By JOHN O'CONNELL

Capital Press

Cheryl Smith admits she bought her first alpacas because she thought they were cute.

The Rigby, Idaho, woman, however, now works full-time in the alpaca business. Alpacas -- long-necked, deer-sized members of the same family as camels and llamas -- are raised for their fleeces. Owners boast the material is hypoallergenic, isn't itchy and is warmer than sheep's wool.

Like many operators of small alpaca herds, she opened a shop stocked with her own products, finding at her scale, it's most profitable to sell fiber directly to customers.

Paintbrush Alpacas Country Boutique, based in her home, has been in business since 2006. She sends fiber from her 26 animals to a Salt Lake City mill, where it's processed into yarn and felt robing, selling both materials and her own handmade products. She pools some fiber with a cooperative for sock production. She's sent fiber to a mill in Pendleton, Ore., where it's made into blankets she can buy at a discount. Customers can also take home alpaca stuffed animals and alpaca Monopoly.

She opened the store to expose people to alpaca products. It now generates enough revenue to cover her feed costs -- most of her profits come from breeding animals for sale to other herds, or people seeking unusual pets.

"They're just the neatest animals ever -- intelligent, gentle, loving, curious -- I can't imagine not having them," Smith said.

Alpacas have dropped dramatically in price since Londa and Jody Palmer entered the business six years ago, after reading an article in a hobby farming magazine. Back then, a single alpaca sold for about $15,000. The cost of a typical animal is now closer to $4,000.

The fiber market has also softened. At the gift shop located in the motel she owns in Lava Hot Springs, the Alpaca Inn, Londa sells raw fiber for $3 per ounce and yarn for $16 per 250-yard skein. Members of the local spinners guild buy the fiber directly and create their own yarn.

Her sister-in-law and cousin help knit hats and scarves. Gloves and blankets are also top sellers. Most of Londa's friends in the alpaca industry have similar shops.

"A lot of them sell on a website, or they have a little shop in their house or their barn," she said.

A Texas mill produces rugs for Londa's store. Yarn and other craft materials are processed in Salt Lake City.

"We don't have enough alpacas in the U.S. for big mills. We need more and more alpacas. It will happen, but we rely on the little mills for now," said Londa, who has 25 alpacas.

Chuck Mowery, a member of the Pacific Northwest Alpaca Association from Oroville, Wash., started his herd two years ago.

"We're still struggling with what we're going to do with the fiber, sell it in bulk or have it turned into yarn and sell that," Mowery said. "The problem is there's not a lot of places that refine the wool. They charge a lot. You don't get a lot of return on it."

Regardless of the product, he intends to sell it in his own small store. They now have 18 alpacas on their 20-acre ranch in eastern Washington.