An Investment You Can Take To The Bank...
The alpaca continues to play an ever-increasing role in the investment market, with exceedingly high individual returns. The alpaca industry merits warrant a closer look for anyone looking to diversify their investment portfolio. Since the early 80's the alpaca has continued to maintain a secure investment level. Worldwide their numbers are low, and unlike other live commodities, the demand for the fine fleece has continued to increase. At present, there is no other livestock that gives the full spectrum of opportunity that the alpaca does. Their endearing characteristics, coupled with the financial returns they provide, make them the perfect asset for anyone. There are multiple investment strategies for investing in alpacas, be sure to select the one that suits your particular situation.
Starting an Alpaca Business Takes Foresight.
The initial investment can take 3-5 years to earn profits. Many people see it as a great retirment option. They are tired of the corporate world "rat race" and long for a more relaxed and low-stress lifestyle. We have met young people who are raising their families and want their children to grow up in a more wholesome environment, or maybe mom or dad simply wants to work from home. Whatever the motivation, raising alpacas is a great option for people with long range vision who want to change their lifestyle.
Industry Merits
The average cost of an alpaca today is $16,000--the same price it cost during introduction of the species in the US over 20 years ago. Although this market value is subject to fluctuation like any other market, the value has stayed the same because the US herd is still small. The US alpaca herd stays small because the registry of imports was closed (we are not bringing any more in from outside the country) and because the females can only have one baby (cria) each year. Alpaca life expectancy is approximately 20 years of age and females will bear young into their late teens if properly cared for.
Breeders in the business for a decade or more will say they've seen the low-end prices for alpacas drop and the prices for the top animals increase, which also points to a stability of the value in the market overall.
There are approximately 190,000 alpacas in the US and all of the breeders combined are only able to supply 3% of the demand in the fashion industry for this luxurious fleece.
Careful selection and up-breeding of offspring will increase fleece quality and the herd in value. Values are expected to stay strong until demand for the fleece and available supply equate. Only a few short years ago the highest price paid for an alpaca was $80,000. Two years ago half interest in a very special herd sire sold for $500,000!
Alpacas range in value from $6,000 to over $150,000 predicated on a wide variety of physical characteristics and genetics. Male alpacas that are not breeding stock, but are still great pets and which produce outstanding fleece, sell for prices between $500 and $1,500. depending upon the quality and color of their fleece.
Alpacas have a gestation period of 11.5 months. They are traditionally rebred two to three weeks after giving birth. Alpaca fleece has good value and the profit on the fleece can offset the cost of feeding and boarding of the animal. The real profits come through the breeding of these animals and selling the offspring to other farms looking to diversify their bloodlines and/or to new people looking to change their lifestyle and begin their own farm. Therefore, female babies are highly desirable, and male crias are for the most part, pets. The higher up the DNA chain you climb, the greater the odds that your males could have all the components to be a herd sire. Only approximately 10% are high enough quality to be herd sires. There are several key strategies to approach when investing in alpacas and we will give a fair explanation to each.
Alpaca Investment Strategies
The most common approach is to invest your money in female alpacas that are near due to give birth. Assuming a female cria is born, in a little over a year you will be able to sell her for sometimes as much, if not more than you bought her mother! At that point, you have your money back and every cria that comes thereafter, along with the eventual sale of the mother, will be profit. This plan sometimes works very well, and other times not. It all depends upon genetic luck of the draw. If your female gives birth to a pet male, your investment is still soundly invested in the mom, but your payoff will not come until she produces a female cria. Even though the odds are 50/50 for male/female offspring, those odds can wreak havoc on the best made plans.
Another option is to invest in numerous females who are ready to give birth. This method is a great entry move for a savvy investor. You spread your odds over multiple females with the expectation that you will on average yield a healthy return of female crias and perhaps a herdsire or two as well! Collectively, this allows you to spread your risk and your reward. Since there is so much time between crias, an investor must look three to five years forward with the expectations of how each of their choices will impact their investment. This level breeder has enough animals that they can sell alpacas on an annual basis and generate money to live on along the way.
A more long-term approach is to purchase numerous females and perhaps partial or complete ownership of a herdsire or two. This mindset does not focus on the selling of animals in the early few years, but rather, focuses on the exponential growth potential of continuing to allow their herd to multiply. IRS regulations require selling some animals along the way to satisfy that this is a business and not a hobby, but for the most part, this mindset will aggressively acquire alpacas and continue to breed to stronger genetic bloodlines thereby ensuring growth of their core business into a burgeoning ranch. If you negotiate well, your purchases could include a breedback to a great herdsire from their ranch. If not, take that into consideration on the purchase price as you will pay between $2,000 to $10,000 for each breeding.
An alternative approach is to invest in unproven "maiden" females. They are less expensive than proven/pregnant females. Heed the word unproven. In even the best genetic circumstances, some females will not carry a cria for a host of reasons. An unproven female is just that...not good or bad, just unknown. This is a bit riskier, but in that risk comes a good profit when the risk is rewarded with perfect outcomes. Approximately 90% of births are successful and uncomplicated.
Another alternative approach is to purchase crias. They are traditionally less expensive than maiden females, which in turn are less expensive than proven females. An eye for a good cria can regularly return outstanding percentages on investment by buying a cria, owning it through maidenhood and delivery of its first cria. A good cria has a wide price range depending on its parents, bloodlines and all the other characteristics mentioned previously. For simplicity sake, it is possible to buy a female cria at 6 months old for $8,000 to $10,000 . At eighteen months old, it should be able to breed. After the pregnancy takes and the alpaca is now a few months pregnant, the same animal could be worth from $12,000 to $18,000. Once the alpaca delivers (around 1.5 years after your investment), you could potentially have a proven female worth as much as $25,000, plus the cria it gave birth to could be worth about $10,000 if it were a female...substantially less if it's a male.
The final investment alternative is for those brave souls who start out purchasing a herd sire, either financed by the selling ranch, or with a discount for cash. This investor will retrieve their initial capital through stud fees. Mortality insurance covers the value of the herd sire, minimizing the financial risk. Herd sires are sold in their entirely, as well as in partial share ownership packages. A passive investor could purchase half of an outstanding herd sire and make a deal with the co-owner to share expenses, as well as the profits generated by that herd sire. A normal breeding fee is $2,000 to $4,000 with some as high as $10,000. It is not uncommon for a top notch herd sire to breed 20 to 30 times in a year. The breeding income adds up quickly and an investment in a great herd sire could return a great sum on the investment. The risk for a beginner with this alternative is that unless you know what you are looking at, you may end up with a male that is not a highly sought after bloodline. Marketing heavily can only do so much. The quality of your male has to keep other farms coming back for more! Do your homework before investing in this alternative!
