When Jim and Sharon Hunstiger began raising alpacas five years ago for retirement income, friends were intrigued -- yet full of silly questions.

"One lady says, 'How are your pachyderms?'" Mr. Hunstiger recalled with a laugh. "My mother referred to them as emus."

A mechanical engineer even asked if they planned to sell the alpacas eggs.

For those too embarrassed to admit their ignorance, alpacas are gentle, warm-blooded mammals that resemble small llamas. Raised primarily for their wool, which is among the softest in the world, they give birth anually. They do not lay eggs nor do the South American natives have anything in common with elephants, although friends thought the Hunstigers were nuts for investing in the animals.

"Very few said, 'What a good idea. Wish I'd thought of it,'" he said.

Despite the naysayers, the couple, who live in the southern Summit County community of Franklin Township, is among a growing number of Ohioans who have launched alpaca farms as businesses. David Damm of Lodi, president of the national Alpaca Owners and Breeders Association, estimated that 65% of alpaca owners view the animals as a secondary income source, while the rest farm full time.

According to the Ohio Alpaca Breeders Association, Ohio ranks fourth in the nation in its number of alpaca breeders, and only Washington and Oregon have more alpacas than Ohio. Alpacas also have been exported to Canada and Australia.

Sharon Hunstiger, who serves as secretary of the Ohio Alpaca Breeders Association, said 110 member farms are registered in Ohio, and 200 new owners were added to mailing lists this year. Many farms are clustered around Medina and Summit counties.

Mr. Hunstiger said he and his wife stumbled onto the idea of owning alpacas after seeing them at the 1996 Summit County Fair. The key to making money with alpacas is through a selective breeding process to produce animals with soft, thick wool. Then, the babies are sold to others who want to raise and breed them.

Breeding females generally sell for between $8,000 and $35,000, depending on the quality of the wool. Gelded males range from $500 to $1,500 in price.

With just 28,000 alpacas in the United States, greater value is placed on breeding animals than on the fleece at this point. Each year, animals can produce more than six pounds of fleece, which sells for $25 to $50 per pound. However, owners hope to reach a point when the fleece is superior to that available elsewhere and therefore will be spun to create fine, expensive garments.

The Hunstigers favor the animal because they are maintained easily and for little expense. They generally are clean and don't smell, they eat an eighth of a bale of hay per day (compared to cattle or horses, which eat multiple bales each day) and need very little land. A three-sided barn provides all the shelter they need, even in winter.

"Our two dogs cost us more each year than the alpacas," Mr. Hunstiger said.

Federal and state tax incentives favor farmers, allowing owners to write off any expenses related to the animals - equipment, barns, fencing - and to depreciate the animal for five years. Females can be 100% insured for 3% of their value each year to minimize risk.