Financial Aspects of Alpaca Ownership
Why do people in so many countries call alpacas "the world's finest livestock investment?"  For any investment to be valuable, it must possess certain qualities which make it desirable.  Gold is scarce, real estate provides shelter, oil produces energy, bonds earn interest, stocks are supposed to increase in value, and diamonds symbolize love.  Alpacas share many of these investment attributes.  Around the world, alpacas are in strong demand, and people pay high prices for them.  They are scarce, unique, and textiles produced from their fiber are known in the fashion centers of Paris, Milan and Tokyo.  There are excellent profit opportunities and tax advantages available to alpaca breeders.  Historically, the alpaca's value has sustained ancient cultures, such as the Incas of Peru, and today alpacas are the sustaining economic force for millions of South Americans.  History has validated the value of the alpaca.

Who Buys Alpacas?
Alpaca breeders come from many walks of life.  For some, alpacas are a source of income, for others a source of pleasure.  For all owners, alpacas offer a great way to diversify their financial portfolio with a commodity that is both rare and in demand worldwide.  Almost all breeders are in the business for the long haul, they believe in the future of the animal.  With the small number of alpacas currently available, there will be an extended and steady demand for breeding stock to continue meeting the needs of our growing industry for many years.

Alpaca Supply and Demand
The market for alpacas has been restricted by lack of supply.  There are approximately 30,000 alpacas in North America and about 35,000 in Australia.  Until recently, there has been little aggressive marketing of the animal, very few auctions, and very little national media attention for the alpaca.  Supply will continue to be restricted in the near future for a number of reasons:

• Alpacas reproduce slowly.
• Many breeders retain their offspring, building their herds.
• Mass production of "crias" or babies, via embryo transplant is not feasible, since there is no available supply of suitable host females.
• The limited size of the national herds in each country outside of South America will restrain growth for some time to come.
• The U.S. alpaca registry is closed to further importation to protect our national herd, which will further limit U.S. herd growth.

"Alpaca Compounding"
A major investment benefit of owning alpacas is based on the concept of compounding.  Savings accounts earn interest, which if left in the account, adds to principal.  The increased principal earns additional interest, thereby compounding the investor's return.  Alpacas reproduce almost every year, and about one-half of their babies are females.  When you retain the offspring in your herd, they begin producing babies.  This is "Alpaca Compounding."  Tax-deferred wealth building is another "Alpaca advantage."  As your herd grows, you postpone paying income tax on its increasing value until such time as you begin selling the offspring.

Tax Consequences of Owning Alpacas
Raising alpacas at your own ranch can offer the rancher some very attractive tax advantages.  If alpacas are actively raised for profit, all the expenses attributable to the endeavor can be written off against your income.  Expenses would include feed, fertilizer, veterinarian care, etc., but also the depreciation of such tangible property as breeding stock, barns, and fences.  These expenses can also help shelter current cash flow from tax.

Investment Qualities
An alpaca rancher with a small herd on a small acreage can expect to harvest his animals' fleece and sell their offspring profitably.  The value of alpaca fleece is the economic underpinning of the future market for alpacas.  Breeders outside of South America are beginning to organize wool co-ops for the commercial processing of the fleece.  Domestic fiber is often sold to cottage industries that revolve around hand-spinning and weaving.  Each animal will produce around five to ten pounds of fleece a year.  Most alpaca ranchers sell their fleece for US$2 to US$4 an ounce to artisans, with a growing commerce in Internet fiber sales.

The current alpaca industry is based on the sale of quality breeding stock, which commands premium prices.  Female alpacas begin breeding at between 15 and 18 months of age, while males begin breeding at about three years.  The females produce one baby per year (twins are exceedingly rare) during a reproductive life of about 15-20 years.  The factors which influence individual alpaca prices include color, conformation, fleece quality and quantity, age, and gender.  Females sell for more money on average than males, but herdsire quality males command the highest individual prices.  Breeders often prefer one alpaca color to another, however the parents' color does not necessarily guarantee a cria of the same color.  Correct, well-conformed alpacas sell for higher prices.  Fleece, density, uniformity, and fineness also affect the animal's price.

The range of value for females is currently between $12,500 and $40,000.  Females with unique attributes have sold for more than $40,000.  Young, unproven high quality stud prospects routinely sell for between $7,500 and $25,000, and the highest quality males with unique characteristics or exceptional offspring on the ground have sold in excess of $100,000.  Many breeders start with several breeding age females and perhaps one male.  Other new breeders may elect to start with several young animals or a breeding pair.  There is an approach suitable for your level of interest and financial position.

A Lifestyle Choice
Alpacas offer an outstanding choice as a livestock investment.  Alpaca breeders enjoy nurturing their animals every bit as much as receiving the profits they provide.   They have long been known as the aristocrat of all ranch animals.  But most of all, alpacas are easy keepers, they have a charismatic manner, they do very well on small acreage, and they produce a luxury product which is in high demand.  Finally, alpacas are easy to transport, which allows them to be traded across the country or around the world.  They have a relatively long and trouble-free reproductive life span, and alpacas can be insured against loss.

Livestock, or animals raised for profit, were an investment long before financial stocks were sold on the New York Stock Exchange.  Today, wealth as a result of livestock ownership is not as common, but tending to a graceful herd of alpacas can also be an exciting way to earn a substantial cash flow and live a rewarding lifestyle.