Alpacas help many ease into bucolic lifestyle

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Attractive tax-breaks
Breeding can be lucrative. The tax rules favor full-time rather than hobby farmers, and include the ability to write off some farming expenses and benefit from depreciation of property.

But most say it was as much a lifestyle as an investment decision.

"I wanted to retire, or semi-retire," said Lorraine Heinauer, who runs Almost Paradise Farms in Forest Grove with her husband, who continues his work as an engineer. "I liked the idea of puttering around a farm."

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But the surging interest, and selling prices, for alpacas has some critics saying the industry is showing clear signs of a speculative bubble ready to pop.

Richard Sexton, a professor of agricultural and resource economics at the University of California at Davis, co-authored a study this year that found the pricing of alpacas cannot be justified because of the lack of value of their fiber.

The price of alpacas increased roughly 50 to 80 percent over four years, depending on breed, Sexton's study found. But the market for fiber remains limited. The Alpaca Fiber Cooperative of North America, Inc. is trying to secure an opportunity for large-scale processing to make the fiber more available.

An alpaca produces six to eight pounds of raw fiber a year. According to Sexton, a reputable producer with good contacts could get $44 a pound for high-quality raw fiber but this is only for a limited few breeders.

Many use the cooperative to process their fiber, which provides them a maximum price of $3.80 a pound after processing, Sexton said.

"The commodity (fiber) they produce is worth almost nothing compared to the cost to produce it," Sexton said. "It would be the same thing as if dairy farmers were out there marketing cows, not their products."

Even if the value of fiber rose significantly — at least double-digit percentage growth for an indefinite time — Sexton said the current prices for the animals cannot be sustained.

He said there is an "irrational exuberance" in the industry and advertising on television and radio by alpaca organizations resembles a pyramid scheme to continue demand for breeding.

"You don't have to think back much further than the bubble of internet stocks. Those were smart people, too, who were investing a lot of money," Sexton said.

Alpaca advocates adamantly defend the breed's financial future. Alpaca farming is still news and prices in any livestock industry will change in the long run, said Jerry Miller, spokesman for the Alpaca Owners and Breeders Association.

"This is not a flash in the pan," Miller said. "This is a long steady increase over a number of years."

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