Benefits and Risks of Alpaca Ownership
Benefits. The stock market is experiencing wide swings on a daily basis. Investors are not sure from day to day whether or not their profit will hold another day let alone another year. Stock market investors are nervous and no wonder, as many “new” investors are close to retirement age.
There is another market, the alpaca market. The stock market and the alpaca market are alike in the following ways: (1) They are subject to capital gains taxes, if held a required amount of time, and (2) They can both be traded as tax-free exchanges. They are; however, different in many more ways: Alpacas, (1) Are insurable, (2) Are tax depreciable over a seven -year period, (3) Make their owners eligible for a section 179 deduction, a small business deduction for capital assets and, (4) Offer a lifestyle which is both peaceful and profitable. The stock market, does not offer any of these benefits.
Alpacas are, as farmers would say, “easy keepers.” They have communal dung piles, designated areas that the herd shares, rather than randomly depositing manure throughout the pasture. They are easy on the terrain in 2 ways – first, they do not gouge out the land from their weight and hooves as do horses and cattle, and second, they do not pull grass out by the roots as do sheep. They snip off the top of grass so pasture rotation allows for regrowth of the grass, not reseeding of it. They take very little care, are disease resistant, and easy to transport. How can such an elegant and lovable animal that emanates serenity and beauty also be so lucrative? In truth there is a financially pragmatic answer to this question. It is based on an ever-growing demand for these animals and their fleece. It is also based on the exceptional quality of the alpacas we are creating in the U.S. due to our breeding and herd management regimes. In short, it is based on many “left-brain” reasons – reasons that are rational, linear, with statistics and charts that document the financial benefits of raising these fine animals.
However, some people are “right-brain-animal-lovers” and “right-brain” investors. Not the kind of people willing or able to take high financial risks. Their hard earned money is sitting in some bank, earning low interest in CD’s, or is slowly depleting in the stock market. Neither case gives them any pleasure. After first encountering alpacas, they decide to learn about these beautiful animals and realize their money could be making them good returns while providing them with a healthy, animal-loving lifestyle. By taking care of alpacas, enjoying them, even loving them, investors can be financially rewarded by them. Raising alpacas is a good business. It is a healthy business. It is a business that meets financial, emotional, and physical needs. And, it is a whole lot more gratifying having control of your money rather than letting someone else control it for us.
The Alpaca Registry, Inc. (ARI). ARI was established to help ensure accurate records and has a state-of-the-art record-keeping system to document bloodlines. In order to be registered, alpacas must be blood-typed (DNA tested). Alpaca value is maintained through this verifiable pedigree.
Alpaca Owners and Breeders Association, Inc. (AOBA). AOBA is the organization that provides information to members regarding alpaca events, has an excellent library, and promotes the alpaca breeding and fiber industries. It is a strong and active national breed association with a growing number of regional affiliates and AOBA-sanctioned national committees focused on addressing all aspects of the alpaca industry. AOBA has numerous membership rights and privileges, including eligibility to vote, eligibility to be a candidate for the board of directors, eligibility to buy Farm and Ranch Guide advertising on the internet, free business reply postcards, eligibility to apply to enter AOBA auctions, access to membership data base, access to inquiry data base, media inquiry referrals, farm events listed on AOBA calendar, annual conference discounts, discounts on AOBA marketing materials, receive membership directory, access to AOBA library, receive newsletter (One Voice), and eligibility to apply to participate on AOBA committees.
Risks. It is important to recognize that there are inherent risks to alpaca ownership just like in any other livestock or financial investment. Therefore, as in most investments, it is best to not invest more than a person can afford to lose or at least have tied up for a couple of years.
This is a true livestock business that incorporates some potential and inherent risk. Although the returns can be significant with hard work and dedication, it is prudent to realistically consider the risks. Illness, injury, and death are sometimes unavoidable and unexpected risks.
As the market matures, it is likely that prices for “average” animals will reduce, but the value of high quality alpacas will ensure that they maintain, or increase, the premium price that they command. As with everything else, you generally get what you pay for, so it is false economy to buy cheap animals, unless you do not want to sell livestock. Start with good quality alpacas and have a defined breeding plan to achieve specific herd characteristics. Without this plan, investors are likely to end up selling “cute” to impulse buyers, and eventually getting frozen out of the market, as the importance of good fiber characteristics becomes more widely known.