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Photo courtesy Alpaca Owners and Breeders Association

Farmers who raise alpacas qualify for a federal tax deduction up to $500,000.

Alpaca farming gains popularity in U.S.

by Natalie K. Gould
Sep 29, 2011


Photo courtesy Alpaca Owners and Breeders Association

Alpaca fleece is warm, light and soft.

More and more people looking to get out of the city and back to the farm are getting into the business of raising alpacas. With low startup costs, minimal maintenance, good returns on investment and a sizeable tax deduction, the four-feet tall furry animals are making their mark in the world of small businesses.

Alpaca farming is a fairly new industry in the United States dating back only to 1984. Native to South America, alpacas are used for meat, leather and fiber. Within the United States, however, alpacas are solely used for their fiber material, fleece.

In fact, a farm with just three alpacas can sell fleece and qualify for as much as a $500,000 tax deduction under section 179 of the IRS tax code. The current deduction is a 100 percent higher than it was in 2010. The section was amended after 9/11 as an incentive for small-business startups.

The deduction comes in the form of accelerated depreciation and write-offs. Qualifiers can choose to take it the depreciation all at once or spread it out over time. “It's an incentive created by the U.S. government to encourage businesses to buy equipment and invest in themselves,” according to the tax code.

While some might think alpaca farming is an easy way to get a generous tax deduction, Pete Sepp, executive vice president of the National Taxpayers Union, isn’t upset about it. “It shouldn’t be surprising that a tax law passed by Congress not only helps people in traditional lines of business but also encourages others in pursuits some would find . . . exotic.”

He added that the alpaca breeding community seems to have done a good job at marketing the tax advantages of raising livestock on a small scale. “This wouldn’t be the first time in modern history that tax laws have helped to fuel growth of an industry potentially developing ahead of its consumer market,” Sepp said.

Illinois’s climate is conducive to raising alpacas with cold winters and mild summers, said Don Kent, president of the Illinois Alpaca Owners and Breeders Association. He said there are 60 member farms in Illinois, but not all alpaca farms register with the association.

Kent said in the last five to 10 years, Illinois has seen a large growth of alpaca farms.

“It slowed down during the recession and now it’s starting to pick back up.” Kent said the key is marketing the products directly to consumers in the form of hats, scarves, ponchos and blankets, for example—or to manufacturers who process the fiber.

Alpaca farming is becoming popular at the national level as well. “The potential is there for years of offspring and can turn into overall profit,” Putney said. Alpaca farming is gaining more momentum, and Putney estimates there could be upwards of 250,000 alpacas in the United States.

Alpaca farming may not be happening on the same scale as raising chickens or other livestock, but it  could become a large-scale commercial industry in the next 10 to 15 years.

Claudia Raessler, an alpaca farmer at SuriPaco Farm in North Yarmouth, Maine, and a member on the board of directors at Alpaca Owners and Breeders Association, says consumers are just beginning to appreciate alpaca fiber, which is very light and soft. “The market is just starting really for U.S.-made alpaca products. It’s been difficult because of the [low] volume and . . . textile manufacturing in this country has taken a big hit.” Raessler is the former head of Cotton Inc., the marketing association promoting cotton apparel, and is currently creating a branding campaign for alpaca fleece.

Steve Putney, managing partner at Safe Haven Farm in Connecticut, said the demographics of alpaca farmers have changed quite a bit in the last 10 years. Putney said seven years ago typical alpaca farmers were retired couples who wanted something to do and to add to their retirement fund. Now, he said, younger families with small children are getting away from the city. “There’s a resurgence in the family farm,” Putney said.

Putney has been an alpaca farmer for the last five years. He quit his corporate job and now runs the largest alpaca farm in Connecticut.

But is it a profitable business to pursue? Yes and no, farmers say. According to Raessler, many alpaca farmers are dual-income families. “A lot of people who work and also want a rural lifestyle will choose alpacas,” Raessler said. Depending on whether the farm is oriented toward fiber production or breeding, the alpaca business can serve as a hobby or a six-figure income generator, players say.

For those who already have at least an acre of land, startup costs for a small production farm can be as low as $200 per alpaca, Putney said. Alpacas require a lean-to-style shelter, one bale of hay per week and supplemental feed. A 50-pound bag of feed runs less than $20, Putney said. Alpacas eat 1.5 to 2 pounds of feed per day. “You can comfortably put five to seven alpacas per acre,” Putney said.

Breeding alpacas can be very profitable, but the startup costs are higher. “A good young male can cost between $8,000 and $15,000,” Raessler said. In addition to females, “you would preferably have two males.” The financial commitment can turn into a $100,000 profit even before the IRS deduction, she added.