[Alpacasite] industry future

Chris, first I have changed the subject line as I disagree with that
singular perspective. I have areas where I agree with John, disagree
and then areas where I do not know. My bottom line is that indeed,
this will be a growing business for many, many decades. Also note
that John is not "the" director of AFCNA, but one of a group of
directors that all work very hard.

I agree that we will have people with a few fiber animals, those with
larger flocks of fiber animals and that some income can be derived
from those animals. There is no question that average alpaca fleece,
pound for pound is a far better fleece for processing than your
average sheep wool. Many people have flocks of sheep and enjoy it a
lot. Alpacas are a better companion animal than sheep, no smell,
smarter and frankly are more farm friendly (and I raised Merino sheep!).

As the numbers of alpacas increase, then there will far better
opportunities for bigger fiber mills, but perhaps at the "cost" of a
decreased average animal value. The fleece will become far more
valuable as the average animal value is reduced. But above average
animals will always sell for above average prices.

Then there will be those that specialize in "high end" start up herds
where density, fleece quality, conformation, and other specific
issues are bred for. Those animals will be much more valuable than
your average production animal just as other livestock "seed" operations are.

There will also be farms where showing is the prime objective and
that too is a niche that can be quite lucrative. Some farms will
combine aspects of the above into one operation.

I simply do not see an alpaca meat market. In the USA, we do not eat
dogs, cats or horses. But in Canada "cheveau" (horse) is widely
available. So this is a cultural issue.

I do believe that the future will be the "mentor farm" coupled with a
strong registry and breed association (the latter two we already have).

Mentor farms that offer true support after the sale, offer REAL
education (not just disguised sales jobs), have a variety of animals
for sale and always breed their females up will continue to do very well.

Does it take a millionaire to enter? No, I have seen people do it
with limited budgets (as I did), but they are also willing to do the
disproportionate work necessary to overcome the small number of
starting animals.

Does it take an animal scientist and a vet to start a farm? No,
there are many people without advanced science or vet degrees who
have spend days at seminars, have attended every AOBA seminar and
have bought from mentor farms. They are now successful and are doing
well. They do not shirk from giving shots and delivering their
crias. And yes, they are also the poop scoopers, trainers, marketers
as well! This is in addition to being a Mom/Dad and even having a
9-5 job. Yes, it can be done as I have seen it many, many times. But
that is work.

In my opinion, that is the future. Couple reasonable expectations
with hard work and education. Humm, now to re-read, those words are
the model for success in any area.

Sadly, many new buyers do not go to seminars (too expensive they say)
and expect to pick "golden apples off of low hanging branches". Or
they breed their female to a local very average male as he is cheap
and close by (too far to drive a long distance). Those perspectives
are the model for failure. Always, always breed up. This will take
time, planning and cash. But that will provide far, far
disproportionate returns.

Do not solely rely on the ads or blue ribbons . Phenotype (what they
look like) is NOT genotype (their ability to pass on superior
genes). Look for a male from a good farm that is throwing great
crias when bred to average females. His fleece may be past his
prime, but LOOK at his crias. These males are out there. That is
why the "get of sire" show category is so valuable.

I continue to be very positive about the long term value of this
business. I feel that compound growth rates that exceed the market
can be realized. But, don't get greedy and realize that your
reputation is up for evaluation on every single sale . . . .

Steve H.

At 05:55 PM 12/06/2005, you wrote:
>OK, I have been lurking for quite some time now. I am interested in the
>business, mainly because I have the available land, I love the animals, and
>I love the idea of having the possibility of another income source. I have
>been to seminars, had farm visits, picked animals, I think I want to
>specialize in Suri's. Every person I have talked to in the business talks
>about the importance of the fiber market, and that is the goal for the
>industry. Who would know better about the truth of this statement than the
>Director of the Fiber Cooperative? Do people in the industry disagree with
>the numbers given by Mr Merrill, or is it the grim truth? I understand
>everyone on this list has something to lose if this is in fact the truth,
>and that would cause for some defensiveness to his statements, but for an
>industry that prides itself on integrity shouldn't this be addressed
>truthfully with people like me, potential buyers?
>
>
>
>Not one person in the industry has given this opinion to me about the future
>of the fiber market. Am I to assume that alpacas are a fad livestock and
>change my business plan to get in, make as many sales as possible to recoup
>my investment, and try to do this all the while without using the future of
>the fiber market as a selling point, instead of slow growth, high quality
>breeding, and focused marketing?
>
>
>
>I am confused and concerned. Please feel free to contact me privately if
>needed, but I would like to hear other opinions.
>
>
>
>Thanks,
>
>Chris
>
>
>
>Chris Miller
>
>Namaste Vineyards
>
>5600 Van Well Road, Dallas, Oregon 97338
>
>Phone: 503-623-4150
>
>Fax: 503-212-0117
>
>www.namastevineyards.com
>
>"The Spirit of the Wine Honors the Spirit of the Vine."
>
>
>
>-----Original Message-----
>From: Alpacasite@yahoogroups.com [mailto:Alpacasite@yahoogroups.com] On
>Behalf Of gepp1
>Sent: Monday, December 05, 2005 10:27 PM
>To: Alpacasite@yahoogroups.com
>Subject: [Alpacasite] You should resign as a Director of the Alpaca Fiber
>Cooperative
>
>
>
>You don't believe in the industry. You don't believe in
>the "vision". You don't have vision.
>
>Please stick with "old style" llamas,
>
>Sorry,
>Greystone Manor
>Gary Epp
>
>
>
>--- In Alpacasite@yahoogroups.com, "gatewayfarm" <johnwmerrell@e...>
>wrote:
> >
> > Gary, there are a number of errors in your figures, errors that
>are
> > unfortunately freely promulgated through the alpaca industry.
> >
> > It is extremely difficult to get accurate prices for alpaca in th
> > global market. That said, if we look here:
> >
> > http://www.gschneider.com/brochure/specialfibresalpacatrend.php
> >
> > we can see that baby alpaca has held a pretty consistant $15 a
>kilo
> > for the past several years. That is about $7 a pound.
> >
> > If we compare this with Mohair, then we can go here:
> >
> > http://www.mohairusa.com/
> >
> > and find that in October of this year it was going for a little
>over
> > $8 a pound.
> >
> > While the value of alpaca is many thimes that of wool, it hardly
> > stands above other specialty animal fibers.
> >
> > This is something that all producers should be aware of.
> >
> > I am not sure where your figures of 12-15 sweaters comes from. I
>think
> > that currently we should use a conservative estimate of 5 pounds
>of
> > prime fleece per animal. We should also figure greater than 10%
>waste
> > in processing.
> >
> > So, we are probably looking at no more than 4.5 pounds of finished
> > yarn per animal per year. With waste from the manufacturing
>process, I
> > would guess no more than 3-5 sweaters per animal.
> >
> > That would produce a gross income of perhaps $400-500 annually.
>But,
> > we have yet to subtract the costs of keeping the animals, shearing
>the
> > animals, or shipping off the fiber for processing.
> >
> > In large quantities it is probably realistic to have raw fiber
> > processed to yarn for $10-12 a pound, including scouring,
>spinning,
> > shipping, packaging, etc.
> >
> > So, for argument, let's assume that it costs $50 to keep each
>animal a
> > year (feed, vet, infrastructure, etc.), $20 to shear each animal,
>$1
> > pound to ship the fiber off, and $10 a pound to spin th fiber into
> > yarn. I am sure that most would agree these are conservative
>figures.
> >
> > 50+20+(1*5)+(10*5)=$125 annual cost
> >
> > Let's assume the yarn is worth $20 pound at the distributor level
> >
> > $20*5 = $100
> >
> > Do you begin to see some problems emerging?
> >
> > So, let's process that yarn into sweaters. Let's assume we can
>get
> > sweaters made for $25 a unit (including labeling and packaging),
>and
> > we get 3 out of each animal. So now our costs are
> >
> > 125+(3*25)=$200
> >
> > We can sell these sweaters for $150 each retail, but as we all
>know
> > retail is twice wholesale, which is twice what the distributor
>gets.
> > As primary producers, let's assume we are at the distributor
>level So
> >
> > 150/2=75/2= $37.50 a unit
> >
> > 37.5*3=$122.50
> >
> > Oops, we are now losing over $75 an animal each year producing
> > sweaters that will retail for $150 each.
> >
> > We can of course try to vertically integrate at a higher level.
>We
> > could become wholesalers, or even retailers. The problems there
>have
> > to do with exponentially increasing expenses, since we now need to
> > maintain inventory and pay warehouse staff, sales staff,
>accountants,
> > managers, etc.
> >
> > I can assure you, the hoped for margins will evaporate quickly.
> >
> > Why this exercise in number crunching? We need to get realistic.
> >
> > I think that it is reasonable to look towards a time when we can
>see
> > actual returns of $15-20 a pound to the fiber producer. This, of
> > course, does not take into account the producers costs, meaning
>that
> > it will be incumbent on the producer to reduce their production
>costs
> > to a level that maintains profitablity. That means the end of $25
>a
> > head shearing, Igg testing on every animal, expensive veterinary
> > interventions, routine chemical parasite controls, etc.
> >
> > In short, it means transitioning into a true livestock industry.
> >
> > Can this be done? Of course, but only with foresight, planning,
>and a
> > realistic appreciation of the task at hand.
> >
> > Further, it will be through this transition that a market will be
> > maintained for high end animals. Without a SUSTAINABLE foundation
>(i.
> > e. livestock industry) the whole house will collapse. Continuing
>the
> > myth of $5 an ounce fiber does no one any favors at this point in
> > time. it was good marketing 10 years ago. Now is the time to get
> > real!
> >
> > It is good to keep in mind that we will have in excess of one
>million
> > alpacas within the next 15 years. It is also important to
>understand
> > that the figures I share above assume collective efforts to
>harvest
> > and process the fleece our animals produce.
> >
> > As a Director of the Alpaca Fiber Cooperative I have spent many
>hours
> > agonizing over these numbers. It might be easier if we were not
> > involved in a global economy, but such is not the case. We must be
> > prepared to compete with low priced goods from Asia and South
>America.
> >
> > I assure you, experienced livestock producers shake their heads in
> > disbelief when they see figures like what you have shared below.
> >
> > John Merrell
> > Gateway Farm Alpacas
> > http://www.gateway-alpacas.com
> > Alpaca, a natural elegance...
> >
> > --- In Alpacasite@yahoogroups.com, "gepp1" <alpacas@g...> wrote:
> > >
> > > This is refering to:
> > >
> > > http://finance.groups.yahoo.com/group/Alpacasite/message/105021?
> > > threaded=1
> > >
> > > Hi Susan Gawarecki,
> > >
> > > The big difference in pricing between alpacas and llamas is the
>base
> > > value of the fleece. People have been buying cashmere for
>hundreds
> > > of years at a 5 - 20 times price premium over wool. Low micron
>count
> > > camilids fiber should always command a price premium similar to
> > > cashmere. There are llama breeders that have been successful in
> > > breeding llamas with fine fleece in reasonable shearing weights
>and
> > > they are still getting good prices. I know two that have waiting
> > > lists for every cria. The older style llamas produced smaller
> > > amounts of high micron fleece than an average alpaca. By the
>way,
> > > when we are considering an alpaca breed standard we should
>consider
> > > this lesson.
> > >
> > > An alpaca that yields 6-8 pounds per year of mid to low 20
>micron
> > > fleece is producing a renewable product worth more than $2000
>gross
> > > (12-15 sweaters) annually. At the same time a young breeding dam
>in
> > > good reproductive health will produce a minimum of 3 breed able
> > > female and 3 fleece quality male cria. Therefore a young
>breeding
> > > quality female will be responsible for 42 - 56 pounds of fleece
>in
> > > her 10th year. That works out to $14,000 to 16,000 per year if
>you
> > > kept and bred that dam. How much do you think the investment
> > > community values a stock whose gross revenue increases by a
>factor
> > > of 6 in ten years, that's a 40+% compound growth rate.
> > >
> > > If that dam is for sale NOW as a stock, the investment community
> > > would value the stock at least 5 times current revenue ($2000 X
>5 =
> > > $10,000) plus about 50% expected 2 year appreciation (50% X
>$11,000
> > > = $5,500). You might ask where that $11,000 comes from. It's the
> > > base price of one breed able female ($10,000) and one fleece
>quality
> > > male cria ($1000).
> > >
> > > The above example uses VERY conservative numbers and assumptions
>but
> > > clearly establishes a base value for a reproductively sound
>maiden
> > > in the $10,000 to $20,000 range. Where things get tricky is when
> > > people pay $20,000 to $100,000 for females. The buyer is paying
> > > a "premium" on speculation that the females genetics combined
>with
> > > an appropriate stud will produce offspring that improve on the
>$2000
> > > annual gross figure and the base value of the cria she will
>produce.
> > >
> > > It gets even trickier when breeders pay over $100,000 for studs.
> > > Let's say that a $200,000 stud has 100 cria, forget stud fees
>and
> > > taxes for a moment, part of the value question becomes, "has
>that
> > > stud increased the base value of its 100 cria by an average of
>$2000
> > > each"? If so the stud fees and tax breaks are gravy.
> > >
> > > Just some thoughts on alpaca value,
> > > Greystone Manor
> > > Gary Epp
> > >
> >
>
>
>
>
>
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Steve . . . .

TimberLake Farms, Inc.
Tom Cameron, D.V.M. & Steve Hull, Ph.D.
Edmond, Oklahoma

A Full Service Alpaca Farm Including Seminars And Consulting

www.timberlakefarms.net

e-mails: mailto:steve@timberlakefarms.net
mailto:tom@timberlakefarms.net

Farm Telephone: 405 341-8444
Farm Cell Telephone: 405 550-3023
Farm Fax: 405 330-8444

note: opinions made here are not and cannot be construed to be
specific veterinary advice, diagnosis or treatments. Both Tom and
Steve strongly suggest always checking with your own veterinarian.

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