December, 2008

This is just a quick note from Jerry Forstner, the Forstner Family, and Magical Farms, in which I would like to share with you our view of the current and future alpaca industry. Please note, I am no longer serving on the AOBA board so this is not an "official" position, rather it a personal assessment based on our farm's experiences, conversations with hundreds of breeders at shows across the country, as well as economic conditions that exist beyond our pastures.

First, on a big picture note, the news media continues to clarify that we are in a severe slowdown both in our country and in the world. Stock market indexes have lost 30 to 40% in the last year, home prices in the broad market have declined, and the banking and auto industry are in disarray. The alpaca market is subject to financial conditions as is the housing market and the automotive market, but to see it as a sign of anything other than 'the times' would be misreading the information.

I have attended shows across the country in 2008 and spoken with alpaca breeders from all regions. They have asked me many questions and they have answered many of mine. A lot of their stories match our farm's recent experience that interest and inquiries in alpacas remain high, while sales have lately tightened. Prospective buyers continue to visit the farm, do their research, formulate their farm and business plans, and even pick out the bloodlines or specific animals that they want, but they are holding off on making the purchase while they take in all that is happening around them. In the Stock Market, they call this phenomenon "keeping the powder dry". Investors may dabble in and out of the Market with a small percentage of their available funds, but they largely maintain a cash position until they see conditions improve. When conditions do turn, they have that 'arsenal' of cash to jump back in.

Do we think that the housing market will recover? Yes. Do we think that people will purchase automobiles again? Yes. Do we think that the volume of sales in the alpaca market will return? Yes.

Just recently, we had our annual Breeder's Choice Auction at Magical Farms, and it happened to fall on the Saturday following the Dow's worst week in its 112-year history in both points lost as well as percentage lost. In the face of this catastrophic week for Wall Street, our sale averaged just shy of $25,000.00 per animal. This is an industry that is strong, vibrant, and continues to grow. We had 800 people in attendance, 350 of them were new people that were looking into the industry, which is a very exciting statistic. Some of them purchased at the auction, some will purchase in the near future, and some are likely "keeping their powder dry" for the moment, but these are the prospects that we are truly excited about.

For an interesting historical perspective, those that were best positioned after the Great Depression of the 30's were those that purchased stocks at the rock bottom bargains that were available and waited for them to recover. It is our feeling that, just like stocks, houses, and automobiles, alpaca sales will recover with the economy; however, right now is a fantastic time to upgrade your herd at very reasonable prices. High end breeding stock remains in demand, so investing and upgrading during these more trying times will have a huge net effect on your herd. We at Magical Farms have been adding to our herd this year, filling in gaps in our breeding program with fantastic animals from farms all across the country.

In short, in our assessment the sky is certainly not falling, although it may seem a little closer to the horizon temporarily. The future of the alpaca industry continues to look bright, and we look forward to many years to come! We wish for all of you a very happy holiday season, a healthy New Year, and we look forward to a wonderful new season where we get to visit all of our alpaca friends at the many fantastic spring alpaca shows. Lastly, we are even more excited to see the new crop of crias as each and every year they continue to improve by leaps, bounds, and pronks.

We wish you all a very merry Christmas, and a happy and healthy New Year

Jerry Forstner
Magical Farms, Inc.