Not so long ago, wealth was measured by the size of one’s flock or herd.
Today, an investment in livestock still shares many desirable characteristics of investments in stocks, bonds and real estate. Desirable, that is, if the livestock is in demand. Among all livestock, none represents a greater investment value than alpaca.
Cuddly, cute-faced cousins of the llama, alpacas were domesticated thousands of years ago by the Incans of the Andes Mountains in Peru and first imported to the United States in 1984. Now being raised throughout North America and abroad, alpacas are typically about 36 inches tall and weigh about 150 pounds.
Alpacas are valued worldwide for their luxurious fleece, once reserved for the garments of Incan royalty. The rare fabric comes in about 22 colors and is warmer and stronger than wool, yet softer than cashmere. Textiles produced from alpaca fiber are coveted in the fashion centers of Paris, Milan and Tokyo.
As this fiber gains greater commercial value, it’s predicted that continued demand will exceed current supply. That makes breeding alpacas a profitable business, as Mike and Stephanie Barnhart discovered two years ago when they started seeking alternative investments.
“My wife was raising and showing Arabian horses, but there were no tax advantages to help offset the expenses since the IRS classified it as a hobby. So we looked for another animal we could raise that would bring additional cash,” says Mike Barnhart, co-owner of The Alpaca Trading Co., the ranch he and his wife officially debuted last year as a business.
Today, their livestock investment yields tax-deferred building of wealth through herd compounding, exemption from state sales tax on items purchased for their farm, deduction of expenses for the farm against other active or passive income, favorable treatment of land in property tax valuation and treatment of many sales as capital gains.
On their 19-acre farm on Lake Center Street N.W., south of Route 619 in Uniontown, the couple raises 32 alpacas of their own, including three high-quality studs. And for as little as $2.50 a day per alpaca, they board alpacas for investors who don’t have their own farms. Alpaca Trading also boasts a store selling items made from alpaca fleece.
Unlike many animals, alpacas eat very little, require minimal care and space (a single acre of fenced pasture can comfortably accommodate a half dozen alpacas) and require a low capital investment. Barnhart estimates a small shelter costs $2,500 (or if preferred, a small barn is about $10,000). Basic farm equipment costs less than $1,000. Wire mesh fencing for an acre of land runs about $1,500. Feed amounts to about $300 a year.
A typical female alpaca fetches between $15,000 and $30,000, but depending on breed quality can bring an auction price of $250,000 or more. This fall, the Barnharts purchased a rare suri for $160,000, the fourth-highest price paid for an alpaca in the world.
Stephanie Barnhart says the animals also shave taxes. Depreciable over five years, sales of alpacas and their offspring are posted as capital gains from which expenses can be deducted. Because Alpaca Trading Co. is an agricultural business, the Barnharts also derive property tax advantages.
Best of all is their return on investment.
“Even though Alpaca Trading started with two alpacas and we reinvested most of our income into breeding and purchasing additional animals, we’ve still realized a 25 percent return on our investment to date,” she says.
Barnhart says that once the hoped-for herd population is reached, the rate of return can be as high as 70 percent over three years of breeding.
How to reach: The Alpaca Trading Co., (330) 244-9313