Alpaca Profits Prove Less Than ‘Huggable’

Alpaca ranching has been touted as a great investment, especially for retirees. But rapidly declining sales prices mean the bubble may have burst, leaving rescue organizations scrambling to find homes for displaced animals.

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Wouldn’t you love to make a 50% return on investment with your retirement savings?  That was the average figure touted by the alpaca industry as part of the campaign to sell alpacas as “huggable investments”—and, for a while, some savvy alpaca ranchers made a lot of money feeding the alpaca buying frenzy that began in the late 1990s. 

The effort to protect the domestic alpaca industry was aided by the closure of the Alpaca Registry to imports in 1998.  The investment craze was spread by a series of cable television ads by the Alpaca Owners and Breeders Association in the mid-to-late 2000s that promoted these endearingly cute camelids.  But like any pyramid scheme, this livestock investment bubble—much like the historical pattern of investments in ostriches, fainting goats, potbelly pigs and llamas—is undergoing accelerating deflation.  Bursting, if you will.

The typical sale to the alpaca “investor” was the “3-in-1 package” consisting of a pregnant female with a baby—known as a “cria”—by her side.  In time the effect of many small breeding operations producing a cria from each breedable female every year was to boost the supply of alpacas past the demand.  Today the “investment” portion of the conversation tends to stress the tax advantages of raising alpacas as an agricultural endeavor, shifting the emphasis away from the profit to be made on the sale of the animals themselves. 

Carman Jackson, owner of Windchime Alpacas of Shelburn, Indiana, admits that her above-average animals, bought five years ago for $5,000 each, now can’t be sold for more than $500.  Like many other alpaca ranchers, she is not only financially but also emotionally invested in her animals, which may live into their late teens.  Her focus is now on promoting her alpacas as companion animals, suitable for 4-H projects and hobby farms. 

But what of the numerous alpaca farms still promoting their animals at prices ranging from tens of thousands to even hundreds of thousands of dollars?  Jackson explains that like the purebred dog industry, breeders with the high-end animals are still demanding and getting high prices.  This is rarefied atmosphere, dependent on excellent bloodlines, standardized conformation and consistently low micron counts when measuring fiber fineness. 

The genetics and phenotype of the alpaca have changed substantially over the last decade, such that the old-style alpaca is no longer competitive.  This left the many small “investment” breeders behind the curve if they failed to pour additional resources into their breeding stock, to compete—and win—in high profile alpaca shows and to ceaselessly promote their animals.  However, even the elite portion of the industry is suffering.  One of the few studies on high-end alpaca prices at auction documents a decline in average price in the range of 70 to 80% from 2005 to 2011, with steeper declines for male alpacas.

Source: Saitone, T.L. and R.J. Sexton. 2012. “The Alpaca Bubble Revisted.” ARE Update 15(5):9-11
The difference in the sales price between males and females at selected auctions has decreased since 2005. The actual market value of alpacas may be lower because of how auctions track sales data.

The alpaca industry has tried to salvage value of alpacas by developing a North American alpaca fiber industry.  This effort has never completely succeeded, in large part because world and U.S. markets remain open to South American alpaca fiber.  In 2009, there were about 150,000 alpacas registered in the U.S., compared to about 3.5 million in Peru alone.  There, alpacas are managed for fiber production only.  They are bred for white coloration and extremely small micron counts.  Unlike the North American alpaca industry, conformation of the animal is not a major consideration. 

After an average of five years, an alpaca’s fiber coarsens, and in South America the animal is then diverted to a thriving meat market.  The better quality of South American alpaca fiber, combined with the lower costs of managing the animals and processing the product, results in North American alpaca fiber being uncompetitive even as a domestic market, except in the cottage industry driven by hand spinners and fiber artists.

A more telling trend is the increasing demand for alpaca rescue, driven by financial stresses on or failing health of the many retirees who bought into industry promises. The recent financial collapse of Jocelyn’s Alpaca Ranch in Falls City, Oregon, is the highest profile example of what livestock rescue groups across the country have been dealing with in recent years.  There the Polk County Sheriff’s Office seized 176 starving alpacas—the survivors of a herd that originally numbered well over 200.  Assisted by Cross Creek Alpaca Rescue and the large-animal veterinarians and students at Oregon State University College of Veterinary Medicine, the surviving animals were stabilized and males gelded to facilitate the adoption process.  All involved with the rescue incurred large costs, which they hope will be offset by adoption fees and special fundraisers.

On the other side of the country, Southeast Llama Rescue found that in 2013 the number of alpacas in their foster system exceeded the number of llamas for the first time.  Unlike those who own llamas, alpaca owners were often counseled to treat their animals in a manner more akin to sheep, handling them only to perform basic maintenance such as vaccinations and annual shearing.  Deborah Logan, a SELR Adoption Coordinator in East Ellijay, Georgia, finds that these unapproachable alpacas are less adoptable than llamas due to this lack of training, giving lie to the “huggable” half of the investment hype.  Even adopters who want alpacas as specialty fiber animals are picky about quality, color, and type of fiber, leaving behind those with coarser fleece, brown coloration, and the trendy suri breed’s fiber, which is difficult to work with.  Consequently, unwanted alpacas are becoming a strain on the limited resources of the rescue, especially space at foster facilities. 

Photo by Susan Gawarecki
Alpacas have a high cuteness factor. These huacaya alpacas have dense crimpy fiber giving them the appearance—and feel—of plush toys.

Looking forward, what is likely to happen with the North American alpaca industry?  It is clear that the investment potential is exhausted, especially for those who don’t have the financial resources to keep up with the latest trends.  In this way, it closely parallels the fate of the similar llama investment bubble which peaked in the early 1990s.  For many years, all female llamas were kept pregnant, beginning at 18 months of age.  A number of highly promoted llama studs commanded exceptional sale prices in the hundreds of thousands of dollars, with breeding fees of in the thousands of dollars.  Those days are long gone.

The remaining elite llama industry is concentrated in the breeding of fancy show stock with conformation, trendy fiber and bloodlines as the selling points.  Similar strong prices are commanded by trained and proven llama pack stock, with athletic ability being the primary criteria.  In fact, llamas have numerous uses compared to alpacas.  Llamas were originally bred to be pack animals, are used as guardian animals for smaller livestock (including alpacas), are trainable for specialty activities such as pulling a cart, and overall tend to be more intelligent and people-oriented than alpacas.  The only area in which alpacas tend to outshine lamas is in fiber quality. 

As with the llama industry, it is going to be up to the small-time alpaca breeder to develop alternative uses and markets for their animals and fiber.  Absent a significant meat market for alpacas (most Americans are loath to eat their companion animals) and from experience with the llama investment bubble, we will see a lot of alpacas dumped into rescue situations before the industry shrinks and stabilizes into one where the vast majority of animals are valued for their own attributes rather than as money-making breeding stock.

Susan Gawarecki owns Pathfinder Farm, in Andersonville, Tennessee.  She raises llamas and keeps a few alpacas.  She has been involved with the llama industry since 1995 and is active with state and regional llama organizations.  She currently serves as a director on the boards of Southeast Llama Rescue and the Pack Llama Trial Association and is the chair of the Fiber Committee for the Southern States Llama Association.  She also trains llamas for driving and sells llama and alpaca fiber to hand spinners.

 

Topics: Ag and Trade
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