[Alpacasite] Re: Alpaca vs. llama prices - Attn: Susan Gawarecki

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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