'THAR'S GOLD IN THEM THERE 'PACAS!
Alpaca Ranching = True Diversification
You Can't Hug or Insure Your Stock Portfolio, Pardner!
STOCK MARKET VS. ALPACA MARKET
As I rewrite this article, (update 2/28/11) originally posted in 2000, the stock market has had some growth, but is experiencing wide swings with the US dollar falling.. Investors are not sure from day to day whether or not their profit will hold yet again another year. Investment markets are running nervous and no wonder, as many "new" investors are close to retirement age. Some retirement aged investors have already seen their nest eggs diminish. To add to the confusion, some advisors see a crash ahead, while others are the same time see a "recovery" happening now. Bottomline: our economy is in a pickle, to put it mildly, and alpacas can be viewed as a tangible which can reproduce, compounding value (literally) and that value can be offset until it is sold. As always, and especially in this volatile market, please make sure to check what is best for your portfolio with your own investment/tax advisors.
Most stock market and bond investment counselors advise investors to hang on and things will come around again (and indeed they probably will), but be sure to diversify your investments....always. The Alpaca Mining Company believes in the strength of another market, the Alpaca Livestock Market. The stock market and the alpaca market are alike in the following ways: (1) They are subject to capital gains taxes, if held a required amount of time, and (2) They can both be traded as tax-free exchanges. They are, however, different in many more ways: Alpacas, (1) Are insurable, (2) Are tax depreciable over a five-year period, (3) Make their owners eligible for a section 179 deduction, a small business deduction for capital assets and, (4) Offer a lifestyle which is both peaceful and profitable. The Stock Market, doesn't offer any of these benefits. If you breed and raise your alpacas on your own property, your land is usually taxed at much less as a farm than it would be ordinarily, stocks don't lessen your land tax burden. If your stock splits on the market, you have more stock that is worth the same amount of money as before. If your alpaca dam has a cria (baby), your have two alpacas that can be worth twice as much. Through careful breeding, you can increase the value of the offspring of your starter stock. There is nothing you can do personally to make a stock go up in value. When you own your own alpaca herd, you are in control. As always, we advise potential alpaca purchasers to consult with their own tax consultant on any investment considerations.
THE NUMBERS GAME:
A major of the world's population of alpacas are in Peru, Chile and Bolivia. The world market has been expanding dramatically and today one can find herds in Australia, Europe, Canada, and even South Africa and some Asian countries. I wrote an article about the first import of 60 animals to South Africa by Dr. Gavin Lindhorst which iwas published in the summer edition of Alpacas Magazine. In the U.S. we have alpaca ranches in every state and the national herd is growing every year. By July 2000, there were 29,856 registered alpacas and the number of owners has grown from 146 in 1991, to 2,919 in 2000. It is now reported that there are over 140,000 registered alpacas and in excess of 4,000 breeders. The scarcity of alpacas is based on their slow rate of reproduction. Usually females give birth to one baby at a time with a gestation period of 11 months. Because of this slow reproductive rate, it will take a long time to drive the price of breeding stock down and top animals will always bring top dollars. Importation of alpacas from South America is difficult, expensive due to quarantine restrictions, and the Alpaca Registry has been closed to new imports since December 31, 1998. Unregistered alpacas are available, but their resale value is only consistent with pet quality pricing. (Note: looking at a "wool" competitor, I just learned that sheep outnumber humans 8 to 1 in Australia. There is plenty, yes plenty, of room to growth in the US alpaca breeding herd.)
Fleece pricing, depending on color and quality, sells from $2 to $5 per ounce in the U.S., primarily to fiber artists, but certainly the fiber co-ops are viable destinations for clips as well. Each alpaca can produce five to eight pounds of fleece per year, enough for several sweaters. While selling stock is the main income and profit line in alpaca ranching today, the future profitability lies in their silky, durable, water-resistant and highly insulated fleece...high quality, luxurious fabric which is often used by top designers and design houses. The end products of alpaca fiber are expensive and rightly so as they can last a lifetime. A man's sweater, for example, can be made out of one pound of yarn worth about $40. It might cost $100 in labor to spin and weave or knit the sweater, and the sweater can be sold for $400. A top designer might charge in excess of $3,000 for a man's suit.
Alpaca stock prices have admitted declined in todays market. What a break for those wishing to join the industry. A female now sells from $2,000 to $20,000 dependent upon age, quality, reproductive records, and many other factors. Only the best males are used and this policy is vastly improving the overall quality of the U.S. herd. Stud fees range from $1,000 to $5,000 and the price to purchase can vary greatly. Now would be an opportune time to buy if you have investment money and are wary of stocks and bond right now.
As an alpaca investor, you can either be active, i.e. you are hands on with the alpacas residing on your own land, or you can be passive, i.e. you can agist (board) your animals at someone else's ranch where they take care of your investment as it grows. As a active investor/breeder you can depreciate a male or female alpaca used for breeding purposes over a 5-year period. Breeding stock are considered a capitol asset. Income derived from the sale of capitol assets is usually taxed at a lower rate than that of income derived from other sources, such as regular earnings. Any expenses a breeder incurs, such as feed bills, veterinary bills, and any other costs associated with the raising of your alpacas are deductible. The active breeder has the ability to depreciate tangible property, such as barns and fences and breeding stock.
An alpaca ranch may also generate taxable losses that may be used to offset taxable income from other sources. A good way to look at your alpaca investment is as tax-deferred wealth building. A passive or active breeder can purchase several alpacas and allow the herd to grow without paying income taxes on the increased value of the herd. The passive investor who agists his animals will have different tax advantages from the active rancher, but they are still quite attractive...the main difference being that you will hold all of your expenses incurred in the raising of your herd to be used as deductions against your profit until such time as you sell the alpacas.
It is suggested that you get a copy of the IRS publication #225, The Farmers Tax Guide, for further information on taxes and livestock. And again, a consultation with your accountant or tax advisor is advisable when purchasing alpacas, as with any major investment you might be considering. See lead in discussion of 2008 end of year tax benefits above.
Potential Sources of Income:
Other Points to Ponder:
Isn't it time to become an Alpacapreneur?
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