Providing Education and Information for THE ENTIRE ALPACA COMMUNITY
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Alpacas as A Business
The alpaca industry has a mixture of individuals ranging from the alpaca breeder who is interested in breeding and raising alpacas as a business venture to those individuals who are interested in raising alpacas strictly to produce fleece to be processed and sold to be made into end products. The industry even has many people who just want to own alpacas as pets and companions on small acreages. No matter which category that you fall into, it is important for you to understand the risks and opportunities in raising alpacas. Just like any business, there are risks and there are benefits.
Although alpacas should not be considered pure investments, in addition to added pleasure and peace of mind that they can bring, there are many business benefits in raising alpacas,. For example, like other valuable assets, breeding stock held for more than a year qualifies for long-term capital gains treatment when sold. Unlike many assets, alpacas are 100% insurable.
Alpacas are depreciable over a maximum of five years, giving farm and ranch owners immediate tax savings while their herd is growing. Also, alpaca purchases can qualify for more rapid depreciation under Section 179 of the I.R.C. As you raise your alpacas, most related expenses (ie., feed, vet care, supplies, farm equipment, computers, plus travel, showing and advertising costs, etc.) are deductible. In many states, those involved in farming can receive a significant reduction in their real estate taxes. Be sure to consult your tax advisor to learn how these tax rules can help you.
Alpacas are not inexpensive, ranging from $10,000 to $40,000 for breeding females and $5,000 to $35,000 for high quality males. High quality proven males with exceptional offspring have sold in excess of $200,000. In many cases, financing your alpaca purchase can be done right on the farm as many alpaca breeders offer financing.
The alpaca herd grows at a limited rate, which helps to keep the supply and demand in check because:
- Gestation periods are only eleven months to a year with single births.
- Alpaca Registry, Inc. (ARI) offers fully DNA-typed protection and has been closed since 1998 to any newly imported animals.
- The U.S. government does not currently have a high security portal into the U.S. for animals imported from countries that have hoof and mouth disease, which at this time includes Peru and Bolivia.
- The only high security quarantine station that was in operation in Key West, Florida was closed permanently by the Clinton administration.
- Mass production techniques, such as embryo transfer and artificial insemination, are difficult, if not impossible, due to the physical characteristics of the alpaca. More importantly, the Registry will not recognize any animals that are not produced naturally.
Contributor(s): Jim King; Mike Safley
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