Fibre Production - What Counts for the Farmer?

Nick Veltjens - Talca Alpacas

This is another subject where not all alpaca breeders agree, and where parts of the industry tend to go in different directions.

We really need to start to be businesslike with what we are breeding for. Nobody will deny that the ultimate aim is to breed animals that will give our major purchasers, broad acre fibre producers, a viable and profitable business. And they will in turn only achieve viability if they can profitably sell their product: Top quality fibre.

We should not forget that our largest market for alpacas will not be in the suburbs of the metropolitan areas of state or even regional capitals, but the farmers on the land. They will mostly buy top quality wethers, and wethers represent about half of the entire (no pun intended) Australian herd.

What is top quality in the broad acre farmer's view? I am not a broad acre farmer, but I can see the bottom line.

To earn their keep in the farmer's herd, alpacas must produce fibre that reliably brings the largest possible return per animal year after year.

Weight versus Fineness

There has until recently been huge pressure by some breeders and opinion in the judging ring to prefer "density" over fineness. This will tend to favour alpacas with stronger fibre, as it will weigh more if all other parameters such as follicle density and fibre length are the same (see Appendix [A]), and appear denser to the feel. The result is that fineness has in the past got little more than lip service. It is only now that there seems to be recognition to the importance of lower fibre diameter.

Now - the following is by no means a business plan for a farmer, nor is it intended to encourage anyone to act on the ideas presented; they are simply an opinion based on my study of possibilities in the future that should perhaps be discussed now.

It must also be emphasised here, that fine micron is not the only determining factor for the quality of a fleece, as suitability for processing by the yarn and fabric manufacturers will ultimately play a vital part in determining the price the farmer will get for their raw product. There is also productivity of the animal per hectare, ultimately expressed in terms of W/D3 (weight in grams over fibre diameter in micron) which effectively is a measure of number of fibres per fleece, i.e. follicle density and growth rate. That side of the coin is another study very clearly presented by Dr Jim Watts with his SRS Merinos[1], and which deals with the breeding aspect of achieving advanced quality alpacas.

This article however looks only at commercial aspects of fibre diameter in a futuristic climate.

Commercial prices per kg for alpaca fibre can be seen to be determined by the Australian Alpaca Cooperative Ltd (AACL), I will use them here to show the effect on farm income:

SF "super fine" (20m and less) $60

F "fine" (20.1m to 23m) $25

M "medium" (23.1m to 26m) $18

S "strong" (26.1m to 30m) $7

XS "extra strong" (>30m) $2

These are prices for members of the Cooperative, and are for A and B length and well skirted fleeces.

By comparison therefore, a consistently superfine alpaca with 2 kg of skirted fleece will earn the farmer $120 gross. If it had a still respectable fleece with say 24m it would have to grow 6.6 kg of skirted fleece to get the same amount. With 3 kg of SF earning $180 gross, the 24m alpaca would have to produce a theoretical 10 kg to earn the same money. That sort of weight will probably never be achieved with an alpaca having a micron much greater than 20m or 21m, and would most likely require two shearings a year.

On the other hand it is possible with alpacas to achieve 3 kg of superfine now, albeit in isolated cases, and if one can expect to achieve genetic improvement as in advanced Merino, especially with embryo transplant (ET) and artificial insemination (AI) now becoming available, then such animals will be bred in sufficient numbers earlier rather than later.

The point is: A broad acre fibre producing farmer making a living out of the fleece of alpaca wethers wants the finest possible alpacas he can get, and would be willing to pay extra if he or she can see in the history of the supplier's breeding that those animals will hold their fineness for at least double the time of when the price has been amortised. This will make a profit the farmer and provide the replacement capital when needed.

In other words, a superfine alpaca is of much less value to this farmer if after 2 or 3 years it is more than 23m as the annual revenue per kg will have dropped by 70%.

So - how much will a farmer pay for wethers to make a living in the market place?

This is a rather theoretical analysis at this early stage, because there are not enough alpacas of the required quality in existence in Australia yet. Let us however assume the following:

One needs to take annual expenditure into account, which may be different for the superfine alpacas in a smaller herd than the strong wethers in a larger herd. Let us assume $40 per annum per alpaca for SF, and $10 for strong, with fine and medium on a pro rata basis. It is actually impossible to get a positive return from a strong fleeced alpaca if the annual operating cost were to be approaching the $40 a farmer may want to spend on the superfine animals. Overheads, such as the amortisation of fences, sheds, equipment, etc, and the initial capital of the land have been ignored in this study.

A herd of wethers that stay the same micron for a number of years, bought for $300 each, and cutting a net 3 kg a year, could provide an annual net return (before tax) on the capital invested for superfine (SF) alpacas of around 47% p.a., for fine (F) the alpacas would yield 15% net, and for medium (M) would return 11%.

If they were to cut a (by today's standards) huge net of 4 kg, the returns would be 67%, 23% and 17% p.a. respectively. .

The end result is that with the medium wethers the farmer would have to pray that they can hold their micron for 7 years if they cut 3kg, or 5 years if the cut 4kg each year just to get the initial capital back for the alpacas, while the superfine fleeces will pay for the animals in almost 2 years or 1.5 years respectively.

On the other hand, if those fine wethers with 21m fleece are $105 instead of $300, then the return on such lower outlay would also be 43% for 3 kg and around 67% for 4 kg p.a. That means that it is the breeder who would not be getting the desired return. By corollary it also means that the farmer could have paid over $450 each for the superfine wethers cutting 3kg and still get 31% net p.a. and when cutting 4 kg get 44% p.a. on the investment.

 

Farm Income

Let us look at it another way. How will a farmer of the future make a good living out of alpacas? Apart from fleece quality and weight sustained over a number of years, it also depends on the minimum size of the herd, not to mention the availability of a market for the fleece. The latter, I expect, will remain the Australian Alpaca Co-op, and for this study I leave the AACL's fleece prices and its policy to buy all the fleece of its members as they are at present. It is also believed by the AACL itself that prices for fleece will remain fairly steady in the longer term.

This exercise is based on the alpaca's performance in terms of fleece, and ignores the fact that at the end of the useful life of the animal on a broad acre farm it will still have a "whole of animal" value that the farmer will not ignore.

 

Obviously a herd of superfine alpaca wethers does not need to be as large as one with stronger fleece to produce the same income. The smaller herd also requires considerably less labour. On the other hand, the purchase price of a superfine alpaca can be higher than the others to obtain the same percentage return on the initial purchase capital. So, to make a reasonable comparison, those factors need to be included into the equations.

Another important aspect is the timing for the first adventurous "cockies" to get into this new industry full time. This may actually occur when the alpacas available at that time may really not be quite up to the standard described above, which means that there will have to be ongoing improvement from a modest start.

Let us make some comparisons for herds obtaining similar cashflow and annual return on capital with different micron classes and fleece weight.

What fleece weight? Starting with 3kg p.a. skirted fleece (saddle and neck only). If a farmer wants to get an annual net income after operating costs of around $120,000 before tax, it requires a herd of at least 900 superfine alpacas, or 2,700 fine, or 3,800 medium alpacas (see Appendix [B]). To get a net return on capital with those herds of about 32% p.a., the price of the wethers would calculate at $450, $135, and $105 each respectively. For a similar exercise with alpacas with strong fleece, the herd would in theory have to be more than 11,000 and the price per wether $30.

If we succeeded in breeding our alpacas up to achieve a cut of 4 kg skirted fleece, then with the same herd sizes the net income would rise from that $120,000 base to nearly $200,000 p.a. The higher fleece yield relative to purchase price would also result in a higher net return on capital of between 45% and 50% p.a with the above purchase prices for wethers. In fact for the "strong" fleeced wethers the price could go up to $40 each and still get this return (see Appendix [C]). That means that the herds are paid for in about two years, and would have to perform for another two years to earn the farmer an average of $60,000 to $90,000 p.a. over the whole period of 4 years. If the performance of the alpacas can last longer than 4 years, then that will result in considerably greater profits for the farmer, and the potential for higher prices for wethers.

All this only supports the general trend that alpaca breeders are following: Lower micron and higher fleece weight. What is still not a strong enough focus is the need for fleece fibre diameter to remain low over the lifespan of the animals. It seems to be a trait that can be inherited, but in selecting a male for stud purposes this will not easily become evident immediately. For this a breeder should therefore wait for the second or third fleece or even later before deciding to certify a male in order to make sure this trait has been verified. Once a breeding family line has been established over a number of generations, this period could be reduced. Such a line would also become visible to the discerning broad acre farmer looking for some security in his or her investment.

We can achieve this and better. There are some advanced Merinos that cut 8kg p.a. at 19m now (see Appendix [D] ). It will take alpaca breeders quite a few years to breed the 4kg alpacas in this article in the numbers that are needed to attract the broad acre farmer into this industry. If we stay focused, we will eventually even get to 5kg, 6kg, and 7kg that will have 19m for more than 5 or 6 years.

 

 

 

 



[1] The Response to Selection in the Merino - by Ken Ferguson and Jim Watts, available on the AAA website.

 



APPENDIX [A]

 

 

 

 

APPENDIX [B]

 

 

APPENDIX [C]

 

 

 

 

 

 

 

 

 

 

 

 

APPENDIX [D]

Source: The Response to Selection in the Merino by Ken Ferguson and Jim Watts