Sick of sinking share markets? Bored with bonds? How about a highly attractive growth stock on four-legs? Owning and breeding alpacas is one of the least known, and potentially most profitable, of livestock investments. The animals are prized for their wool, which is in very short supply, and can be woven into anything from expensive blankets and sweaters to three-piece suits and even boxer shorts.
Alpacas are curious and affectionate little critters, cousins to camels and llamas, but much smaller. They weigh between 45 and 82 kilograms, live for between 15 and 20 years and are never slaughtered for their meat. Instead they are sheared annually for a yield of 2 to 4 kilograms of their extraordinary fleece, which is a silky fibre much warmer than wool, several times stronger, and comes in 22 colours from white to shades of greys, silver, brown and black.
Alpacas hail from the Andes mountains in Peru where they were domesticated by the Incas 5,000 years ago, dismissed for centuries by the Spanish conquistadors, and only recently recognised internationally.
More than 98% of the approximately 3 million world population of alpacas remain in Peru, Chile and Bolivia. But in the past decade enthusiasts in Canada, the United States and New Zealand have been importing and breeding the animals.
The industry has enjoyed particularly rapid growth in Australia. The first three alpacas were imported into the country from Chile via Alaska in 1988 by Nancy and Geoff Gilpin, who brought them back to their Capalba Park sheep farm in Seymour, Victoria. Now they have 60 alpacas on the property including a champion male 'Romeo', who is snow white with deep blue eyes, and is a docile conveyance for the Gilpin's young son Douglas.
Widespread appeal
Today the national Alpaca Association has 1500 members. As well as farmers, doctors, accountants and lawyers, attracted by tax advantages available to primary producers, have got into the act. At last count there were more than 20,000 alpacas around the country, ranging from herds of 60 or more on country paddocks, to pairs of animals kept primarily as pets in outer suburban gardens.
The economics of the enterprise are fairly simple. Female alpacas begin breeding at between 14 and 18 months of age. Males are not much use in that area until they are three years old, and are generally less regarded - although a busy top stud can earn his owner big dollars. The female produces one baby cria a year. The gestation period is 342 days so the consummation has to be completed within three weeks to keep up an annual production schedule. A trustworthy indication of a female alpaca becoming pregnant is when she discourages further amorous advances from a mate by spitting at him. A good quality female alpaca costs around A$15,000 (about US$8,850) but a particularly high class lady could go for three times that figure. Given reasonable fertility, a pair of females could grow to a herd of 20 or more in 10 years - allowing for the sale of a number of offspring to boost cash flow along the way.
There are more alpacas in Australia than anywhere else outside South America. But the numbers are a long way short of bringing the critical mass that would make the sale of the fleece into a viable domestic or export trade. Experts estimate that an annual production of 500,000kg would be necessary to meet this ambition. More than 400,000 alpacas would be needed to meet the target. At current growth rates, that should happen before 2010. In the meantime, the wool is being sold mainly as a cottage industry, although a recently completed A$1 million fibre plant in Geelong processes alpaca fleece along with angora and cashmere goats wool.
Breeders are determined not to suffer the same fate as the battling graziers of Australia's 100 million sheep. Many wool growers have become rural peasants doomed to be price takers, with A$10 worth of sheep wool passing through layers of middle men before ending up in a US$200 Italian suit in New York or Paris. The alpaca brigade are making virtue of the scarcity of their fleece until they are in a position to be able to pool their production for the world market, as well as participating in the value added process.
For the next few years, the principal way investors can make money is by breeding quality animals and selling them to new entrants into the business. Basically all you need is a little land. Alpacas take up very little space, you can graze 10 to a hectare, and they cost less than A$200 a year to feed. Modified ruminants, they cheerfully munch on grass and hay, but they will eat anything from pine leaves to carrots and they will accept fruit fed by hand, delicately spitting out the pips. They considerately deposit their dung in only one spot in a pasture.
One of the better performing breeding farms earned A$400,000 last year from sales of young alpacas and another A$5,000 from boarding animals belonging to city dwellers. That is 10 times their initial investment eight years ago, but may well be an exception.
According to Sydney accountant Guy Pounder, who runs the Aspen Alpaca Stud in New South Wales: 'This is a get rich slow business. It is not suitable for retirees, or anyone relying on the alpacas for income in the short to medium term. One alpaca should, with luck, compound into 15 to 20 over a period of 10 years, but with a high incidence of male crias early on, you might have nothing to sell for three years. It is suitable for Australians who pay high tax rates on their professional earnings and can get tax breaks on primary production investments. Overseas investors too might find it rewarding to buy a share in what is an interesting and high-potential business.'
Pounder owns a score of stud male alpacas in Queensland, New South Wales and South Australia, which earn up to A$1,500 a time for their services. 'One of the reasons I am involved in the industry is that I can see the long-term potential in Australia of exporting genetics to buyers in the Far East, Japan and Europe who want to establish their own breeding herds and find there are restrictions on South American exports of top quality alpacas,' he says.
David Johnson, full time general manager of the Alpaca Association, agrees. He says he is in 'early stages of negotiation' with interested parties in northern China. That makes good sense. The Chinese are masters of husbandry, alpacas do not like humid conditions, and would do well in the north of the country. Mongolia already has a thriving trade in cashmere and one of its producers is listed on the Hong Kong Stock Exchange.
The warning that alpacas are not a fast ride to riches is a timely one. Hobby industries have mushroomed in Australia in recent years around emus, ostriches, miniature donkeys and even Tibetan yaks, along with planting macadamia trees and other nutty schemes. Nearly all have failed because poor economy of scale meant few could afford marketing and promotion, and demand for their product was sporadic.
Alpaca wool enjoys a keen and consistent demand from textile and clothing companies like Pringle, Armani, Loro Piana, Hugo Boss and Zegna.
The Alpaca Association would be pleased to assist any Asian investor who would like to buy a stake in the fast growing industry. Anyone migrating down this way looking to supplement their incomes might do worse than buying a brace of the spectacular animals - they would be a hell of a thing to show the neighbours.