The Case For Closure(1998)

By Mike Safley

I spend a lot of my time thinking about the alpaca business and believe me there is plenty to think about: genetics, marketing, politics, shows, animal husbandry, and fiber, to name a few. Lately I have been thinking about our long-term future as breeders. In particular, I am concerned about the negative impact on our market of repeated shipments of imported alpacas.

In 1998, Camelids of Delaware, Pet Center, et al (CODI/PCI) plans to import several hundred ARI registered alpacas into Canada from Peru. Bill Barnett may add several hundred more from Bolivia to the herd he affectionately refers to as “North America’s largest.” Not to be outdone, CODI/PCI will most likely finish the year with another shipment through the Harry S. Truman Center in Florida. This summary ignores the miscellaneous shipments from Australia, Chile, and wherever.
Supply and demand are what make markets. Our market is currently being supplied and dominated by importers. The small domestic breeders, and all breeders are small compared to the importers, stand at the end of the marketing line. Simply put, we domestic breeders create the market and the importers receive the lion’s share of the benefits.

That’s enough of my keen description of the obvious. It is more important to decide what we, as an industry, can do about it. I believe its time to close the Registry to the registration of non-pedigreed alpacas.

A BRIEF HISTORY OF SCREENING

The screening program has been very effective, encouraging a higher standard of imported alpaca and denying registration to substandard alpacas. Today North America has arguably the best herd of alpacas to be found anywhere.

A REGISTRY EXISTS TO CREATE VALUE

“In summary, a pedigree is an ancestral record of an individual animal. A pedigree has value because it is a recording of knowledge. That knowledge can be promoted into additional value because knowledge can contribute to the earning power of future progeny from an individual animal. The registered livestock business can be highly rewarding as you form and mold highly predictable genetic packages of breed-improving material into superior animals. Self-satisfaction comes through the accomplishment of producing genetically superior animals which you made possible through wise breeding decisions. To top it all off, there is the satisfaction of working through your association with people of integrity who have similar interests, ambitions, and goals.”

The National Pedigree Council recognizes the role of registries in creating pedigrees which create value. The ARI needs to do everything they can to reinforce the value of their members’ livestock.

THE NEXT STEP

Closing the Registry is not a radical step. Many, many breed registries are closed. The real question is can closure work to create value for the alpaca industry? Any assessment of our prospects should include a look at how other bloodstock industries have handled the issue of registry closure.

The Alpaca Registry was originally patterned on the American Morgan Horse Association Registry, which has been a closed registry since 1948.The Arabian Horse Registry of America registers only Arabians from registered and blood typed parents. The American Shire Horse Association was closed in 1992 by a vote of their members. The American Hereford Association has been closed since 1881.Yorkshire, Hampshire, American Landace, and United Duroc swine are all registered in a closed registry which requires both parents to be registered if the progeny is to be registered. The American Paint Horse Association was closed in 1990.These are just a few examples of closed registries.

The Canadian Llama Registry has already made the decision to close their registry to the registration of foundation stock or alpacas with unregistered parents as of December 31, 2000. Thereafter, only alpacas with dams and sires previously recorded in the herd book will be registered.

THE BENEFITS OF A CLOSED REGISTRY

“Registered purebred swine has a market value worth two to three times that of non-registered swine. Purebreds can range in selling price from $250 up to $80,000.”

THE BENEFITS OF A CLOSED ARI REGISTRY

1. Pedigrees will become more important as alpacas with unknown parents become a decreasing percentage of our national herd. Remember, breeders, not importers, reap the benefits of pedigrees. Each successive generation on a pedigree will add value.
2. Closing the Registry will create a stable genetic pool without the constant addition of the unknown variables that imports represent.
3. North American breeders will begin identifying the American alpaca, as opposed to the current focus on Chilean, Peruvian, or Bolivian alpacas. This is the next step in adding value for the ARI pedigreed alpaca.
4. Finally, the true breeder who is committed to raising alpacas in the future will take control of their market. They have invested their hard earned capital establishing the market and the Registry. They should reap the future reward.

THE RISK OF AN OPEN IMPORT POLICY

Ask a breeder who has raised ostriches, emus, and boar goats what they think about imports. They will tell you imports contributed mightily to the demise of their industry.

A market more closely illustrating the danger of repeated alpaca imports would be llamas, another market previously supplied by Tom Hunt, Phil Mizrahie, and Bill Barnett. Any long time llama breeder will tell you imports contributed to the decline of the llama market. Ask Brad Sprouse, Tim Vincent, Tom Simmons, or Mike Wilkens. Sure, there were other factors, such as a divided industry, poor marketing, and lack of vision. But when imports were stopped for about four years due to foot and mouth disease regulations, the llama market was vibrant, even explosive. And we have one added advantage over the llama industry -- the alpaca community is not divided, it is united. Once a consensus is reached on closure, we can march forward, stronger than ever.

THE ARGUMENTS AGAINST CLOSING THE REGISTRY

No argument for closing the Registry would be complete without an analysis of the arguments advanced by those who oppose closure. I think it would also be interesting for you to asses the vested interest of the people making these arguments. Are they importers? Do they profit or derive power from the present system? Are they being funded by screening dollars? The arguments against closure are generally as follows:

1. The North American gene pool is too small and not sufficiently diverse. This argument ignores the fact that over the past fifteen years, importers have scoured Chile, Bolivia, and Peru for alpacas. To the contrary, the argument could be made that the North American gene pool is the most diverse of all the Camelid rearing countries.
   
2. If the ARI closes their registry to imports, a second or third registry might be established. This argument ends with the conclusion that a second registry spells disaster for our industry. First, there is a second registry, the Canadian Llama Registry, which as been registering alpacas for years, without negative effects.

Recently, there has been the suggestion that several well-financed alpaca breeders were going to start a United States Registry that would exclude imports. It seems just as likely that we may have a second (third) registry whether we close or not. I have heard for years that if the ARI didn’t do this or that, someone would start a second (or third) registry. I personally don’t believe a third or fourth registry would ever succeed. My research of other breed registries found that secondary registries are rarely successful or influential. I will discuss the reasons for this later when I analyze the prospects for successfully closing the ARI Registry.

I’ve also heard rumors that I intended to start a new registry, the Plantel Genetics Registry or some such equally self promotional name. How about the Accoyo Registry? First, I am not and will not start another registry. I have tremendous loyalty to the ARI. Second, it wouldn’t work. Third, even if it did work, it would not be in my best interest. Fourth, if I wanted to start another registry, I could do so whether the ARI is open or closed. It’s an interesting rumor, but it is simply not true.

3. Closing the Registry will defund the Alpaca Registry. A memorandum was recently distributed among AOBA’s marketing committee and on the Internet. The memo contained the following paragraph:

“Consider. Approximately 2/3 of our existing industry marketing program (inc. Affiliate funding) and all of our funding for the Alpaca Research Trust comes from ARI grant, which we all know are based on import fees. Should the Registry close, obviously all or most of the funding for all the programs we have worked so hard to develop over the past years could be lost for lack of adequate funding.”

I agree that the screening fees have been helpful in developing our market. As an original member of the ARSC committee, I was a lone voice, pushing hard for those fees beginning back in 1989.I don’t believe for a minute that alpaca marketing programs will cease to exist if we quit registering imports. AOBA has always had a strong marketing program, beginning back when the entire AOBA budget was less than $20,000.I know, I was an original member of AOBA’s first marketing committee. We created brochures, videos, news articles, and sales, all on a shoestring budget.

Today, ARI screens an alpaca and is paid $500. The importer sells the alpaca for $20,000 plus. I have to believe that our market would be much stronger and better promoted if a domestic breeder sold his own alpaca for $20,000 and the importer didn’t sell any.

The single factor, which most strongly influences our market, is supply. Today, the major supplier is the importer. ARI and AOBA are currently engaged in funding a huge marketing campaign, which primarily benefits importers and large breeders. This is not hard to see, ask yourself who is selling the most alpacas, the importers and the larger breeder, or the small breeder.

I hate to think that our industry’s plan for long term success hinges on receiving screening fees from importers. We have to be more creative than that. AOBA has created many funding sources for marketing: auction commissions, the color breeder’s directory, the sale of donated auction items, profits from the annual convention, the sale of mailing labels and marketing materials, web site ads, etc. They will continue to do so.

I sent the AOBA Marketing Committee a memo suggesting a marketing plan on April 8, 1997. I projected a budget which created potential revenue of $540,000 for marketing, only $60,000 of that was ARI funds. Last year AOBA ended their year with a surplus of $83,000 in their marketing program. The surplus almost equaled the ARI contribution for the year. There is no doubt in my mind that we can market and prosper mightily without the $500 stipend we receive from the importers. Remember, the importers don’t pay the $500. The buyer of the imported alpaca pays the $500, which is included in their purchase price.

The Alpaca Research Trust (ART) currently has over $150,000 available for research projects. The nature of funding research is that it takes time. We shouldn’t throw money at the process. ART can go about its business spending the funds they currently control.

There will be many sources of research dollars in the future. The trust has been organized so that contributions are tax deductible, which will encourage donations. I believe in the generosity and concern of our domestic breeders. The llama industry funded hundreds upon hundreds of thousands of dollars for research without screening fees. So can we.

ARI, as a source of funds in the future, is not going to go away. The Registry currently has assets of more than 1 million dollars and will add a significant amount in screening fees this year. This balance has accrued as we approach a potential break-even point on our operating revenue. There will be additional surplus ARI funds in the future if the market value of alpacas stays high.

4. Importers and large breeders will be the largest beneficiaries of closing the Registry. Again quoting from the memo circulated to the AOBA Marketing Committee and on the internet:

“As you may or may not be aware, the sitting President of the ARI has initiated an effort to close the ARI Registry. Though I am very concerned with the ramifications and economic motivations that are driving this effort, I am more concerned with the short and long term effects on the mainstream domestic alpaca market.”

“In my opinion, in the short term, closing the Registry, or even the threat of closing the Registry, will benefit large breeders and importers to their domestic market if we do not keep our eye on the ball.”

Well, I do agree with one thing the author of this memo said, we must keep our eye on the ball! While I don’t take the suggestion in the memo personally, I am perceived as a larger breeder and it is true that I will do better in a market with less imports, as will every other domestic breeder.

I see this equation a little differently than the author of the memo. I see myself as one who has more to lose if we keep the Registry open to imports and, in that respect, all breeders, big and small, are equal. I would like someone to point out to me any domestic market where the domestic producers of a product were benefited from repeated, unrelentless imports of the same product that they were producing. Ask General Motors what they think of Japanese cars or IBM how much they like the IBM clones from Korea. For an analogy that is a little closer to home, ask an old time llama breeder how they liked imported llamas.

The second argument found in the paragraphs quoted is that the importers will benefit from closure. The theory here is that the notice of closure will act as a sales tool. People will rush to buy the last load! I think the concluding paragraph from a letter sent to the ARI by an importer is most informative of what importers think of closure:

“If I can assist in putting out the message to folks, that control not curtailing is the more reasonable approach, please do not hesitate to ask. I cannot stress enough the value of a single registry and this closing of the ARI registry would be tantamount to alpaca industry suicide.”

It seems to me that the control the importer is talking about is his control of our market which is exactly to the importer’s benefit. Believe me folks they do not want the Registry closed. I think the suicide contemplated in the letter might be that of an importer, not our alpaca industry.

If you analyze these arguments with “your eye on the ball” the first thing you will see is that the importers have all done just fine, without any notices of the Registry’s closure. They have always sold their shipments. If they hadn’t, they wouldn’t be bringing more. I’m sure they will sell their next load with or without closure.

Furthermore, who is to say that, instead of selling their next load, the importers will not keep it and become breeders? If so, I for one will welcome them with open arms. Anthony Stachowski was a breeder before he was an importer. Phil Mizrahie maintained and bred a herd for years before he began importing Peruvians, and Bill Barnett ought to be able to find happiness in America’s largest herd.

The current marketing operation goes something like this: big breeders and a few new breeders buy from the importers. The big breeders use the supply of imported alpacas to market to the new breeders. When they run out of alpacas, they buy more from the importers. I know this because l used to do it: Remember, the only the only way any dollars given to importers reappear in our marketplace is in the form of another import. If w close the Registry and tighten supply, either new breeders will buy from existing small breeders or, more likely, big breeders will continue selling the majority of the alpacas, but they will re-supply their herds by buying from small breeders, instead of importers.

I want to make one final point about importers. They are not bad guys. I consider Phil Mizrahie one of my best friends in this industry. I bought my first alpacas from Phil. I have his alpacas agisted at my ranch today. I enjoy his company and he is an honest worthy competitor. Anthony Stachowski was a pioneer in our industry. I have collaborated on many successful projects with Anthony. I will never forget the day he offered my dad $35,000 for one of our 6 month old, silver, baby males. Dad turned him down. I almost killed him, Dad, not Anthony. Tom Hunt has always been very generous with our industry, contributing money and resources. Remember the CODI camel he contributed last year in Pueblo. Bill Barnett is one of the most optimistic alpaca breeders in the world, for that I commend him. The point is I don’t harbor any ill will against those guys personally. They simply have different expectations and goals for our industry than I do.

5. Screening regulations alone will reduce the level of imports to an acceptable level. This argument assumes there is an acceptable level of imports. I’m not sure this is true. But I have to say in my three years of experience on the ARI BOD I have learned that the increasingly more stringent regulations have not stopped the serious importers from bringing in their full permit allotments of alpacas. The quality of animals imported has increased, but the number imported has not decreased. There may have been some instances when a smaller, less experienced importer may not have understood the rules and lost a large number of animals due to screening, but to date that has been the exception, not the rule.
6. Closure of the Registry will limit the future genetic improvement that is available from imports. This is the toughest argument for me to address. I agree that one very effective way of rapidly improving our alpacas is through imported genetics.

I just think that we need to pause, digest the genetics we’ve already brought here, and develop our own American pedigrees. Closing the Registry is not an irrevocable act.

Furthermore, I think there are better ways to import select genetics. We could follow the model of the inter-registry pedigree exchange protocol, which was recently negotiated with Canada. This would require that South American breeders set up a verifiable registry, track their bloodlines, and pay attention to pedigrees. It could work. They could be encouraged to export animals with proven pedigrees.

Please remember that the amendments which I have proposed allow the Registry to be reopened by a vote of the membership. Either the ARI BOD or the members can put forth a plan and ask the members to vote to reopen the Registry of non-pedigree alpacas.

THE PROSPECTS FOR SUCCESS

More important than any of the above arguments is what are the prospects for success if we close the Registry? To help answer this question, let’s first look at the industry’s strengths.

AOBA is a strong national breed organization. They own most of the industry’s means of communication, they hold the national convention, control alpaca show policy, provide marketing support, preside over the affiliates, support the fiber co-op, and, best of all, the industry is united behind AOBA.

ARI sets Registry policy, registers alpacas, owns the blood data bank, and enjoys wide spread industry respect. They are far stronger than any other registry could ever hope to be. How could a second registry succeed without access to the blood typing data, which ARI owns? The best a second registry could do is use existing ARI pedigree information. A second registry would always be just that -- second (or third) best. Why would our industry support a registry that was not acting in their best interest? Ask yourself, would you buy an alpaca registered in a secondary registry, especially if the second registry wasn’t good for your business? I believe the vast majority of our industry would act in their own self interest and support a closed ARI Registry.

As I have previously discussed, many livestock industries thrive with a closed registry. Look at the AKC, their formula is simple: 1) the registry is closed, and 2) they control dog shows. You can’t register a pure bred puppy with them unless the parents are registered and you can’t show your dog in an AKC show unless it’s registered with them. They have spent years building the power and prestige of an AKC pedigree. This system guarantees its members prices that are often ten times that of their competitors.

AOBA controls show policy and Alpaca Llama Show Association (ALSA) rules which currently prohibit the showing of alpacas that are not registered with the ARI or the Canadian Llama Registry (CLR). AOBA supports regional events where alpacas are displayed. They could institute the same rules for the animals on display.

Together, the ARI and AOBA have the ability to deliver value for their members. If our industry can achieve a consensus on our future, our breeders will do well for generations, not just years. I can’t think of anything I would rather leave my children than a thriving alpaca business.

Leadership is what we need. Leadership with a vision of the future that charts a path of prosperity for domestic breeders, not importers. The importers can take care of themselves. AOBA and ARI should stand for the future of their rank and file.

I’m not saying that our past screening policy and the attendant funding it generated was not good. The $500 screening fee doesn’t rise to the level of a deal with the devil, but it is time to move on and evolve. Screening has been very effective in accelerating the quality of our national herd. The point is that we must continue to evolve and plan for the future. I think our future will be stronger and last longer without imports.

Prosperity depends on planning the creation of goals and the execution of the plan. If we come together, the future is ours. I hope you agree with me and vote to close our registry.

Reproduced with permission from:

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