Wall Street gives "Thumbs Up" to Alpacas
KENTUCKY ALPACA FARMERS AGREE
THE BEST STOCK MIGHT BE LIVESTOCK
But don’t look for it on Wall Street!
With the turbulent state of the U.S. stock market, one would assume all investments are feeling the blow of the current crisis. However, the alpaca industry remains strong.
As mentioned in the October 3, 2008 Wall Street Journal article “When Stocks Tank, Some Investors Stampede to Alpacas and Turn to Drink,” people are looking to alternative investments for relief.
Peggy Parks, a 49-year-old auditor in Johnstown, Pa., is one of many who have turned to alpacas. "I've lost a fortune in stocks, and my 401(k) is falling through the floor. I feel comfortable in alpacas," she says. Parks invested $56,000 in a small herd she believes has a better outlook than most mutual funds because of the animals' breeding potential.
Ms. Parks says a female of "medium quality" can fetch $10,000 and that prices have been rising, supporting her hopes that she'll see a profit on her alpaca portfolio in five years.
An indicator the alpaca industry is doing well was evident in October when one of the leading alpaca auctions in the country auctioned off over 70 alpacas at an average of almost $25,000 per animal.
And yet another sign the alpaca business is continuing to flourish was exemplified when the Alpaca Owners and Breeders Association (AOBA), the backbone of the alpaca industry, held its second annual National Alpaca Farm Days. Over 1,100 alpaca farms opened their doors to the public for the opportunity to learn more about these unique, inquisitive animals that produce luxurious fiber. Expectations were exceeded dramatically with numerous farms reporting numbers of over 500 visitors each.
In a time that new business ventures are looked upon with trepidation, the alpaca industry is proving to remain a wise choice for alternative investments.
Alpacas, cousins to the llama, are native to the Andean Mountain range of South America. First imported into the U.S. in 1984 from Peru, Bolivia, and Chile, the alpaca industry has grown steadily. Current estimates total over 100,000 registered alpacas with the Alpaca Registry, Inc. (ARI) in the U.S. and more than 4,000 AOBA members in North America.
Adult alpacas stand at approximately 36 inches at the withers and generally weigh between 150 and 200 pounds. They do not have horns, hooves, or claws and, therefore, are easy on the land. Alpacas are social animals that seek companionship and are best described as alert, intelligent, curious, and predictable. They communicate most commonly by softly humming.
Alpacas are shorn once a year, producing five to ten pounds of luxurious fiber. Alpaca fiber is as soft as cashmere and as warm as wool. It comes in 22 natural colors yet can be dyed any desired shade. Containing no lanolin, alpaca fiber is also naturally hypoallergenic. Additional performance characteristics include stretch, water repellency, and odor reduction. For travelers, clothing made from alpaca is desirable because it is wrinkle-resistant.
Alpacas are Livestock
The 2008 Farm Bill defines livestock as meaning “all animals raised on farms,” and in the accompanying explanatory language, alpacas are specifically mentioned. This is great news for the alpaca industry.
Because of the alpacas’ newly-acquired federal designation, alpaca breeders now have access to myriad low-interest and grant programs previously available only to more traditional livestock producers. The federal recognition of alpacas as livestock also means those in the alpaca business can more easily join forces with their compatriots in other livestock industries to make their voices heard on Capitol Hill.
Tax Benefits of Owning Alpacas
Raising alpacas at your own farm, in the hands-on fashion, offers the farmer some very attractive tax advantages. When alpacas are actively raised for profit, all the expenses attributable to the endeavor can be written off against other 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 help shelter current cash flow from tax.
The less active owner using the agisted ownership approach may not enjoy all of the tax benefits of the hands-on alpaca farmer, but many of the advantages still apply. For instance, the passive alpaca owner can depreciate breeding stock and expense the direct cost of maintaining the animals.
Alpaca breeding allows for tax-deferred wealth building. An owner can purchase several alpacas and then allow the herd to grow over time without paying income tax on its increased size and value until he or she decides to sell an animal or sell the entire herd.
To qualify for the most favorable tax treatment as a farmer, the alpaca breeder must establish he is in business to make a profit and is actively involved in the business.
The best way to learn more about alpacas is to visit a Kentucky alpaca farm. To locate a farm in your area and learn more about the investment opportunities of alpacas, visit