Please place your mouse over each "video screens" to view the short video clips.

Starting Right   By Dan Gromek

      If there is one thing that I have learned in life it's "do it right the first time". This has special meaning when considering an investment in alpacas. All too many do not see the whole picture when first starting out in alpacas. They soon find their first years to be a "learning it the hard way" experience. Understanding and paying attention to 3 critical areas can be the difference between floundering and early success. Quality alpacas, quality warranties and quality support; these are the 3 keys to starting right.

     Quality alpacas: This is obvious to everyone. You certainly want quality livestock to start with. But how do you define that quality? Of course you can have breeders show you the aspects of conformation and fleece. Take this with a grain of salt if they are trying to sell you animals. Especially beware if you hear the word "perfect" spoken repeatedly. There is literature available that will do a good job of explaining body conformation and fleece quality. This is the knowledge most people start out in the business with. Of course the "that one has the most beautiful eyes" or "this one nuzzles me" are quite often important aspects of purchasing one's first alpaca.

     But there is no perfect alpaca. So what areas do you give on and which do you insist on. Did you know that fleece quality is the easiest genetic trait to improve on, or that reproductive problems are among the most difficult to eliminate. There is much more to assessing the quality on an animal than just looking at it. Insist that the breeder you buy from understands these points, and will support you in your learning years.

     Quality warranties: Understand what warranties can come with your purchase. There can be many differences. Is your female guaranteed to give a live birth or only that she will get pregnant. I know a party who purchased a very nice female for substantial money. After 3 years she has yet to have a baby that lived. The seller is unwilling to do anything for this client. Know alpaca warranties, and how well the breeder helps his client when problems arise. The best breeders will help beyond their warranties.

     Quality support: Receiving excellent support is much more important than people realize. Too many take this important area for granted. Alpacas are very hardy, carefree critters. Still, for someone just getting started the first two years of support are critical to his or her success. There are many questions and concerns that will come up such as breeding, birthing, nutrition, etc. You will have nothing in writing that you will receive this support, only someone's word. You must background check who you are buying from. It is easy to do. Our alpaca industry is small. You can learn a lot with a few phone calls. Just get on the phone and start calling other alpaca breeders. Building a background check of references will be your best insurance for success.

     Alpacas can be a fantastic, rewarding life style. To insure your success, be sure to start up right. Know your stuff and do extensive background checks before purchasing. Remember, no matter how nice the promises, wining and dining, blue ribbons, magical moments, etc., your future success really depends on quality support, quality warranties and quality alpacas.

 
 

Which Alpaca to Buy?  By Dan Gromek

     The established breeder knows what he is looking for and merely searches the critter out. For someone new (perhaps buying their first alpaca) the task of choosing can be a daunting one. Everyone you speak to has a different sales pitch. You want this bloodline, that color, this type, his country of origin, stay away from those genetics, etc., etc. Which do you believe? Which direction do you go?

     Let's first examine your goals. If your owning alpacas is centered more on pleasure than profit, buy the critter that appeals to you the most. Insure good health, personality, support and warranties. Then just enjoy. They are neat critters to have around.

      If return on investment is very important to you, then focus your purchasing on one and only one thing - your ability to produce offspring that can compete in the show ring! Our trained sanctioned judges determine which alpacas are the best quality and therefore the most valuable and in demand. All the other reasons why you should buy this alpaca or that alpaca are sales hype. The bottom line for long-term success is to produce consistent quality, quality, quality offspring.

     Genetics: Oh, you don't want to buy their genetics; you will have to compete with them someday. I just happen to have alpacas with "Timbuktu" genetics for sale. This sales pitch makes some sense on the surface. But let's do some homework. We have just recently seen the end of the importation phase of this industry, which means there is tremendous genetic diversity everywhere. I stop to think about our breeding females and I am hard pressed to think of two that are related. So whether you obtain your females from "Timbuktu" or your next-door neighbor is not important. Your genetic label will come from your herd sire. As long as your herd sire can produce blue ribbon quality offspring, do you really care where he came from? Bottom line; buy the quality, not the location.

     Alpaca Type: You will hear; you want huacayas, they're the best! No you should invest in suris, they're better! We own and breed both huacaya and suri alpacas. Neither one is perfect or better than the other in my opinion. We can say huacayas attract more people and are more winter hardly. But suris are more rare and sparkle in the sunlight. Bottom line: They're both great, buy the type you like most. Just learn everything you can about both types first. If you can, obtain investment diversity by owning both.

     Don't buy from them, they have problems, they're no good, etc., etc. The vast majority of alpaca people are great people. However, you might have the misfortune to meet a bad mouther. What you really want is someone to sell you on the quality of their alpacas, their support and their warranties. Bottom line: If a breeder has to rely on saying negative things about others in order to sell his alpacas, you should go somewhere else.

     Country of Origin: Some will say, you should buy my alpacas; they are purebred Chilean, Peruvian, British or whatever. Country of origin has little to do with quality. In fact it does not even prove where the alpaca was born. All you really know is that the "country of origin" is the last country that the alpaca saw before being shipped to the United States. Imagine seeing a superb quality stud, unbeaten in the show ring, exactly what you need to breed your female. But, you cannot breed to him because your female's country of origin is different from his? Does this make any sense? Bottom line: In the show ring, the judge does not know or care about the country of origin.

     We are the biggest, we have the most alpacas, you must buy now, we have a glitzy show, more pizzazz, more blue ribbons, etc., etc. When shopping for that first alpaca it can get confusing. So whom should you believe? The answer is, no one. Learn the basics of alpaca quality - it's not hard. Then ignore all the hype and focus on one thing - alpacas that will produce offspring that can compete in the show ring!

 

The Alpaca Business, A Unique Opportunity   by Mike Safley of Northwest Alpacas   

    People visiting our ranch often ask me if I have a real job -- or what I did before I retired. I've been in business for myself ever since I quit college in the middle of my senior year to embark on a home building career. Over the years, I've been involved in the building business, land development, and real estate brokerage. I've owned and operated a hotel, bar, and restaurant business. I've never been involved in a better business than Alpacas.

It is important to understand the difference between a business and an investment. Investments are more passive assets, such as mutual funds, CDs, real estate, and bonds. While it's true that Alpacas are the world’s finest livestock investment, they are also a wonderful business. The concept of Alpacas as a business opportunity should not be overlooked.

    What makes for a great business? One that you would really like to own? The following characteristics come to mind: high profit margins, a simple operating plan, and as few employees as possible. Businesses with good cash flow and growth potential are attractive. A unique product that can't be reproduced quickly or cheaply gives a business stability. The luxury market provides lots of opportunity for the right business plan.

A world-wide market provides far more opportunity than a local market. An ideal business requires as little of your time as possible. In other words, profits should not be contingent on how many hours you work. Finally, for any business to be good it has to be fun.

    All this makes perfect sense. Who wouldn't enjoy large profits and short work days? But anyone who has been in business for themselves knows that it's not always easy. How do Alpacas measure up as a full-time business opportunity?

    Alpacas as a business, either full time or part time, enjoy many of the attributes I've described. You can manage an Alpaca ranch with few to no employees. Most ranches in the United States are run by the owners. No withholding taxes, labor unions, employee lawsuits, sick leave, or vacation time to be considered. Even the biggest Alpaca operations have only one or two full- time employees.

I run our ranch operation, including 200 Alpacas with one employee whom I pay $7.50 per hour. I do all the marketing and Julie, my wife, handles our public relations and operates her Country Store. She has one additional employee who helps her in the retail store.

    We have plenty of time to attend our four children’s plays, karate tournaments, and baseball games. We travel regularly. Most of our days are spent at home on the ranch. All of this wouldn't be possible if we owned a restaurant or manufacturing plant or were professionals practicing medicine.

    The Alpaca market is national and even international. The Alpaca rancher doesn't necessarily depend on his local economy for sales. People travel across the United States and from other countries to buy Alpacas. Regional Alpaca Fests, auctions, and barn sales occur regularly around the country. Fleece, made into fine fashions, finds its way to many far off boutiques.

Alpacas are unique. We don’t have to worry about someone manufacturing low cost copies. There are only about 2,000,000 Alpacas in the entire world. Alpacas are the rarest of all domestic livestock. Less than 400 Alpaca ranches exist in the United States -- less than 50 Alpaca ranches exist in all of Europe. Australia, with a population 1/15 that of the U.S., has two or three times more Alpaca ranches than North America.

    The other day someone asked me what I thought the profit margin was in Alpacas. That is a hard number to calculate. First, consider that when a cria is born you have little or no cost attributable to the animal. It is cheaper to feed an Alpaca than it is to feed the family dog. Veterinary costs are minimal because Alpacas rarely get sick. At our ranch, labor costs are less than $20,000 per year and we care for 200 Alpacas. This amounts to $100 per Alpaca per year. If you care for the Alpacas yourself, the out-of-pocket cost is zero.

    No cost of goods, no labor, very few expenses, high sales volume -- what a great business concept. But we all know that any business needs to account for its cost of capital, the owners time, plant and equipment, etc. Yet even when these factors are taken into account the profit margin in Alpacas is higher that in most businesses.

Approaching Alpacas as a business opportunity also opens up other related profit centers. Many breeders with good marketing skills are offering brokerage services. Both Teri Phipps of Colorado and Linda Livengood of Oregon sell Alpacas regionally on behalf of small breeders. They earn a sales commission of $10% on the animals they sell and everyone benefits. Many breeders sell stud services or offer agistment services to add income to their Alpaca operations.

    Shirley and Robert Applegate train and halter break Alpacas for a fee. Lenny Charnoff has created a computer marketing service called AlpacaNet, in addition to owning a herd of Alpacas with his wife, Sharon. Several Alpaca owners such as Libby Forstner, Tilly Dorsey, and Jane Wyck, have opened retail stores in conjunction with their ranch operations. The potential for Alpacas as a business is only limited by your creative imagination.

In summary, the Alpaca business requires little labor, has high profit margins, and produces a rare, unique end product. The market potential is inter national in scope. In fact, most of the world has yet to discover alpacas; few people even know they exist.

    This all sounds great, but what about the future, asks the skeptic? How long will this rosy scenario last? I've been in this business over ten years and I believe we’ve only scratched the surface. Australians are exporting Alpacas to England. Californians are exporting Alpacas to Japan. In the meantime, the U.S. domestic economy, the world’s largest by any account, has barely been exposed to Alpacas.

    Who do you know that wouldn't like to retire on ten acres in the country and raise their kids free from the hassles of urban America? Do you know many 50 year old doctors that wouldn't like a career change, freedom from long hours, and the threat of law suits? How many women do you know who would like to stay home and raise their children, but can't afford to quit their job because raising a family today requires two incomes?

    The market for Alpacas as a business opportunity is easily defined. All we need to do is look at who is already participating. Retired, or soon to be retired, couples are attracted to Alpacas. Men and women looking for a career change find the Alpaca business alluring. Women are often the prime movers involved in a family’s Alpaca venture.

    In fact, Alpacas may be the number one business opportunity for women in America today. Many of the skills required to succeed in the Alpacas business are second nature to women, including fashion sense and sales skills. They also under-stand the birthing process and nurturing the young cria. Women are perfectly suited for overseeing the husbandry of Alpacas, just as the Quecha women have done in South America for centuries.

    If we just considered the female half of the U.S. population as potential Alpaca business owners, there will be a long future for our industry. When you look around the Alpacas business, you’ll find many of the herds run by women. Men, of course, also enjoy Alpacas. The fact is, everyone in the family loves owning Alpacas and this is a central reason why this business will continue to grow and prosper for many years. The alpaca business -- what a concept!

Keeping Stock Healthy  -  Use this "kid-toy" model to help your animals thrive.   by Randy Kidd, DVM, PhD

    I'll admit my last few columns have been pretty critical of the current conventional approach to livestock health. In a nutshell: We rely too much on drugs. We frequently cram animals into unhealthy facilities. And far too often our management stresses them out, reducing their resistance and practically begging disease agents to move in and set up shop.

    Finding fault is the easy part. Now let's turn our attention to ways you can reduce your reliance on antibiotics and vaccines, strengthen your stock's immune systems so that they can fend off diseases naturally, and cut your livestock health costs.

    I'd like to introduce you to some healthier practices - such as homeopathy - that take an entirely different approach to keeping animals hale and hearty. But first it's important to understand how these strategies fit into a comprehensive livestock wellness program that focuses on prevention, rather than simply treating diseases.

Kidd Stuff
    Whenever I get serious about explaining wellness programs, I whip out a toddler's toy- one of those colorful plastic playthings with a base, stem and stacking rings. As I think through a livestock health problem, I always start at the base and work my way up. The potency of the "cures" increases as I move toward the top, and so does their ability to cause harm or mask underlying causes. Skipping up to higher rings before considering the lower ones can have serious long-range consequences, I remind myself.

     So let's walk through Randy's "Kidd-Toy Model for Livestock Health." The base, naturally, represents the fundamentals you need to take care of first:

Soil and water.  Does your farm have healthy soils to grow high-quality, nutritionally balanced feeds? Is your stock's drinking water free of toxic contaminants?

Genetics. Is your breeding program designed to develop animals with capable immune systems as well as good producers?

Environment. Does your farm's environment and facilities meet the animals' physical and behavioral needs as much as possible?

Systems management. Are your systems of pasture rotation, shelter, pens, herd movement, etc. designed and managed to break pest life cycles, minimize stress and encourage optimum health?
6. Allopathic Medicine
5. Energetic Medicines
4. Herbs
3. Nutrition
2. Stress Management
1. Soil & Water, Environment, Genetics, Systems Management

    A solid base lays the foundation that supports the other levels. Next I look more closely at the rings, starting with the big one on the bottom and then moving up. The larger they are, the greater emphasis you should place on them:

Stress management. Stress produces hormones that inhibit both the cellular and humoral components of your animals' immune systems. (See "Who Needs Vaccines?" The New Farm, Feb. '95.) Whatever the cause -- weather extremes, overcrowding, lack of socialization, poor handling practices --the results are the same: A substantial decrease in your animals' ability to fend off diseases.

    Nutrition. All components of the immune system require sufficient and balanced protein -- and carbohydrate levels. Take stress levels into account when developing rations. Some immune system pathways also require specific vitamins, minerals and other micronutrients. High-quality feeds grown on healthy soils and pastures made up of diverse plant species can help your stock get the raw materials they need for proper immune function.

    Herbs. While helpful in many ways, herbs are usually not the most potent remedy available when specific medical intervention is indicated. I generally use them to aid and abet other treatments. For example, herbal wormers and herb-based external parasiticides can help in prevention-based programs. But once parasite populations are well established, you're probably better off using synthetic products.

Some herbs directly stimulate the immune system, such as Echinacea, goldenseal and garlic. Others have proven therapeutic effects or antimicrobial properties. I’ll tell you more about them in a future column.

    "Energetic" medicines. A few vets in the U.S. (and many in other countries) are using homeopathy, acupuncture and chiropractic in addition to - - or in lieu of - - standard allopathic medicines, such as vaccines and antibiotics. These alternatives are tough to explain in Western scientific terms, though I’ll try in my next few columns. They're called "energetic" medicines because their action is often described as enhancing an animal's "innate vital force."

There has been little research of these practices in the U.S. But trials in other countries have produced excellent results. Of the three, homeopathy is the most practical for improving the immune response of herds. The others are better suited for treating individual animals for specific diseases.

    Allopathic medicine. This is the approach I learned in vet school. Some people have suggested that I make it the top ring, because it has the most potential for masking underlying causes or doing more harm than good, and it should be the area you focus on last and least.

    They have a point. But I make it the central stem because you can barely see it -- and don't need it -- until one of the other rings is missing. If a sudden change in the weather chews a hole in your stress-management ring, you've got allopathic treatments to back you up until you can reduce the stress and restore the ring.

Even with all it's shortcomings, allopathic treatments will remain -- in some instances -- the best choice is an integrated livestock health program. Acute and severe bacterial infections often require antibiotic treatment, and steroids can be lifesavers in acute trauma cases.

    Many of the problems associated with allopathic remedies come from excess or inappropriate use -- trying to cover our mismanagement with short-term solutions. Because they can be so effective, we often haven't asked ourselves enough questions about the underlying causes of the problem or the long-term.

Raising Alpacas With Your Partner,The IRS   by Mike Safley    

    America’s forefathers were uniformly against taxation. Indeed our nation sprang from ancestors who refused to send King George the tax he felt was due from the colonies. Today we have only one alternative to paying taxes-death. But this is not to say that we can't arrange our affairs to pay the least possible amount of tax to our revenue-hungry government. Alpaca farming can help you reach that goal.

Raising alpacas can offer the farmer some very attractive tax advantages. If they are raised for profit, all the expenses attributable to the endeavor can be written off against your income. Expenses would include not only feed, fertilizer, veterinarian care, etc., but depreciation of such tangible property as breeding stock, barns and fences, which help shelter current cash flow from tax. Beyond these basics are several strategic tax advantages for the alpaca farmer.

    Alpaca breeding allows for wealth building, while deferring tax on your investment’s increased value. A small farmer can purchase several alpacas and then allow his herd to grow over time without paying tax on its increased size and value. If the same amount of money was invested in a Certificate of Deposit, any interest earned would be currently taxable. In addition, the C.D. could not be depreciated, thereby offsetting the amount of tax due.

The tax law recently proposed by President Clinton includes provisions for a lower tax rate on capital gain than on ordinary income. Alpacas held as breeding stock can be sold and the proceeds taxed at the lower capital gains rate. I have been involved in the investment market for more than 20 years; I've seen assets gain and lose value due to tax legislation.

    In-vestment real estate, for instance, lost considerable value as a result of the 1986 tax laws which were passed by Congress. Most people's taxes were lowered and most tax shelters were eliminated. With increased taxes as the order of the day, I would speculate that the tax advantages attributable to alpacas will tend to make them more valuable in the near future.

I recommend that you engage an accountant for advice in setting up your books and determining the proper use of the concepts discussed in this article. The aim of this discussion of IRS rules is to make you more conversant in the issues of taxation.

    The first step in qualifying for favorable tax treatment as a farmer is establishing that you are in business to make a profit. You cannot raise alpacas as a hobby farmer and receive the same tax preferences as a for-profit farmer. A farming operation is presumed to be for profit if it has reported a profit in three of the last five tax years, including the current year.
    If you fail the three years of profit test, you may still qualify as a for profit enterprise if your intention is to be profitable. Some of the factors considered when assessing your intent are:
1. You operate your farm in a business-like manner.
2. The time and effort you spend on farming indicates you intend to make it profitable.
3. You depend on income from farming for your livelihood.
4. Your losses are due to circumstances beyond your control or are normal in the start-up phase of farming.
5. You change your methods of operation in an attempt to improve profitability.
6. That you make a profit from farming in some years and how much profit you make.
7. You or your advisors have the knowledge needed to carry on the farming activity as a successful business.
8. You made a profit in similar activities in the past.
9. You are not carrying on the farming activity for personal pleasure or recreation.  

    You don't have to qualify on each of these factors - the cumulative picture drawn by your answers will provide the determination.

One of the frustrating factors in dealing with the IRS rules is getting to a definitive answer. The code is often more grey than black or white; consider the following statement which is found in IRS publication 225, Farmers Tax Guide:
"This publication covers some subjects on which a court may have made a decision more favorable to taxpayers than the interpretation of the Service. Until these differing interpretations are resolved by higher court decisions or in some other way, this publication will continue to present the interpretation of the Service."

    I recommend everyone who farms alpacas obtain a copy of this handy guide at your local IRS office. It is very informative.  

    I must confess, I don't like to pay taxes; I always do, but I'm never happy about it. I inherited this bias, I believe, from my father. Dad, for those who don't know him, is always fully convinced of his beliefs, and he believes that IRS agents are the bad guys.

    Dad was one of the first full-time llama farmers in the U.S. to be audited by the IRS. It was quite a task to prove to the agent who conducted Dad's audit that llamas were in fact a profit-making enterprise. The agent decided that before he completed his review of Dad's tax return, he wanted to see these llamas with his own eyes - just to make sure, of course, that everything was on the up and up.

    After much negotiating between my dad's accountant and the agent, it was agreed that the agent could view the llamas from the road in front of Dad's farm; he wasn't to be allowed on the property. When the fateful day arrived, Sam, the IRS agent, appeared at the fence in front of Dad's ranch. It wasn't long before Bonnie, his big black llama, wandered up to the fence and offered Sam a kiss. I still to this day believe that my dad's audit is the only one ever closed as a result of a llama's kiss. Thank God, she didn't spit!

    Once you've established that you are farming alpacas with the intent to make a profit, you can deduct all qualifying expenses from your gross income. The discussion from here forward presumes you are a cash basis taxpayer and you keep good records. Accrual basis taxpayers would also be allowed the same tax treatment, but their timing might be different.

    First, the following items must be included in your gross income calculations:
1. Income from the sale of livestock
2. Income from sale of crops, i.e. fiber
3. Rents
4. Agriculture program payments
5. Income from cooperatives
6. Cancellation of debts
7. Income from other sources, such as services
8. Breeding fees

Then the following expenses may be deducted from this income:
1. Vehicle mileage at 28 cents a mile for all farm business miles
2. Fees for the preparation of your income tax return farm schedule
3. Livestock feed
4. Labor hired to run and maintain your farm (remember, you must not deduct the expense of maintaining your personal residence)
5. Repairs and maintenance
6. Interest
7. Breeding fees
8. Fertilizer
9. Taxes and insurance
10. Rent and lease costs
11. Depreciation on animals used for breeding, real property improvements such as barns and equipment
12. Farm-related travel expenses
13. Educational expenses, which improve your farming expertise
14. Advertising
15. Attorney fees
16. Farm fuel and oil
17. Farm publications
18. A.O.B.A. dues
19. Miscellaneous chemicals, i.e. weed killer
20. Vet care
21. Small tools having a useful life of less than one year.  

    Please note: Personal and business expenses must be allocated between farm use and personal use, for instance, with such expenses as telephone, utilities, property taxes, accounting, etc. Only the farm use portion can be expensed.

    Once you've determined your net in-come or loss, it is included on your tax return as an addition to or a deduction from your ordinary income. Losses can be carried back for three years and forward for 15 years. To deduct any loss, you must be at risk for an amount equal to or exceeding the losses claimed. The "at risk" rules mean that the deductible loss from an activity is limited to the amount you have at risk in the activity. You are generally at risk for:
1. The amount of money you contribute to an activity.
This is a complicated world we live in, it often requires C.P.A.’s and on occasion an attorney. (Whatever happened to the day when all you needed to farm was a mule, a plow and a strong back?)
2. The amount you borrow for use in the activity.

    You must establish the cost basis of your assets for tax purposes. This basis is used to determine the gain or loss on sale of an asset and to figure depreciation. In determining basis, you must follow the uniform capitalization rules found in the IRS code. Animals raised for sale are generally exempt from the uniform capitalization rules, and there are other exceptions for certain farm property. You need to become familiar with these rules.

Once you've established the cost basis of your various assets, you take a charge for depreciation against your annual income. This process allows you to expense the historic cost often asset to offset present income. The effect is to create non-taxable cash flow on a current basis. This benefit is especially attractive in an environment of higher taxes.

    Alpacas, in which you have cost basis, can be written off over five years if they are being held as breeding stock. There are several methods of writing them off, beginning with the straight line method which allows you to deduct one-fifth of their cost each year, except the first year, in which the code allows for only six months of write-off. There are also several accelerated schedules which allow for a larger percentage of the asset to be written off early.  Alpacas born at your ranch have no cost basis and cannot be written off, although you may qualify for capital gain treatment on sale.

    Capital improvements to your ranch can also be written off against income. Barns, fences, pond construction, driveways and parking lots all can be expensed over their useful life. Equipment such as tractors, pickups, trailers and scales each have an appropriate schedule for write off. The depreciation schedule for each asset class varies from three years to forty years.

    The original cost basis of an asset is reduced by the annual amount of depreciation against the asset. Other costs add to basis, such as certain improvements or fees on sale. The changes to basis result in the adjusted cost basis of the asset. Upon sale excess depreciation, previously expensed, must be recaptured at ordinary income rates. The recapture rules are a bit complex, as are most IRS rules, but the IRS Farmers Publication I've mentioned explains them well.

    When an asset is sold, say for instance a female alpaca, which was purchased for breeding purposes and held for several years, the gain or loss must be determined for tax purposes. If this alpaca was purchased for $20,000, depreciated for two and a half years or, say, 5O% of its value, and then resold for $20,000, there would be a gain for tax purposes of $10,000. In other words, your adjusted costs basis is deducted from your sale price to determine gain or loss.

    Once you've determined the amount of a gain, you must classify it as either ordinary income or capital gain. Ordinary income is currently taxed at a maximum rate of up to 31 percent and capital gains are taxed at rates of up to 28 percent. The sale of breeding stock qualifies for capital gains treatment (excepting that portion of the gain which is subject to depreciation recapture rules). Any alpacas held for resale, such as newborn crias which you do not intend to use in your breeding program, would be inventory and produce ordinary income on sale. If the present administration is successful at raising the tax on ordinary income up to 39 percent and capital gains remain taxable at 28 percent, the capital gains treatment of sale proceeds will become an attractive benefit of raising alpaca breeding stock.

    There are other tax-saving strategies that can be utilized in concert with operating your farm. For instance, you are en-titled to claim a charitable deduction for the fair market value of a capital asset, which you contribute to a qualifying charity or institution. You can also exchange like for like assets and avoid the tax of a sale. An example of this strategy would be a breeder who wanted to diversify his bloodstock. If he sold his alpacas and simply bought more, he would be required to pay tax on his gains. If he exchanged his alpacas for others, there would be no tax due. Employing the exchange concept can he very' beneficial; for it to work efficiently, a third-party buyer is usually introduced into the transaction. The model for this type of transaction would be a real estate exchange. I'm sure your C.P.A. would be familiar with the use of like kind exchanges and how it might benefit you.

    Installment sale rules allow you to defer income to future years. If you sell an alpaca with credit terms, you can defer your gain until you receive payment (excepting that portion of the gain which is subject to depreciation recapture rules). If an animal dies of disease and is insured, you can use the involuntary conversion rule in the code. These rules allow tax-free replacement of your animal.

    Please hear in mind that I am not an accountant. This discussion of tax issues omits a number of rules which will impart your taxes. I did not discuss tax preference items, alternate minimum taxes, employment taxes and other concepts of importance. Whether we like it or not, this is a complicated world we live in; it often requires CPA's and on occasion an attorney. (Whatever happened to the days when all you needed to farm was a mule, a plow and a strong back?)  

    In summary, the major tax advantages of conducting an alpaca business include the employment of depreciation, capital gains treatment, and the benefit of offsetting your ordinary income from other sources with losses from your farming business. Wealth building by deferring taxes on the increased value of your herd is also a big plus. It pays to keep your eve on the tax law changes instituted by Congress. On occasion, you may find a silver lining in the clouds of government.

    In closing I wanted to let you know that the idea of taxes is not new no ran exclusive sin of the United States government. Caesar Augustus decreed, in Roman times, "that all the world should be taxed. - The politicians have taken taxation to heart for centuries. We have, on occasion through, been given good advice about our responsibility to pay tax. The Honorable Supreme Court Justice Learned Hand had the opportunity to instruct the IRS, in a high court decision, that it was not a citizen’s duty to conduct himself so as to pay the maximum tax possible, but that a common man might arrange his affairs so as to pay the least amount of tax possible. God bless the judge, and God bless our alpacas.

Field Watching   By Antoinette Brewster    

    One of the most important daily routines in a successful alpaca breeding operation is field watching.  When breeders are leaning against a pasture fence gazing out a their beautiful alpacas in the field, this is rarely a display of pride in ownership.  It's much more likely that they're engaged in field watching, that many faceted art of looking at and listening to your alpacas and their environment.

    At Lanark, we walk and the paddocks and pastures several times a day, observing our alpacas both individually and  in groups, and carefully scrutinizing their surroundings.  This practice will enable you to better understand your alpacas' behavior, habits and attitude.  Once you have opened your perceptions to all the varying nuances of the alpaca personality, you will be able to spot a potential problem in the field.

Body Language
   If you want to know what's going on with your animals, you must learn about their individual personalities as well as how they interact with each other.  An animal's body movements or lack of them reveal a lot about its health from both a physical and attitudinal point of view.  Its solitary behavior is usually quite different from what is expressed in a group situation.  This behavior can also vary depending on which group you place an alpaca in.

   This is where field watching becomes a real art.  First, you learn about each alpaca's individual character.  Are they used to attention or are they very territorial?  do some of them automatically put their ears back when someone walks through the field or are they so curious that they follow you around?  One of my breeding males is very docile, no matter where he is placed.  He is as content with the females as with  a herd of males.  Another of my herdsires is only aggressive with other males, is a total wimp with my pregnant females.

Group Dynamics
    The first thing we do is take a total head count.  Many times, babies can slip under the fences or females may be birthing far off in the fields.  Taking a count prevents us from having anyone missing in action.  Next, I do a quick scan to see if there are any obvious problems.  Are any of the alpcas lying down with their heads on the ground and eyes closed?  Although they could be sleeping or sunbathing, I will walk over and make certain that all is well.  Is everyone grazing or chewing their cud?  Does the herd look comfortable and relaxed?

   As alpacas are hard animals, it's important to watch their movement as a herd.  Are they staring at something in another field?  If it seems to bother them, then it's worth checking it out.  It could be an expression of their intense curiosity, but it could also be a dam having a cria, a pack of dogs nearby, or an emergency that needs your attention.  I also always check to see if an animal is not with the herd, and the reason why.

   Since we field breed, the female's reaction to the male is constantly monitored.  If they show interest in the male, it could mean that they are no longer pregnant.  We must then adjust our breeding dates and retest her for pregnancy.  If a female is interest, she parades around in front of the male with her tail flipped up or will lie down in front of him.  The male's interaction with the females is also observed.  One of my most aggressive herdsires was unable to eat next to his females.  The minute he would eat out of one bowl, one of them would push him away, and so on with the second bowl.  We finally had to move his bowl to the other side of the paddock.  If I had relied only on my male's usually aggressive character and not looked at the group dynamics, he would have been run ragged trying to get a bite to eat.

   We find at Lanark that feeding time offers one of the best opportunities to observe our alpacas as a group because you get to understand their hierarchy.  The pregnant mothers are the power brokers of the herd, so they will always get to eat first.  Sometimes they eat everything and leave nothing for the crias.  If the crias don't seem to be getting enough food we will build creep feeders for them.  This enables them to eat where moms can't go.

Mothers and Crias
    If you have a pregnant female who is close her delivery date, there are several signs to look for.  check the udder to see if it is starting to fill up with milk.  See if the vulva has started to drop and become more elastic.  The abdomen also drips, and the female begins to physically look different.  She might hum a lot more than usual, and be getting up and lying down several times in succession.  In addition, you may notice your pregnant female straining at the manure pile or distancing herself from the rest of the herd.

     When watching mothers and crias, there are several things that demand your attention.  First of all, is everyone nursing?  The, are the right babies with the right mothers, for the crias will nurse any female that looks promising.  Also, it's imperative to see that the crias are actually getting milk.  We check their faces for stray droplets of milk that are clinging there.

   Make certain that all crias are near their mothers in the field.  The other day, I saw one of my females happily grazing in the fields without her newly born cria.  I searched the pasture and paddock, and finally found her asleep in one of the stalls,  Her head came up the minute she heard my footsteps, and I made a mental note to check on her in the evening as many newborns sleep during the heat of the day.

Individual Examination
    Now that you've looked at the alpacas as a group, it's time to look at them one at a time.  Once again, feeding times works well.  The alpacas are likely to come close in hopes of a good handout, and you will be able to watch their total body movement as well as each individual part of their anatomy.  I find that I do best when I start at the top and work down the animal, examining each part.

   The ears should be up and in motion.  Many times in the summer, one ear will be moving separately of the other.  This is usually and indication of the presence of insects in the ears.  The crias seem to be most susceptible as they lie on the ground a lot.  We will pull them into the barn and treat their ears with medication.

   My eyes move next to the face.  I look to see if it is even or asymmetrical.  Then I examine the eyes to see if they are alert, bright and clear.  Is the alpaca squinting or blinking?  This might indicate an irritation or something in their eyes.  Now observe the mouth.  Are the teeth protruding, needing to be cut?  Is the animal breathing through the nose in a comfortable fashion or are they breathing open-mouthed with flared nostrils?  Your alpaca's open-mouthed breathing could be the result of a spit fight or the alpaca could be stressed.

    Now look further down.  Is the alpacas standing on all four legs and is the stance appropriate to the animal?  Do their toenails need clipping?  I then walk around to the rear of the animal and see if there is any discharge.  Matted wool around the hindquarters is usually indicative of some kind of discharge.  This could be from diarrhea, a new baby or something else.

    As you get to know the personality of each of your alpacas, you'll know immediately if something is wrong for you will be very familiar with their regular patterns of behavior.  It also helps to keep your sixth sense tuned in at all times for sometimes just a sense that something is not quite right with an animal leads to closer examination and a problem is revealed.

Trouble Shooting the Paddocks and Pastures
    One of my daily rituals is to frequently check the fences and water troughs.    Every time I enter the barn, I automatically listen for the ticking of the electric fence.  Our original fences were three board horse fences, and rather than tear them down, we put New Zealand hot wire in between our boards.  This makes them predator-proof.  Our other fencing is made out of 4x4 roving wire.

    While walking through the field one evening, I noticed that a group of younger males were teasing my herdsire by placing their heads through the holes in the roving wire fence.  My male became so thoroughly annoyed at their attempt to infiltrate his territory that he started to run up and down the fence in an attempt to catch one of them.  In order to solve this problem, we moved the males temporarily, and placed small roving wire over the larger one.  Once again, my continued surveillance uncovered the problem.

    Checking the water troughs several times a day during summer and winter is vital.  If it's particularly hot, they need to be refilled or cleaned.  When it's cold, the water freezes, and the troughs need the ice broken on them.  Look to see if the alpacas have access to the water.  If someone is hogging the water and another can't get to it, that's a real problem.  Recently, one of my 6-month-old alpacas looked really stressed.  His nostrils were flared and his chest was moving up and down readily.  I looked at everyone else and they seemed fine.  This puzzled me until I noticed that one of my older females was standing near the water bucket, ant it occurred to me that the youngster was afraid to go near it.  I quickly put out another water bucket to see if my deduction was correct.   He immediately began drinking and within five minutes the heavy breathing has stopped.  He was dehydrated, but too timid to assert himself.

    While waling through the fields, I pay close attention to the ground, keeping an eye out for new plants or a poisonous one that may have blown onto the field.

    We watch out for thistles and other debris for they tend to wind themselves into my alpacas' fleece and create havoc with the fiber.  Check the manure piles to see if any animal has a digestive problem.  If one does, it requires a rear end check to see who has the problem.

    It's also important to pay attention to the noises in the field.  In Virginia, we have lots of hunters with dogs who shoot raccoon and birds.  We are always worried when we hear shooting and dogs barking.

    These are our field watching rituals at Lanark.  The better you know your alpacas, the easier it will be to decipher their personal body language.  This holistic approach will enable you to quickly perceive if something is truly wrong, or if it's just an off day for your alpacas.  According to my herd manager, Terry Bailes,  watching what is happening in the field enables you to better manage the health and happiness of your alpacas.  I agree one hundred percent.

The Alpaca Industry:  Examination of a Business Model  By Charles J. Espersen

    A business model is definitional.  It describes a business or family of businesses.  It differs from a business plan, which is an operational document providing road maps, formulas, and milestones needed to run a business.  A business plan is far more robust and detailed than a business model.  A business model says “what” is being attempted, while a business plan supplies the “who, where, when, and how”.   The “why” comes from the entrepreneurial spirit that takes root in the heart and mind of the “would be” business owner.  This distinction is not trivial.  For example, throughout most of the 20^th century, the railroads in the United States self-destructed.  The reason was simple:  they persistently believed they were in the railroad business and missed that they were, in fact, in the transportation business.  Thus, they squandered an immense asset base, and through gross mismanagement and total lack of vision, they disappeared.

    The alpaca industry is not just one business.  Just as the petroleum industry is not just one business, the alpaca industry is at least a dozen related businesses.  Some of them are linked almost one-to-one.  Others can be part of a greater enterprise, or can stand pretty much alone.  Anyone contemplating being in the “Alpaca Business” needs to have a well-thought-out, written business plan.  But before any business plan can be written, the prospective business owner must decide which of the various alpaca-related businesses he wants to be in.  That critical decision may be the “make or break” point in the process and should be guided by a number of factors, and should start out with a business model.   To follow is a document, which stands as one person’s ideas of the “Alpaca Business Model”.  Other writers, other business people, and especially, other “Alpaca People” should be involved from the beginning.  To fail to do so risks peril that should not be faced, and need not be taken.

    Alpacas are relatively new to North America, having been imported for only a few years and as of the year 2001, still number only about 37,000 animals.  The ultimate stabilized population of alpacas cannot be accurately estimated, but it is undoubtedly going to be tremendously larger than 37,000.  For the sake of discussion, let me propose that the North America alpaca population may one day stabilize at between 37,000 (factor of 10) or 3,700,000 (factor of 100) or some other larger number.  Regardless of where the population ultimately stabilizes, it is certainly a much larger number than 37,000.  Due to long gestation (approximately one offspring per female per year with a 80% survival to adulthood rate), the overall growth in the national herd will be steady, but slow.  In addition, there are no new alpacas being imported into the United States, and there will not be due to the breeding registry now being closed.  Thus, for the foreseeable future, the “primary” alpaca business will be raising alpacas for breeding.  This is the first of a dozen or so “alpaca businesses” that will be discussed in this business model.  The list is presented here in a condensed form.

Alpaca Business #1 – Raising Alpacas For Breeding Stock
    Raising alpacas for breeding stock involves far more than turning a few females out into a pasture with a male and hoping for the best.  Not only is quality animal husbandry required, but also, the careful selection of foundation stock is of ultimate importance.  “Breeding Quality” females retail from $12,000 up to and above $25,000.  They are the result of careful research and close attention to detail.  They do not just “happen”.  “Herd sire” quality males can run from $5,000 up to $40, 000 or more for the very best.  Stud service from these males can run from a thousand dollars to several thousand or even higher.  The old racehorse adage “To get the best, breed the best to best, and hope for the best” is somewhere true when applied to alpacas.  But, there is also the factor of “genetic promotion.”

    If a “pretty good” female is bred to a “very good” male, the offspring is likely to an improvement over the dam.  If the cria (baby) is a female, she is very likely to be more valuable as a breeding female than her mother.  Let me illustrate:  If a $15,000 females if bred to a $50,000 male the female’s cria will very possible be worth $20,000, which is a 33% gain in a single generation.  However, if a $30,000 female is bred to the same $50,000 male (or even a better male), to achieve the same single generation gain of 33% would have to mean that the cria would be worth $40,000.  there are very few $40,000 females, and very few breeders willing to pay $40,000 for a single female.  Thus, one need not position oneself ant the very pinnacle of the industry to succeed.  Pinnacles are very uncomfortable places to try to occupy, and very expensive places to stay.

    Most successful breeders can do very well by maintaining a quality herd of breeding females valued at $12,000 to $20,000 and seeking out the best quality male that they can own or from whom they can obtain breeding services.  Further, a breeder who owns a breeds low quality females valued at under $7,500 will not likely produce show quality animals in a single generation, or even in several generations.  As the market matures, there will be a larger and larger number of these “Grade B” alpacas whose value will ultimately sink to their “Pet/Fleece” value (today in the are of $1,000 to $2,000; will probably stabilize at around $1,000).  At that point, very large breeders of these animals will emerge and will run what amounts to “Alpaca Factories” and the small breeder of low quality alpacas will be forced out of business. Or forced into a less profitable business.

    The outlook for “show quality” alpacas is substantially better, and the small breeder is at no disadvantage in this market.  A review of show records and auction prices over the last several years shows that most winners come from farms with herds of 100 or fewer breeding females.  There is no reason to believe that this will change in the foreseeable future (10 years).  Thus, a small breeder can still enter the business (at the “ground floor”) and reasonably expect to be very will rewarded for his efforts and investment.  There are always risks associated with any venture, and success is never guaranteed in any business.  They only guarantee is that if you don’t try, you cannot succeed.  Failure can be guaranteed,  but success cannot be assured.

Alpaca Business #2 – Raising Pet/Fleece Quality Alpacas
    A word about males is order.  Assume that 50% of all live births will be males, and assume that, at best, only 5% of all males (even from quality parents) will be destined to be of “herd sire” quality, then 95% of all males (and nearly half of all babies) will be destined to go into the “pet/fleece” market.  That is alpaca business #2.  The alpaca breeder, therefore, is destined to be in the business of selling pet/fleece quality alpacas, and their marketing plan must address this issue.

Alpaca businesses #3 through #12 are ways that the alpaca breeder can enhance his or her chances to succeed, by building on what they are already doing and having the various businesses feed one another.

Alpaca Business #3 – Breeding Services From Herd Sires
    Any breeder who is skilled and fortunate enough may eventually find that the “Pot of Gold”, a truly great herd sire, has been dropped in his lap.  Top-notch herd sires will have proven their worth through pedigree, conformation, fleece, show performance and especially “get-of-sire” recognition in the show ring.  If the “Proof is in the Pudding” then the herd sire’s “get” (offspring) is indeed, the pudding!  A top quality herd sire also “stamps” his qualities on his offspring.  His desirable traits denominate over the dam’s less desirable traits and the babies will closely resemble their sire.  Even a “good” but less that great herd sire is to be treasured, and if properly utilized, can go a long way toward insuring success.

    Three common ways to maximize profits from a herd sire are:  (1) provide service at stud’s own farm, (2) visit other farms, and (3) provide stud service “to go”.  #1:  Any herd sire can be expected to stand at stud not only for the farm’s own females, but also can be used for a considerable fee as a stud for females brought in for this purpose.  Fees can range from hundreds to thousands of dollars per service, and a male is capable of breeding 100 or more females in a given year (actually, males can breed every day if there are sufficient open females available).  #2: Stud service at a distant farm for a period of time.  It is easier to transport one stud for six months to a distant farm to service females there, than to transport a hundred or more females to the males.  Further, the two farms can gain genetic diversity by exchanging breeding services between each farm’s herd sires.  There is not problem insuring that paternity is established for all offspring because during the registration process, DNA testing positively identifies both the dam and the sire.  Thus, even “accidental” breedings, which were not accurately recorded, can be caught and accounted for (and paid for) at the time of registration.  #3:  An emerging use of herd sires is “stud service to go” for nearby farms.  A herd sire located in an areas where there are nearby farms can be transported and left for a pre-determined period of time or brought back home the same day.  By opening up the horizons of relating one business to another closely-linked business, alpaca farm can increase revenue, sometimes very substantially, without increasing costs or capital investment.

Alpaca Business #4 – Alpaca Brokering
    The very small alpaca breeder may lack marketing resources necessary to effectively sell their animals.  By consigning them to a broker, their animals will likely bring more, and sell more quickly, than could be obtained on their own.  They are pared marketing expenses, which on a small number of animals can be prohibitively high and their animals are exposed to a larger pool of potential customers.  The broker usually operates on a fee plus commission basis and has a stronger incentive to move consigned animals in order to meet his revenue requirements.  The broker benefits by selling from a larger pool of animals into a larger pool of customers, by having more blood lines from which to choose; and by spreading marketing costs over a larger number of “for sale” animals.

    The broker can achieve economies of scale that a small breeder cannot duplicate.  The broker is not very likely to sell his own animals over those consigned to him because only by selling consigned animals in a timely manner for a good price can he hope to continue doing business with his supplies. He many not even own any animals for sale at a particular time, but by being a broker, he can always supply his market.  Consigning animals for sale to a farm which has only a very few consigned, and a large number of owned animals may or may not be a problem , but dealing through a reputable, bona fide broker may be a small breeder’s best marketing technique. 

Alpaca Business #5 – Boarding Alpacas
    Alpaca boarding (also know as agisting) is a powerful business tool for the beginning breeder.  Some beginning (or even established) breeders lack their physical plant (farm) on which to raise a herd of alpacas.  They may be in the process of establishing a farm, or waiting for some event in their life (vesting in a retirement program for example) before becoming full time alpacas breeders, but they want to start their alpaca investment program without undue delay.  This way, they can still enjoy the possible financial gain and tax benefits of alpacas without yet having to be “hands on” breeders.  Such breeders can and frequently do board their alpacas with the breeder where they bought them, or with another, perhaps nearby, breeder.  The cost is modest (typically $50 to $100 per animal per month plus fees such as vaccinations and vet bills).  The breeder benefits by having a regular cash flow with agisted animals at a little increase in monthly cost, and thus can balance out his revenue requirements and prove a pad against zero revenue months (which can happen to even medium-size breeders).

Alpaca Business #6 – Leasing Bred Females
    Livestock leasing is a recognized powerful tool for investing.  It has several substantial advantages.  Typically, lease costs can be expensed in the year incurred, as opposed to being depreciated over a number of years.  This can offset other current incomes (consult your tax advisor).  Further, for a small investment (usually about half) a new breeder can build a herd of superior animals in a very short time.  The existing breeder, likewise, sees some very good advantages.  They are pre-selling their babies before birth and avoiding the cost of marketing them.  Their cash flow is immediately improved, and they get to keep their prime-breeding females.  They also establish strong ties to their customers, which can result in profitable relationships for both the breeder and customer. Leasing cattle is well established, but leasing breeding alpacas is somewhat new, and there are a variety of programs available.  Check with several breeders to get a general feel of what is available to you. 

Alpaca Business #7 – Raw Fiber Sales

    At present, the alpaca fiver business is a mixture of commercial producers and cottage industry producers/users.  An alpaca breeder can sell his annual shearing fleeces to a variety of customers including mills, co-ops, private spinners and weavers, or other breeders.  Prices of prime fleeces can run to several dollars per ounce, and an adult alpaca can produce 10 or even more pounds of fleece per year. 

Alpaca Business #8 – Fleece Processing and Fiber Sales
    Alpaca breeders, particularly with farm stores or close relationships with local artisans can find a market for their own fleeces and finished fibers, and can supply a local spinner/weaver/knitter not only the raw material for her craft, but a market for her products.  Breeders can broker fleeces and fiber, and their presence in the fleece/fiber market can provide an entrée into sales of breeding or fleece quality live animals.

Alpaca #9 – End Products Sales
    Retail and wholesale outlets for alpaca and (related products) represent a potentially very lucrative market for the alpaca breeder, both from farm stores and other locations.  Alpaca breeders can choose to open a farm store (particularly if they enjoy a prime highway location) and can stock their store with all manner of alpaca products and other related products.  These can range from apparel to blankets to decorator items to whatever your imagination allows.  The tie-ins are many, and the typical alpaca product customer is likely to be up-scale and potentially interested in any of a wide variety of related quality products.

Alpaca Business #10 – Seasonal Product Sales
    Many alpaca products, by their very nature, are presented as quality, treasured gifts.  Thus, the opportunity exits for the alpaca breeder who also owns a farm store to sell during certain seasons (e.g. Christmas) at small kiosks in local malls; at weekend artists’ exhibitions where upscale products are sold; or at local wine or cheese stores, etc.  The key is being creative.  For example, for outdoor events where promoters will permit it, set up a small livestock pen and bring along a couple of cute (and well-tempered) alpacas to how not only the animals but also the finished goods made from their fleece (which, of course, you hope to sell).

Alpaca Business #11 – Transporting Alpacas
    One constant in raising how-quality alpacas is going to alpaca shows.  Some breeders have the time, equipment, and skill required to transport their show stock hundreds or even thousand of miles to various show.  Some choose not to.  At times, breeders sell one or more animals to a distant customer and for one reason or another there is no way for them to effect delivery at a mutually agreeable time and place.   At this point, the professional alpaca transporter comes into the picture.  This person may be another breeder with space to sell on his stock trailer going to a show, or it may be a person who specializes in alpaca transporting.  Alpaca transporting is a viable business, and one sure to grow either as a stand-alone entity, or as an adjunet to anther alpaca business.

Alpaca Business #12 – Consulting to Breeders
    This is the last topic to be covered in this paper.  Not because the list is exhausted, but because sufficient variety has been presented to get the “creative juices” flowing in anyone interested in the “Alpaca Business.”  I saved it for last to illustrate that what appears to be one topic (consulting) can be viewed as a single business, or can be subdivided into  a number of businesses itself.  An alpaca consultant is someone who can assist you with buying a farm, laying it out with fences, barns, water lines, security systems, guard animals, or making an existing layout even better.  He can specify computer equipment and software, and advise you on where to get it.  He can help you with your web-page design, or design a web page for you.  He can help you with proper breeding procedures, neo-natal care, breeding and health supplies, animal husbandry, nutrition advice, references, and contact information.  He can help you buy, sell and/or market your animals, show your animals, and hold you hand when you are uncertain what to do next.  Obviously, the are at least a dozen businesses under the umbrella of “consulting”.

Conclusion
    This marketing model is not intended to be by an a means an exhaustive examination of the subject.  It was produced in only a couple of hours drawing only on the author’s own knowledge and experience.    If you are considering getting into one of the many “Alpaca Businesses”, you should lay out a plan of action.  At the very least, you should investigate AOBA and investigate its two websites (www.AlpacaInfo.com and www.BuyAlpaca.com).  You should visit several alpaca farms (at least) and talk to the people you meet there.  Your should attend a show or convention, or several; you should take notes, lots of notes, and then study them to come up with the questions that are better asked before, rather than after, you commit to the alpaca business.  If, after all this, you really believe that alpacas represent an opportunity, and a lifestyle that you want; write your own business model to reflect your values and needs, write a business plan even if you have to get help, and one step at a time, begin a journey into the wonderful world of alpacas!

Financial Independence With Alpacas  by Daryl W. Goodrich, J.D.

    My years in the legal field focused heavily on buying and selling businesses for my corporate employer. While the legal and accounting aspects were challenging, meeting the business owners and walking through the many varied manufacturing and office facilities profoundly changed my life.

    I saw business owners with cars provided by their companies, lavish offices, freedom to pick the projects they worked on, and the ability to come and go as they pleased. Employees, on the other hand, had their own cars, small or shared offices, assigned jobs and definite work hours. Owners had greater financial independence and security than their employees. Business owner characteristics appealed to me.

    I found it curious how some people become employees and others become owners.  My experience assured me that the outcome is not a conscious choice.  As a child, my employment destiny was set by the implicit expectations of my formal education and parents.  I was never given an owner/employee choice nor was I aware of the owner option. I then wondered if wealth, education, personality or luck explains the outcome.

    Over the years, I spoke with the many owners and employees my job put me in touch with. My conversations were focused on uncovering how people think about and understand money and their relationship to it. Frequently, I attempted to assemble the seemingly random conversation pieces into patterns. After several years, the puzzle began to take shape. It showed several important principles.

    The two groups see the money attainment process differently. Employees work for money. Owners make money work for them. The employee money attainment process is merely working for others. The owner money attainment process is developing and implementing a business plan. This plan is a structure of investments designed to generate money. Examples of these investments are apartment buildings and manufacturing businesses. Plans frequently include employing others as employees or independent contractors.  And, money is produced even when the owner is not working.

    These two groups also see the money expenditure process: differently. They tend to buy different kinds of assets when investing their money. This difference arises from how the nature of the asset fits into their respective money attainment process.

    Net worth statements are the same for both owners and employees. Homes, cars, apartment buildings and manufacturing businesses, if any, are listed as assets. That is because they are all property with value. This is accounting, though. Their nature is quite different.

    Homes and cars have expenses such as maintenance costs, energy bills, loan payments and insurance premiums and do not generate money. Apartments and businesses have these expenses and generate money. Owners buy apartments and businesses because they are the means to making money work for them. These are true assets in the owners' eyes. They see homes and cars more as liabilities because these have expenses without income.

    Employees see homes, cars, apartments and businesses all assets since they have value. They do not buy apartments and businesses because employees already have jobs for income. Employees buy homes and cars as a result of believing value is wealth.

    Investing in assets such as homes and cars, however, gives a false sense of wealth. One can have a big net worth and a big paycheck but due to these assets acting as liabilities, there may be no discretionary income left after paying bills.

    There is also another difference between the two groups in the money expenditure process.  An owner tends not to increase his expenditures for assets acting as liabilities and for consumer goods unless he can increase his income.  An employee, on the other hand, is more likely to increase these expenditures simply if he can find more credit on his credit cards or home equity loan.

    Employees make their lives harder by buying these things that do not generate money to build wealth or fill emotional desires. While the goals may seem worthwhile, they rarely justify the resulting debt increase that pushes employees to work harder and harder.

    While owners and employees may start out economically even, over time their positions become very different. When money works for owners, they are in charge of their money stream and it flows to them largely regardless of how much they work. Also, debts do not push owners to work harder and harder since debts are paid out of existing income.

    When employees work for money, their income stream slows if they slow. In fact, their income stream can abruptly stop if their jobs are taken away. Employees are forced by the very things they buy to work harder and harder to meet the growing debt load of their asset investments and consumer goods purchases.  Also, as they get tied to more and more bills, the negative impact of job loss increases along with stress.

    It is not an accident that owners generally have greater financial independence and security than employees. The above-discussed owner and employee money processes breed this difference. "But how," I then pondered, "do people end up an owner or an employee'?"  

    Reviewing my years of informal business conversations revealed another principle. It is a pipeline or assembly line explanation. The line starts with learning the necessary social and technical skills. It continues, with learning about the owner/employee money process, then executing the process and ends with being an owner or employee depending on which pipeline is followed.

    I was in the employee pipeline. Life said I needed money to live. My parents and formal education told me I needed education to learn skills that would land me a job so I could earn the money life required. I never chose that pipeline. Rather, I was cast into it. I would have selected the owner pipeline if given a choice.

    This is just how life deals the cards. My dad was an electronics research engineer working his entire career for RCA.  If my dad were an owner, I likely would have been in the owner pipeline. As we become worldlier, however, the other pipeline and chances to jump to it may come into view. Beware! Human nature may block jumping to the owner pipeline.

    Emotions can prevent execution of the owner money process trapping you in the employee pipeline. Acting in reaction to one's emotions may be human nature but owner actions are not reactive. They are carefully thought out. To jump, you must overcome emotions and act as an owner.

    Fear tends to push one to the immediate income stream of employment. The fastest way to allay fear of no money is to get a job. Paychecks follow work like night after the day. These emotions also tend to steer one away from apartment rent streams, for example. Rent streams are influenced by many uncontrollable variables and thus are less certain than paychecks. Careful thought leads would-be owners to apartment and business type income streams.

    The emotional urge for possessions believed to bring happiness or self-esteem causes income to be spent on such things as fancy cars and expensive homes, Their liability, nature demands the immediate income stream of employment. Incurring debts before income to pay for them, does not allow time for income to build from investing in owner true assets. Owners only buy assets acting as liabilities, out of existing income streams.

    Also, buying in reaction to this emotional urge for possessions can get more frequent and extreme due to the expected happiness and self-esteem outcomes being non-enduring. Soon, growing debts drive employees to more and more work. Avoiding reactive behavior diverts would-be owners away from being controlled by debt.

    Much earlier, I intuitively understood what my observations articulated. They served as reassurance that I was jumping to the right pipeline. While employed, my wife and I purchased several multifamily rental houses. A while latter, I retired from the day-to-day practice of law. My wife and I then managed our rental property business. By the mid '90's, we had built sufficient equity to do something else and decided to sell. We then looked for another money working for us opportunity. Alpacas caught our interest. We recognized that they were owner true assets.

    I still think in terms of apartment buildings. Our female alpacas are just like multifamily rental housing. People pay money for our females' crias like tenants pay rent for apartments. The Internal Revenue Code lets us shelter our income by depreciating breeding females similar to rental housing.

A    lpacas are not abusive to our land or buildings. They do not stop paying rent, loose their door key or make noise at 2 a.m. causing neighbors to complain. There are no leaky toilets or refrigerator failures. Financial independence and security without people and building problems are the alpaca way. Alpacas are definitely a step up for us.

    By Daryl W. Goodrich, J.D. C 2003 Angel Wood Alpaca Farm, L.L.C., www.angelwoodalpacas.com. All rights reserved.

Don’t Let Micron Madness Crimp Your Style  By Mike Safley, 1995

    I was always a chubby kid growing up. My Mom, God bless her soul, was the world’s finest cook. We ate well, from biscuits and gravy to pork chops and apple pie. As a result I had a high micron count mid-side.

    At the tender age of seventeen I went to Navy boot camp, lost thirty-five pounds and six inches around my waist. Ever since I’ve been overly concerned about the diameter of my waist. Now at age fifty-five and thanks to Julie’s home cooking, my mid-side diameter is slowly inching up again. I gotta admit that I’m not as concerned about it today as I once was and that started me thinking about “micron madness.”

    Everyone who comes on the farm these days is concerned about two items – micron count and crimp. I, myself, have written much about the virtues of skinny fleece and bold crimp, so I began to ponder whether this narrow focus was all that healthy for our industry.

    I am concerned that if we place too much emphasis on one or two selection criteria, we may do so to the detriment of the breed we’re trying so hard to improve. We need to remember that large, well-muscled animals that forage efficiently are essential. Mothers need to be good milkers. The constitution of every alpaca we raise should be our first consideration if we are going to develop a sound livestock industry. See "Alpacas: Synthesis of a Miracle".

MICRON MADNESS

    Today, people are going from state to state and farm to farm selecting alpacas, often with only one thought in mind – what is the micron count? I can tell you that a histogram is absolutely and unequivocally irrelevant as the basis of evaluation for two different animals from two different farms. The problem is further complicated if the animals being compared are of different age and different sex or if the histogram is an old one.

    If you, the buyer, go out and purchase three animals, one from Oregon, one from Colorado, and one from Ohio, with identical micron counts, take them home to your farm for one year, and then shear them, you will find a huge variance from the original test results for those three fleeces. I guarantee it!

    A selection criteria, which includes density, animal size, staple length, typyness, handle, an absence of medulation, good body condition, crimp, and luster, all viewed in perspective, is far superior to one based solely on micron count.

    Fiber grows fat on overfed animals and “starvation fine” on underfed animals. I think most of us can relate to a changing waist line based on food intake. Putting too much emphasis on a particular criteria, such as micron count, which is directly impacted by environment, is foolhardy.

    The only fiber fineness which is valuable or relevant is genetically based. It is much more revealing, if fineness is your goal, to ask a breeder for all histograms on his yearling alpacas which were sampled at the same shearing. This allows analysis with the environment neutralized. In other words, all the animals presumably ate the same diet over the same period of time. In this herd based scenario, the animals which have the lower micron count are more likely to be genetically inclined to fineness.

Over time, I believe sound breeding objectives should have the following priorities: 1) raising alpacas which will grow and thrive, 2) fill as many fleece bags as possible, and 3) produce fiber of premium value. Balance is the key. We want, overall, outstanding alpacas.

IS CRIMP YOUR STYLE?

    There is a lot of mystery surrounding crimp. Is it good or even necessary? Should the crimp be bold or fine, frequent or broad? Is crinkle the thing to have or is straight suri fiber superior? Does more crimp indicate finer fiber?

    One person will tell you that processors won’t pay a dime for crimp. Another person says that crimp makes for superior yarn. Some breeders find crimp attractive and many measure the quality of their fleece by the amount of crimp present. Other breeders couldn’t care less about crimp and value handle as their main fleece quality. In fact, if you ask three alpaca breeders about their opinion regarding crimp, you’re likely to get four opinions.

    Crimp is obviously a complex subject. CSIRO, the Australian research organization, has recently developed a “style instrument.” Crimp (amongst other things) can now be measured as related to processing performance in wool tops.

    The results of the processing trials conducted by CSIRO are not what you might expect. Before we discuss the findings, it’s important to understand that the trials were on wool and the results may not correlate to alpaca fiber. With that in mind, CSIRO found that:

    1.   Wool with a crimp frequency of five crimps per centimeter would process four millimeters longer than wool of six crimps per centimeter at the same fiber diameter, strength, and length.

    2.   When wool was classified into three crimp style definitions, high, medium, and low, the wool with high crimp definition produced tops which were four millimeters longer than wool in the medium category.

    David Marland of CSIRO maintains that once these measurements become commercially available processors will use them in “prediction equations” to decide which sale lots to buy for a particular order. Staple length is important to manufacturers. They pay a premium for longer fiber.

It’s also interesting that Marland identified a series of trade offs that related to longer staple length or “Hauter” in the wool tops. They included an increase in strength, which is of commercial value in wool.

    The concept of crimp and its relationship to value is undergoing change in the wool business. The old court system which was used to determine micron count (the more crimp, the finer the fiber) has been found to be somewhat inaccurate. With the advent of the LASAR SCAN and OFDA measuring devices, it’s been proven that crimp count does not always accurately determine micron count.

    The new style instrument will surely lead to more understanding of how crimp is valuable to the textile processors. Crimp can also be an informative guide to the breeder in selecting animals.

    I realize that little is know or has been written about what crimp means to an alpaca breeder. In fact, Rigoberto Calle Escobar’s book, Animal Breeding and Production of American Camelids, states on page 68:

    "The crimp* differentiates the alpaca fiber from sheep wool. Alpaca fiber lacks crimp, and if it has it, it is almost imperceptible; except in the case of the huacaya, where in some individuals it is possible to notice a curling, though not as noticeable as in sheep.

    *  Crimp: Regular and successive undulations on the same plane, which is different from a curl, which is curved, spiraled, and in different planes. Alpaca fiber does not have crimp, not even in the newly born.”

    In other words, Escobar is saying that crimp is not a phenotypic trait of alpacas.

    With all due respect of Professor Escobar, I disagree. Alpacas do exhibit crimp. It can be selected for and it is heritable. From my point of view as a breeder, I find crimp definition to be a useful selection criterion. In my opinion, crimp is evidence of the following characteristics:

    1.   Crimp indicates uniformity in the fleece. A uniform fleece will exhibit the same crimp characteristics over the body of the animal.

    2.   Crimp is an indication of density. A dense, crimpy fleece often has a well organized lock and staple structure that allows for more and longer fiber to occupy a smaller space, much like a well folded newspaper occupies less space than one which has been wadded up in an unorganized fashion and piled on the floor.

    3.   A fleece with high crimp definition will stay cleaner and more compact from one shearing to the next.

    4.   A staple with crimp measures longer than one without, once it is processed. This allows the breeder to select for longer staple length by breeding crimp into the alpacas’ fleece.

    5.   Crimp indicates fineness.

    6.   Crimp wins in the show ring.

    I realize the above are personal opinions. Crimp makes for an interesting debate. Given the data presented by CSIRO, and their ability to measure crimp frequency and definition scientifically, we, as alpaca breeders, should give this subject some thought. If we find that a certain type of crimp is a more positive trait than another style of crimp, we can select for it. If not, we should select against it. But there is no doubt that breeding for crimp in huacayas will improve our product’s acceptance by the textile industry.

I offer the above discussion of micron madness and crimp style as food for thought. There is nothing like a well nourished mind.

    Reproduced from http://www.alpacas.com with permission of Northwest Alpacas. Copyright © 2003 Northwest Alpacas.

What is the Value of a Gelding Alpaca?   By Christine Perala Gardiner

    Another name for a gelded alpaca is a “fiber male”, a non-breeding animal. What value are these boys to an alpaca industry busy breeding for a future textile market? Fiber males have values sometimes overlooked in the rush to produce breeding livestock. First and foremost, the alpaca is a fiber production industry. Gelded males have lower levels of testosterone, so they keep their fleece fineness years longer than intact breeding males. The primary measure of a gelding’s value is the fineness, uniformity and quantity of his fleece.

    Is that it? We don’t think so. There are many other qualities that make gelding alpacas valuable animals. Perhaps their next greatest quality is their looks; they are just beautiful creatures, in a world where there is never enough beauty. They’re always photogenic, and their soulful eyes speak to the human heart. They’re by nature gentle creatures without much defense, always alert, cautious and shy. By virtue of their size, alpacas are naturally good with human children, as they are with their own. Geldings make the best companions for children, since boys don’t have to look after crias of their own. Well-trained geldings have greater value than those who run when humans come near.

    Geldings can do the work of interacting with people better than breeding girls. Interacting with humans is hard work for alpacas – we are so much clumsier and louder than they are. It’s stressful for girls and can impact their growing babies, but boys can take the stress better. Geldings are the best candidates for animal therapy; going into hospitals to let patients touch them, meeting with groups of school children, visiting retirement homes, greeting the public in public places. Lots more people would love to see and touch them, and there is great potential for the niche market small business to train and present alpacas, to assist with healing people who have suffered emotional or physical damage. Gelded males can be gentler, and for this purpose gentle alpacas have greater value than fierce ones.

    Some geldings are naturally more fierce by nature, and will challenge a predator when a threat comes near his herd. These “guard alpacas” have greater courage in the face of danger. In Australia, gelded guard alpacas have helped the sheep ranchers reduce their losses to predators, and have saved ranchers many times more than their cost.

But don’t neglect one of the alpacas’ most enduring farm products; manure. Alpaca manure is fantastic fertilizer, either raw for trees and shrubs or as compost for vegetable crops. A local source of wholesome farm nutrients is, or soon will be, a great asset to small-scale sustainable agriculture. Alpacas and llamas could help to revitalize