THE ALPACA INDUSTRY – VARIOUS PARADIGMS FOR BUSINESS ACTIVITY

A FEW THOUGHTS ON VARIOUS ALPACA BUSINESS MODELS

So – you want to be an alpaca farmer? Well then, I commend you on your discerning taste in livestock! Cute, and possessing lively personalities, they do seem to have an almost magnetic and hypnotic effect on many folks.

OK, now “Snap out of it…!”, to quote Cher, in responding to a lovesick Nick Cage, swooning over her in the 1980’s movie, “Moonstruck”. As romantic a notion as being in the alpaca business can be, it’s important to realize that there’s a lot more to creating a successful alpaca business than having a warm & fuzzy appreciation of their personalities and appearance. Depending upon what model of business set-up you adopt, there will be many different things to be considered before taking the plunge. If you are going to become an alpaca owner/breeder, you must be concerned with the costs of proper barns and fencing, and providing a plentiful supply of pasture grasses/hays that don’t contain dangerous endophytes, the never-ending poop clean-up, veterinary & medication expenses, deaths/injuries, the emotional and financial pain of the occasional dead cria, annual shearing, not to mention a significant devotion of your time, sweat and energy.

Still interested? Great! Now let’s get down to business! And let’s make no mistake about it – this is a business. It requires not only that you possess or are willing to acquire the necessary animal husbandry knowledge and skills, but that you also understand the basic fundamentals of being self-employed and operating a successful business.

The US alpaca industry is still a “young and evolving” industry, relatively speaking. It’s also one that is divided into a number of sectors, some of which are not yet very well established or populated. After 10+ years in the industry, this is my take on how things are shaping up. It is by no means the complete picture, but I think fairly well describes it in broad strokes:

1) There are seedstock producers who are dedicated to creating the highest quality breeding stock possible, and pushing the envelope of possibilities in various ways – in terms of longer-held low micron, of ever lower micron, of tighter uniformity, greater brightness, greater staple length or overall shearing yield. Some are pursuing various combinations of the above. Some do so without regard to color and some focus on only one color or a narrow range of colors. They control herds of varying size, and either sell a small number of animals at a fairly high unit price, or use economy of scale to their advantage by selling more animals at a somewhat lower, but still significant price. They may also sell culls that fail to qualify for their strict breeding requirements for a reduced price. Most of these farms also realize some income from breeding fees to studs or herdsires that they own.

2) Another sector takes those highly evolved seedstock animals and uses them in a breeding program to produce herds of good, consistent quality fiber-producing animals and attempts to make a living by selling raw fiber. My own opinion is that this particular sector is one that is best structured in parts of the country where overhead and other out-of-pocket costs such as shots, feed and labor can be kept to a minimum. Herd sizes in this sector would ideally be large (think cattle), and per animal annual profit from fleece sales would be small, but the overall multiplier effect of volume would realize a decent profit for the farm owner. Oh, and you’d better be prepared to shear all of those hundreds or thousands of animals yourself, to keep out-of-pocket costs at a minimum, and to help ensure that you actually turn a profit against total expenses! There are not yet very many farms occupying this sector, and earning a full-time income in only this kind of venture. In a future commercial fiber industry, these would be the farms supplying the bulk of the raw fiber for processing. Farms such as this may or may not elect to create a secondary revenue stream through participation in a hide and/or meat market in order to maximize profitability.

3) A third sector is farms that are a hybrid of the first two types – folks who raise high quality animals, focusing on ever-improving quality, some of whom they sell to others. These farms also attempt to sell raw fiber. They are only interested in the livestock side of the business, and have no desire to produce or sell intermediate stage or finished fiber products.

4) A fourth sector is folks who are only interested in the fiber side of the industry. This sector is composed of fiber processing mills, fiber co-operatives or fiber/textile artists who may work exclusively with alpaca fiber or work with a blend of many types of fiber that include alpaca, creating artistic products, yarns, fabrics, high-end fashion or utilitarian type of garments and accessories, or some combination of all types of fiber products. Some of these businesses may choose to mainly rely on buying wholesale finished product for re-sale to the public. Another subset may engage in a combination of these things.

5) The fifth sector is comprised of people who are engaged in some combination of all of the above, in an attempt to maximize profits by adopting the vertical integration model of profitability, and satisfy their own personal desires to be in both the livestock and value added fiber product business. This model, in my opinion, for the interim time being, may likely contain the greatest number of successful alpaca businesses. Some of these folks may participate in one or more of the existing fiber co-operative exchanges, either in addition to or instead of creating their own products from the fiber they produce.

This overall scenario will change over time, as the numbers of animals and their quality & uniformity peaks and stabilizes. In my opinion, we are yet dozens of years from that time. It requires that sufficient tons of fiber of uniform color, micron and staple length be available annually to sustain it. As this occurs, larger scale mills will arise to process this available quantity of raw material and meet the growing consumer familiarity and market demand for the finished goods those mills will create. At this point, the other paradigms will likely recede to a niche position.
As I stated earlier, this is not a perfect description, but is a fairly close portrayal of the basics of things as they now stand and may evolve.
This is an exciting and challenging time to be in the alpaca related businesses. As with any business venture, hard work, dedication, persistence, creativity, flexibility and a keen eye on the bottom line will be necessary to ensure success.

OK – you may now resume hugging your alpacas!

Bill Goebel is a former teacher, actor, stained glass artist, and long-time computer programmer. Bill lives and works in the foothills of the Appalachians, in southeastern Ohio. Together with his wife, Louise, they have owned & operated Renaissance farms for the past 12 years. They run a mixed purpose alpaca farm, where they maintain a herd size of between 30-40 animals. They are seedstock producers, and also offer stud services to their string of high quality breeding males, sell animals and, of course, are busy adding value to their annual clip of fleece, producing dyed and natural color yarns and carded fiber, both knitted and felted clothing accessories and artistic pieces. In addition, they also offer manufactured alpaca products! They operate an online store, as well as attend dozens of venues for product sales each year. They also spend time mentoring a number of farms. Bill is a former member of the board of directors of the OABA affiliate, and is a long-time forum moderator on Alpacanation. Oh, and yes, Bill has been known to hug an alpaca or two!

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