before information about products/services

As I've indicated, there's more than one way to write a business plan. Indeed, there are infinite variations on the theme. The only thing that really counts is if the plan does what it's supposed to do: sell you and others whose support you need.

Small businesses benefit from Section 179 deduction

2006-08-30T03:49:00.000-07:00

Typically, if property for business has a useful life of more than one year, the cost must be spread across several tax years as depreciation with a portion of the cost deducted each year. But there is a way to immediately receive these income tax benefits in one tax year. The provisions of Internal Revenue Code Section 179 allow a sole proprietor, partnership or corporation to fully expense tangible property in the year it is purchased.

And tax-law changes over the past few years have made this option much more appealing by dramatically increasing the amount that can be written off immediately. Changes first made in 2003 and then extended in 2006, mean that businesses can write off more of their capital expenditures through 2009.

Enhanced section 179 expensing now is at the base level of $100,000 with that level indexed for inflation for the last several years. This is four times more than the previous-law limit of $25,000. In addition, the investment limitation also has been increased to more than $400,000 and it, too, is indexed for inflation.

These changes mean that in 2006, a business can expense $108,000 in capital expenditures up to an overall investment limit of $430,000. Eligible propertyProperty that may be written off in the tax year of purchase, rather than depreciated over the asset's useful life, includes:

Machinery and equipment· Furniture and fixtures
Most storage facilities
Single-purpose agricultural or horticultural structures
Livestock

Also, the definition of eligible section 179 property was expanded by the 2003 legislative changes to include off-the-shelf computer software. Previously, it had to be written off over three years.

The IRS says ineligible property includes:

Buildings and their structural components
Income-producing property (investment or rental property)
Property held by an estate or trust
Property acquired by gift or inheritance
Property used in a passive activity
Property purchased from related parties
Property used outside of the United States

How, when to use deduction The Section 179 election is made on an item-by-item basis for eligible property. You don't have to use it on all eligible property bought in that year. The election must be made in the tax year the property is first placed in service.

The Section 179 deduction isn't automatic. Taxpayers who want to take the deduction must elect to do so. You make the election by taking your deduction on Form 4562. When you file this form, attach it to either of the following:

Your original tax return filed for the tax year the property was placed in service, regardless of whether you file it timely.
An amended return filed by the due date, including extensions, for your return for the tax year the property was placed in service.

Make sure you make the election when you file your original income tax return for that year. You can't later amend your return to elect Section 179. The only exception to this is if you amend your return before the actual due date, including extensions, of your original return.
For example, the maximum extended due date to file your return is Oct. 15. You file your return on Sept. 1 and then realize you didn't utilize the Section 179 deduction. You still have until the Oct. 15 deadline to file an amended tax return to claim the deduction.

Laws tweaked to enhance Section 179 deductionsCongress periodically reviews the amount a taxpayer can claim as the annual Section 179 amount. As part of an economic stimulus and tax-reduction package signed into law in May 2003, the expense limit was temporarily hiked from $25,000 to $100,000.

The Tax Increase Prevention and Reconciliation Act (TIPRA), signed into law on May 17, 2006, expanded this increase through 2009.
And an inflation adjustment component means that the $100,000 will increase while TIPRA is in effect.

Lawmakers upped and subsequently extended the section 179 deduction amount in the hopes it would encourage businesses to invest in new equipment sooner. However, when it comes to vehicles purchased utilizing the Section 179 break, legislators took back some of the benefit as it related to large sport utility vehicles. When the limit was originally increased, business owners were allowed to select for company use one of several light-truck models (which included many luxury SUVs) weighing more than 6,000 pounds fully loaded and write off most, if not all, of the costs on their tax returns. That changed on Oct. 22, 2004, when the American Jobs Creation Act became law; now only company vehicles weighing 14,000 or more are eligible for the larger deduction amount.

Any amount of property over the maximum deduction must be depreciated.
Limitation on annual amount of property purchased There also is a limit on the annual total of deductible property. If the cost of qualifying Section 179 property you put into service in a single tax year now exceeds a statutory base of $400,000 then you can't take the full deduction.
This amount also is indexed for inflation and runs through 2009.
For 2006, every dollar above $430,000 (the inflation-adjusted limitation) that a business owner spends on eligible property, he loses a dollar in deductions.
For example, a manufacturer completely re-equips his facility this year at a cost of $437,000. This is $7,000 more than allowed, so he must reduce his eligible deductible limit to $101,000: the current $108,000 expensing limit minus $7,000.
Deduction limited to taxable incomeYou have now determined the maximum deduction based on the amount of property purchased during the year. You now must pass the aggregate income hurdle.
Your deduction is limited to your aggregate taxable income from the active conduct of any trade or business. Active trade or business includes employee and spouse's wages, sole proprietorships, partnerships and S corporations. Basically, this means that unless you have other sources of business income, your Section 179 deduction can't create a taxable loss for your business.
More business owners are able to take advantage of the deduction when they combine their company earnings with those of a spouse or money earned in addition to (or before starting) their own company income.
For example, you are someone else's employee for most of the year. Your wages exceed the Section 179 deduction. You start your own business at the end of the year and purchase equipment and furniture. Even if your new business doesn't generate gross income that year, you can still take the Section 179 deduction on the new equipment and furniture. Why? Your wages exceed the Section 179 deduction.
This aspect of inclusion also applies to a spouse. For example, you earn annual wages of $60,000 as an employee. Your spouse doesn't work during the year but begins a new business at the end of the year. Your spouse purchases and places in service $15,000 of Section 179 property at the end of the year. Your spouse's business doesn't generate gross income at the end of the year. Even though your spouse hasn't earned trade or business income for the year, the Section 179 deduction of $15,000 is still allowed in full since your wages count as trade or business income.
Any amounts disallowed by the trade or business taxable income limit are carried over to the next year and added to the cost of any eligible property placed in service in that year. The same rules for maximum deduction, maximum annual investment and taxable income apply to the next tax year as well. .
ConclusionThe tax tip explains the process for using Section 179 to fully expense certain business expenses immediately instead of depreciating them across a period of several years. You should also be aware of less obvious advantages of the Section 179 deduction:
· Lowers adjusted gross income, which could help you qualify for various deductions which are limited by AGI.
· Lowers earned income, which can increase your earned income credit.
· Is allowed in full even if the eligible property is placed in service on the last day of the year.
This tip also includes examples that demonstrate the three limits: the maximum dollar limit, the investment limit, and the taxable income limit. By including employment and spousal wages, many taxpayers find they are able to take advantage of this provision. Are you interested in more information? Refer to Chapter Two of IRS Publication 946: How To Depreciate Property.

Hay, good lookin'

2006-08-17T10:16:00.000-07:00

I found this humorous article about the alpaca industry in the UK. While it's not extremely informative, it does give a idea of the health of the industry outside the US.

#####

Thursday, August 17, 2006

OK, we admit it – she's not a traditional Page 3 stunner but at least Pia the alpaca does not want to bring about world peace.

And, despite living in an image obsessed society, the orthodontically challenged animal is doing rather well – as are many of her friends.

Alpacas are replacing sheep in fields up and down the country and are becoming one of our most successful immigrant species.

The South American animals, which are more usually found in the mountains of Peru, count both llamas and camels as relatives.

There are about 20,000 in Britain and their numbers are growing at a rate of about 20 per cent each year.

Peter Watson, one of 300 alpaca breeders in the country, keeps about 35 of the animals on his farm in Devon. He says they are very easy to look after.

'They are used to surviving in the harsh conditions of the Andes, so here there is virtually nothing you have to do,' he said.

'Apart from breeding – which they have to do naturally – they are easier than any other farm animal.'

Their soft fleece comes in 22 natural colours and is more luxurious than sheep's wool.

And they offer quantity as well as quality, producing more than ten tonnes of fibre per year, making them Britain's largest indigenous producer of natural luxury fibre. Alpacas cost from about £500 but a quality breeding female could set you back £8,000.

Perhaps best of all, they don't have an annoying baa like sheep – they produce an inquisitive hum instead.

Ohioans Flock to Alpacas as Investment Alternative

2006-08-06T18:52:00.000-07:00

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.''

Alpaca Market Prices are Sustainable

2006-08-03T06:07:00.000-07:00

As an addendum to my article from yesterday, I have heard U.S. alpaca industry
critics say that the market prices commanded today are not sustainable or supported
by any real economic underpinnings based on the animal's byproduct (ie. Fiber).
I contend that market prices are supported by sound breeding stock values and
are sustainable over the long term. It's interesting to note that the U.S.
is not unique in this regard. In other countries such as New Zealand, breeders
enjoy equivalent market prices for their alpacas. See the Palmerston North newspaper
article below.

-------

01 August 2006

By KELLY GREGOR

Alpaca lovers from around the country were in Palmerston North during the weekend
for a conference.Sometimes confused with their less glamorous cousin the llama, alpacas are
mainly bred in New Zealand for their fibre.

Conference goers and members of the New Zealand Alpaca Association discussed breeding options and fibre quality, while visiting local farms in the region.

Despite a small population of 4000 nationwide, the industry is growing, with
passionate breeders looking to mate females with the best, conference goer
Alistair Newton said.

Due to numbers, New Zealand is unlikely to be a great producer of fibre.

At the moment the market supports a domestic demand, he said.

Males can retail anywhere from $20,000-$180,000.

Most breeders bring in males from other farms to mate, the process has been
nicknamed "squeals on wheels."

New Zealand breeders are trying to refine the microns to a lower count by
enlarging the gene pool. "The lower the better, with a low micron count the
wool's softer.

"We want to get it to 16, but anywhere between 23 and 25 is good," Mr Newton
said.

The cross-section of the hair's diameter is measured to see how thick it is.

We want the fibre to be really fine, finer than merino, he said.

Conference goers were quick to dispel any myths about alpacas and their spitting
habits.

Pukekohe breeder Lynda Mathews said the males usually only spit when fighting. "It's
not true they spit like camels, the females spit at the males once they're
pregnant, that's how we know," Mrs Mathews said.

The fibre collected from the alpacas is spun into wool.

There are two types of wool - huacaya and suri.

Suri is rare in New Zealand.

A Banker’s Take on the State of the Alpaca Industry

2006-08-02T14:17:00.000-07:00

I keep seeing references to a 2004 article written by Tina L. Saitone and Richard Sexton as the definitive counter to the long term price stability of the US alpaca industry. While Saitone and Sexton are credible critics based on their education and affiliation with the Department of Agriculture at UC Davis, I believe their view of the industry’s dynamics is myopic at best.
The article; Do Alpacas Represent the Latest Speculative Bubble in Agriculture? Is well written and convincingly argues that the economic value of the alpaca, pegged solely to the market value of its fiber does not and can not support the breeding stock prices commanded in the marketplace.
As a consummate analytic, I initially struggled with the appearant fiber/breeding stock value contradiction as well. While it is true that fiber is the only useable and renewable product produced by an alpaca, a market value model based on fiber prices can only be used as a measure of the animals worth when a functioning fiber industry exists.
The Saitone/Sexton analysis is flawed as the domestic alpaca population and the quality of their fiber will not support such an industry at this time.
After much analysis and research, I came to understand that today’s industry is driven by "breeding values" meaning the overall quality of an animal and its ability to reproduce a variety of desired phenotypic traits of which fiber is but one.
Our whole industry today is driven by the rarity of the animal and the quest to continually improve the quality of breeding stock in order to one day support a fiber industry.
One would expect that alpaca prices will decline over time as the domestic population increases and the gap between high and low quality breeding stock closes. It’s my opinion that at the point where the population is adequate to support a fiber industry, the market value of the “majority” of alpacas will be driven by fiber commodity prices much like the sheep industry is today.
But, when will such a decline occur?
From an optimistic perspective, one can say the time horizon is quite long if using the South American alpaca industry as a guide.
If we use the Peruvian model of 2.5 million alpacas to support a fiber industry, it will take another 20 years before the alpaca population will reach a comparable level and alpaca prices drop to the $1,000 to $5,000 levels currently commanded for other fleece bearing animals such as sheep whose stock prices are generally driven by fleece market values.
By contrast, the US Llama industry, driven by the domestic demand for camelids enjoyed 20+ years of high breeding stock prices until the US population reached roughly 400,000 animals and prices began to drop. While the animal is somewhat similar to alpacas, the dynamics of the fragmented Llama industry are not. By comparison, the alpaca industry enjoys a well organized national organization and superior registry. In addition, the animal has far more appeal due to its fleece potential and ease of handling.
Another important dynamic in live stock trading is the demand for “breed standard” animals in general. Whether horses, sheep, cattle or dogs, high quality breeding stock always brings high prices at market because serious breeders need such stock in order to continually improve their herds regardless of the size of the population.
For example, I recently surveyed a list of Angus Beef auction results from 2006 and found that top bred heifers captured auction prices ranging from $15,000 to $120,000. Prices averaged $4,500 per Angus heifer. To use the Saitone/Sexton argument, the market prices for these cattle are in no way supported by the price per pound for beef yet breeders were willing to exchange hard-earned dollars for these animals without regard for the size of the domestic Angus herd.
Why? Because of their breeding value.

In their article, Saitone and Sexton suggest the alpaca industry represents the latest speculative bubble in agriculture and that current price levels and their rate of increase are not sustainable.
I would agree with their position if auction prices were representative of all prices paid in the market place. As anyone knows, auctions entice the buyer to bid “against him/herself” and perhaps against others strategically attempting to artificially push prices high in order to gain market credibility by setting records. In their analysis, average prices are cited. Any statistician will argue for the use of mean prices for such an analysis rather than average prices becasue the aberant high prices artificially inflate the average.
Based on my experience, breeding females of good quality can be bought (or sold) for $18,000 to $25,000 today which is not significantly higher than the prices paid by the original importers in 1985. When you add to the mix the higher quality of the domestic herd today as compared to the original imports, the price of $18,000 to $25,000 is a bargain.
We buy and sell alpacas off our farm and within this price range consistently and we see no evidence of a speculative bubble.

Are the high six figure prices paid for alpacas at auctions sustainable? Who knows?

Can reasonable prices, based on quality be sustained over the long haul? Absolutely.

Any business enterprise has some speculative element to it. Alpaca farming is not a short term, get-rich-quick opportunity. The industry is enjoying a period of high visibility and the lure of quick returns may attract some short term investors to the industry which may drive prices to artificial levels for a while. It happens in every industry at some point. However, for the alpaca breeder with a long term view and a business model based on trading within realistic price levels, current prices are sustainable over the long haul.

Penned Baby Alpacas Killed by Loose Dogs

2006-08-02T09:03:00.000-07:00

By Lawrence GleasonWednesday August 02, 2006Morinville Mirror — Two dogs, pets in a subdivision neighboring a Sturgeon County farm, had to be put down after the pets got into a pen of alpacas and killed two of the animals, one a month old and one only days old. The life of another alpaca was threatened before the incident was stopped. “They had that black one down and they weren’t stopping,” said Pete Peeters of Peters Pride Alpacas.
Peeters, a former NHL goalie and last season’s goalie coach for the Edmonton Oilers, said on that morning he and his wife Laurie were setting up for the Country Soul Stroll, the recently held county-wide driving tour, and then went inside the house for lunch.That lunch break was all it took for the mayhem to happen. Laurie Peeters said she noticed right away there was a problem when she saw the mother of the youngest baby alpaca without the baby.“I knew something was wrong. She wouldn’t have been without it.”Pete Peeters said chasing the alpacas likely started out as a game for the two pet dogs. “It doesn’t matter how far away you get from the wild state, that is still in them and some point it is not a game. They wanted blood, they had a taste of it and they weren’t about to stop.
”Peeters put one dog down and called the owner of the other who put his own dog down.“They were all very nice people,” Peeters said. “I have no doubt they treated their dogs well and I have nothing bad to say about them.”The Peeters farm, on Range Road 241 near Namao, is near near the subdivisions of Cameron Park, Sturgeon View Estates, and Namao Ridge. The dogs did not come from the subdivisions, said Sturgeon County Constable Barry Bamford. “The tags on the dogs helped a lot,” said Peeters. Sturgeon County bylaws allow subdivision residents to keep four pets, including three dogs, on their property, unless an exception is made through a petition of area residents.

Alpaca: A Growth Industry

2006-07-28T20:13:00.000-07:00

HOOD RIVER, Ore. (AP) - Standing in the green grass, with Mount Hood's snowcapped peak on the horizon, it's hard for Marcus and Cathryn Whitman to imagine life any other way: the peace, the quiet - the alpacas.Like thousands of other Americans, they ditched their former lives for the bucolic experience of raising the easygoing shaggy animals.
A relative of the llama, alpacas originated in South America and were first introduced to the United States in 1984. They were initially popular in the Northwest, primarily among llama farmers wanting to diversify.
But the alpaca has since generated a following among nonagricultural types nationwide looking for a tax-friendly business and lower-stress lifestyle."For not knowing what an alpaca was six years ago, it's now everything," Cathryn said.The Whitmans wanted to make a change after weathering a few too many hurricanes working as dive instructors and yacht captains in the U.S. Virgin Islands. At their accountant's suggestion, they looked into farming for the tax breaks.They picked the alpacas because they "didn't want to raise something that we had to kill, or that would kill us" Cathryn said.Cathryn works for a diving magazine from her home but Marcus works full-time on the alpaca business.
After six years running Good Fortune Farms, they were able to pay off the debt incurred to start it. The Whitmans now have more than 30 alpacas, a shearing business and an alpaca store on their property.
The animals look like a cross between a teddy bear and a llama. Owners say they are easy to care for: their annual food costs rival those of some dogs and they can fit in the back of an SUV. And, they say, the animals are adorable.The Alpaca Owners and Breeders Association said the animals are an easy entree into an agricultural lifestyle.
Membership in the association spiked after 9/11, when some people opted for a simpler life, and it has continued rising steadily since then. The association now has more than 4,000 members, primarily in Western states.
But interest has grown nationwide - the largest presence of alpacas in the nation is in Ohio.
The animals only have one offspring a year. Imports from South America are limited and a national registry used for breeding and lineage tracking are closed to imports, further driving interest in breeding.
The price of a nonbreeding alpaca can be a few hundred dollars but the high-end breeding stock, with top appearance and lineage, can sell for as much as $100,000, according to the association.
The alpacas' soft fiber, which resembles cashmere, is sold - but the market is small. There is limited demand and there are no large-scale processing facilities, which prevents the fiber from being readily available."We would never tell anybody it's a get-rich-quick scheme," said Bob Black, who runs Black Acre Alpacas with his wife Val from their home in Beaverton, Ore., a Portland suburb.Both continue to work full-time, he as an information technology manager and she as an attorney. They have 24 animals now and they said they hope to transition into farming full time when they retire.
Breeding can be lucrative. The tax rules favor full-time rather than hobby farmers, and include the ability to write off some farming expenses and benefit from depreciation of property.But most say it was as much a lifestyle as an investment decision."I wanted to retire, or semiretire," said Lorraine Heinauer, who runs Almost Paradise Farms in Forest Grove with her husband, who continues his work as an engineer. "I liked the idea of puttering around a farm."But the surging interest, and selling prices, for alpacas has some critics saying the industry is showing clear signs of a speculative bubble ready to pop.
Richard Sexton, a professor of agricultural and resource economics at the University of California at Davis, co-authored a study this year that found the pricing of alpacas cannot be justified because of the lack of value of their fiber.The price of alpacas increased roughly 50 percent to 80 percent over four years, depending on breed, Sexton's study found. But the market for fiber remains limited.
The Alpaca Fiber Cooperative of North America Inc. is trying to secure an opportunity for large-scale processing to make the fiber more available. An alpaca produces 6 to 8 pounds of raw fiber a year. According to Sexton, a reputable producer with good contacts could get $44 a pound for high-quality raw fiber but this is only for a limited few breeders.Many use the cooperative to process their fiber, which provides them a maximum price of $3.80 a pound after processing, Sexton said."The commodity (fiber) they produce is worth almost nothing compared to the cost to produce it," Sexton said. "It would be the same thing as if dairy farmers were out there marketing cows, not their products."Even if the value of fiber rose significantly - at least double-digit percentage growth for an indefinite time - Sexton said the current prices for the animals cannot be sustained.He said there is an "irrational exuberance" in the industry and advertising on television and radio by alpaca organizations resembles a pyramid scheme to continue demand for breeding."You don't have to think back much further than the bubble of Internet stocks. Those were smart people, too, who were investing a lot of money," Sexton said.
Alpaca advocates adamantly defend the breed's financial future. Alpaca farming is still news and prices in any livestock industry will change in the long run, said Jerry Miller, spokesman for the owners association."This is not a flash in the pan," Miller said. "This is a long steady increase over a number of years."

Alpaca: it's the new cash cow

2006-05-28T10:16:00.000-07:00

There’s a lot of money to be made in alpaca farming — at least for now. But those who have taken the plunge, many of them Floridians, say they’re happy to have an investment they can hug.

By CATHERINE E. SHOICHET
Published May 27, 2006
[Times photo: Will Vragovic]
Mike Temple holds the head of Dakota to keep him still while his wife, Sheila, uses shears to cut Dakota's first coat.

CRYSTAL RIVER — Mike and Sheila Temple wanted a way to pass the time and earn extra cash after their two sons graduated from high school.

Flipping real estate made them some money, but their hearts weren’t in it. They wanted an investment they could hug.

In 2003 the Temples moved from Palm Harbor to Citrus County, sold their last property and used the money to buy something entirely different: an alpaca.

They now care for 27 of the hug-friendly animals on their 20-acre farm south of Crystal River, and they hope a healthy profit is on the horizon.

“In three years, our alpaca portfolio has quadrupled in value,’’ said Sheila Temple, 53. “Nobody can say that about a 401(k).”

Alpacas are native to the highlands of Peru, where for centuries people have domesticated them, sheared their luxurious fleece and sold it for top dollar. They were commercially imported in 1984, and today there are more than 80,000 alpacas in the United States and more than 800 in Florida, according to the Alpaca Registry International.

That number is growing as more and more Floridians leave the fast life behind and take an interest in these funny-looking relatives of the llama.

New farms are popping up from Tallahassee to Miami. Most are in the central part of the state; the North Suncoast is home to more than a dozen.

Why? Alpaca fleece is warm, hypo-allergenic and flame-resistant, used in pricey designer sweaters, scarves and socks sold at Bloomingdale’s and Burberry. The best-bred alpacas sell for hundreds of thousands of dollars — well above traditional livestock prices. And they’re cute.

Although, they do spit when they’re angry.

Critics say alpacas are just the latest farming craze without a financial foundation to back up the boom, like ostriches and emus before them. But owners of alpacas say that in a state agricultural market traditionally dominated by cattle and citrus, these fleecy faces are here to stay.
...

Start-up costs for a first-year alpaca farm — including a pregnant female and a young female, insurance, feed and other farming supplies — amount to about $68,000, according to the association. Many expenses are tax deductible. Well-bred females sell for around $20,000. The best-bred ones tend to rake in more money because of their ability to have more offspring. Recent auction prices have run as high as $750,000 for half-interest in a top-notch male alpaca.

Read article in its entirety...

Alpacas help fight the war against foxes

2006-05-19T19:22:00.000-07:00

ALPACA breeders Julie and Joe Hofer, of Jindera, are making a difference in the war against foxes.

Selling these South American animals as stock guardians, the couple’s efforts have been supported by a recent University of Sydney study which shows alpacas reduce newborn lamb deaths attributable to foxes by 13 per cent...read more...

Alpacas: A Sound Investment In A Great Business

2006-04-29T04:40:00.000-07:00

I have spent my entire professional career as a commercial lender in the US banking industry. I have been intimately involved in the financial affairs of numerous businesses, reviewed countless business plans and have seen many succeed and some fail. From the outset, I have been trained in the conservative management of assets. I am by nature, and as a product of twenty-five years of training, very conservative when it comes to managing our familyÂs personal assets. Why would someone with my background farm alpacas rather than concentrate on traditional investments such as real estate, stocks, bonds and mutual funds?
The answer, aside from the sound fundamentals of the alpaca industry, is diversification and superior returns on investment. Based on my experience with numerous businesses in a vast array of industries, I have never found any thing with the potential for gain like the alpaca industry. Of course, I believe that traditional investments are an important part of one's personal portfolio and Anita and I will continue to maintain positions in them. However, none of them offer us the potential to control our destiny by being actively involved in an exciting, growing industry while producing above average returns on a tax deferred basis.
Anita and I fit the alpaca owner/breeder profile to a tee. We love animals, are actively working our plan to build wealth and we pay our fare share of state and federal income taxes. I have to admit, in our lives, Anita and I have been extremely blessed. But, in building wealth, we have been continually frustrated by the impact our investments suffered by market conditions outside of our control. Terrorist attacks, oil prices, accounting irregularities and changes in consumer confidence all impact the value of these assets. In addition, taxes are a continual burden, reducing gains and further impeding growth. As saddened as I was with the events of September 11, 2001, I was extremely encouraged to find that the alpaca industry actually grew when all other financial markets suffered declines.
Anita and I were initially attracted to the alpaca business as we were looking for a way to enjoy our farm, produce superior financial returns, build wealth on a tax deferred basis and reduce taxes on our current income.
Why are alpacas such a superior businessopportunityy?
Based on an alpacaÂs quality, returns of 30% to 75% are possible. This is significantly better than the historic 10returnsrs available with traditional investments.
Alpacas can be insured to protect the owner against loss due to death of theft.
An alpacaÂs offspring (cria), if bred properly, will have a market value equal to or greater than that of its mother. The result of this is a compounding effect on the value of the herd.
Alpacas are scarce due to the size of the domestic herd and their slow rate of reproduction. A female is generally bred at 12-18 months of age and can only produce one cria per year. Viable twins rarely occur. This supports price stability.
The rate of growth in AOBA membership has consistently exceeded the growth of the domestic herd. There is a strong demand for elite natural fiber which is driving the industry to grow and improve the herd. If compared to the market for wool, 2,000,000 alpacas will be required in order to support a domestic fiber industry. Today there are approximately 80,000 alpacas domestically. Based on the historic herd growth rate of 10%-15% per year, the demand for quality alpacas should remain strong for many years.
Alpaca prices have remained stable for nearly twenty years. This is due, in part, to the single US registry (ARI) which is closed to imports. There is no risk of competing with cheap imitations and alpacas produce slowly. Finally, the tax benefits of owning and operating a for profit farming operation significantly enhance the return potential by allowing you to depreciate your farm alivestocktok purchases. For more information on the wealth building benefits of alpacas, go to www.alpacabanker.com.

Treating Deep Flesh Wounds

2006-04-28T19:53:00.000-07:00

Spring is the perfect time for shearing alpacas. Like most ranchers, we plan a spring shearing day early enough to avoid the potential for heat stress caused by the early onset of high temperatures. Just as in prior years, we sheared the entire herd in a single day.
This year was no different and the job was progressing as expected. Toward the end of the day, the guys shearing the alpacas began to tire and in a single slip of the clippers, one of our females received a severe laceration to her hind leg.

Initially, the injury appeared to be a simple cut which a ranchhand quickly treated with Corona, a topical anteceptic salve and put her out in the paddock with her pals.

However, within a short period of time, the extent of the injury became more apparent. The laceration was so deep that the muscle was exposed but very little blood was present. Aside from the exposedure of deep tissue to the potential for infection, the lack of blood flow meant that a clot could not form to aid in closing the wound.

We contacted our veternarian who upon examination, told us by attempting to treat the wound with the salve, we elevated a simple procedure of suturing the wound to a quasi-surgical procedure that potentially required weeks of daily treatment.

Due to the extent of the injury (deep tissue exposure with lack of blood flow), the introduction of the salve created a rejection response resulting in the inability of the skin to knit together. The vet thoroughly cleaned deep inside and sutured the wound after trimming away a sizable portion of the skin along the edges of the laceration.
The alpaca was restricted to a closed pen area for a week to avoid re-opening the wound.

After two weeks, the sutures were removed to reveal a partially healed wound site that will still require weeks of continued observation and treatment to aviod infection.

The lesson in all of this is don't work beyond the point of fitigue when there is a posibility of injury to your alpacas or yourself and, never treat a deep tissue wound with anything other than a sterile cleaning agent such as Betadine solution and if possible, suture immediately.
It's a good idea to keep a supply of sterile sutures on hand. If you are not confident in your stitching abilities, call your vet immediately. Left untreated, severe wounds don't get better with time.

The AlpacaBanker

Accoyo! Apparel

2006-04-28T17:23:00.000-07:00

I’ve never been a big fan of Peruvian Style alpaca clothing. The sweaters are so loud, bright, and heavy…that’s why I was so interested in starting our own alpaca clothing business. We took the fashion forward approach and developed our own line. The first time I felt baby alpaca, I was sold! The touch was amazing and there was hardly even an itch. When you see alpaca against other fibers, it’s not even comparable. For that reason alone, cashmere is the only competitor and that’s why people love buying alpaca.

Join us!

2006-04-28T11:51:00.000-07:00

We are hosting a Breeding, Birthing and Aftercare seminar taught by the renowned alpaca veterinarian, Dr. Patrick Long. The 2-day seminar will be held at our farm in Northeast Ohio on July 15 and 16. Breakfast, Lunch and snacks will be served each day. The seminar will be hands on with labs, etc. The cost is $300 per person with 25% discount for registration before June 1. Join us! For more information go to info@abfschool.com or e-mail me at RainyB3@hotmail.com

Welcome to Alpacaville!

2006-04-27T16:04:00.000-07:00

This is a blog that will be dedicated to educating the world about alpaca's and the businesses that goes along with them. We will have seven different posters, all bringing different experiences, information, and thoughts to this blog. The content will be fresh, interesting, and alpaca fun! Let me introduce our 7 posters:

Jamie- That’s me! I am part owner of our online alpaca store, Accoyo! in Los Angeles.

Jill- My sister! She is part owner and does all the computer graphic designs.

Gina- My sister-in-law! She’s part owner as well and is the programmer to our site.

Ben- My dad! He’s the president …the business man. His main focus belongs to Double Stuff Farm back in Ohio, where they breed Accoyo Alpaca’s.

Rainy- My mom! She’s the queen. She takes care of the farm and runs the farm store during the Christmas season.

Tim- My uncle! He owns Beachwood Creek Farm and is an alpaca financial consultant.

Anita- My aunt! She’s the owner/caretaker of the alpacas at Beachwood Creek Farm and also helps with Double Stuff Farm.

Feel free to comment and ask questions whenever you like…that’s what we’re here for!