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Sykora
Remington, 1 hour old, trying to figure
out what to do with those long legs
Bella
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Why Invest in Alpacas?
First, let's talk a minute about investing in general. Whether
your money is invested in equity, bonds, real estate, precious
metals, race horses or alpacas, there is always risk. Understanding
your risk associated with any investment choice and having
the necessary information to make an informed decision as
to compatibility of that investment with your long term goals
is always a prudent step.
There is a great deal of credible information available as
to the benefits of breeding and raising alpacas. A large number
of those benefits are in the form of tax savings and appreciation
of your property. As you operate an agricultural business,
the majority of the expenses associated with animal care are
deductible. Expenses associated with feeding, veterinary care,
fencing, electrical consumption, maintenance, breeding fees,
transportation of animals and many other items, depending
on the advice of a CPA are deductible. Large capital items,
such as the cost of land, barns, machinery, equipment, shelters,
water wells and the animals may be depreciated. As permanent
improvements are depreciated, those same improvements add
value to your property. In recent years, with the enactment
of legislation providing for the 100% depreciation of capital
improvements by small businesses (Section 179), many items
such as the cost of the animals can be deducted from a tax
burden in their entirety. It is wise to always talk with your
CPA regarding your personal financial situation.
As a herd grows through purchases of new animals and reproduction,
the capital gains associated with the growth and increasing
asset value will be deferred until the animal is actually
sold. So the wealth that is measured in the size and quality
of your herd accumulates until a transaction occurs.
Compared to other livestock, alpacas are relatively inexpensive
to maintain. Aside from the initial investment (which is depreciated)
the cost to maintain these hardy animals is minimal. Alpacas
are very easy on the pasture land because of their padded
feet and toes, which unlike hoofed animals, do not destroy
the grass and dig into the soil. The alpaca's basic needs
are few, shelter, protective perimeter fencing to guard against
predators, adequate space to roam freely with other herd members,
small amounts of grain with minerals, good quality hay and
clean fresh water is sufficient. A veterinarian in your area
can recommend a worming and vaccination schedule suitable
for your farm.
Once you have alpacas you will soon find that they return
far more than the effort and cost to care for them.
How to Buy Alpacas
Now that you're committed to launch a new business, how do
you find and buy your first herd members. Through the process
of investigating the opportunity and gathering information,
either visits to a local farm or two have occurred or visits
to many websites have started the decision process. Continue
that activity, visit as many farms as possible, visit the
AOBA, Alpaca Registry and Alpaca Nation websites, and visit
any number of other farm websites that provide an abundance
of information. Learn about fleece and all of it's characteristics,
learn what wins in the show ring, go to alpaca shows and watch
the judging, visit the booths of winning farms, put your hands
on the winning animals and always ask questions. Learning
what to buy and what not to buy will come quickly as well
as who to buy from. The objective is to reach a comfort level
with the animal and the knowledge required to be a good Shepherd.
These animals are your trusting charges and they depend on
you for their every need.
When the purchase decision has been reached and animals are
being selected, one thing that is never, never done is to
buy one animal and remove the animal from the herd to live
in isolation. These are herd animals and they require the
socialization of the herd to thrive. Many breeders offer agistment
(boarding) for purchased animals and if a hands-on operation
is not possible at the time of purchase, agistment will be
the best option.
Results
A start up alpaca business can begin with an investment of
as little as $15,000 to $20,000. However, experience is a
wonderful thing and the one thing it has taught many of us
is to purchase the best animals we can. Not all alpacas are
the same and genetics are a dominate force in breeding to
improve the next generation. The lower the quality of the
animal that is purchased, the longer the process to achieve
the quality desired. Always purchase the best animal possible
and breed to the best genetics. The potential of birthing
a better animal will be improved.
Diversity in blood lines is a great asset when offering individual
animals for sale. In many cases, buyers may express an interest
in the purchase of a breeding pair, with little thought of
quality and characteristics of future generations. To improve
the quality, one must breed to quality genetics and often
that may be outside the boundaries of your farm. Consistently
breeding the same two animals will in most cases reproduce
the quality of those two animals. To be a competitor in the
show ring and in the overall breeding industry, diversity
is necessary and desirable.
As your herd grows, so will the overall value. For example,
a pregnant female is purchased and herd growth may increase
under the following scenario.
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Asset Value
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Expenses
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One pregnant female due Jan. 1
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$20,000
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One cria increase the value by $10K
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Two animals are valued at
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$30,000
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The first female is rebred
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($1,500)
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In 11 months due Dec 1
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A second cria increases value by $10K
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Three animals are valued
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$40,000
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The first female is rebred due Nov 1
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($1,500)
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The first cria will be bred within 18 months of birth
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($1,500)
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Two new crias increase value by $10K
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$60,000
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As demonstrated, this very simplistic model indicates the
value increases from the original $20,000 invested to $60,000
within approximately three years, excluding cost of feed and
care during that time.
There were several assumptions applied to the foregoing model
that may not be realized in practice. First and foremost not
every cria is valued at $10,000 and the number was selected
merely for the ease of the math. Considering that, on average
males and females will be produced on a 50/50 ratio and males
in general are not valued as highly as females, therefore
the ending asset value may not achieve $60,000. However, the
purpose of the model was to demonstrate the compounding effect
of growth through reproduction. The Alpaca Owners and Breeders
Association website, www.alpacainfo.com,
has more information on compounding for review.
We encourage you to talk with your CPA to determine how alpacas
may fit into your life and whether an alpaca investment is
the right decision for you. We would be happy to discuss the
growth of our herd, expectations and how alpacas may fit into
your life.
We are not CPA's or tax lawyers. Each individual or farm
should make their own projections based on your personal desires,
risk tolerance and goals.
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