The auctions that are put on by the big alpaca farms are still doing well. You are buying the farm name more than anything, just so you can say, "this alpaca is from Snowmass (or whoever)." The alpaca auctions that are put on by smaller alpaca breeders don't do as well as the large farms but better than the the regular livestock auctions.
The alpaca that was sold for $650,000 at Snowmass was bought by another alpaca breeder who has very deep pockets and probably needed a really good writeoff. There are still some wealthy people out there and some of them are in the alpaca business.
You can eat alpaca, it just isn't generally practiced. They are still mainly for their fiber. The biggest moneymaker was selling the offspring but with this economy, you have to be willing to sell at lower prices. If you bought when the market was high, then unfortunately, it is going to take longer to get your money out of it. If you want to get into alpacas, now is the time while prices are low and you can get some extremely good quality animals for a much lower price. You just have to go to the smaller farms and look around.