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breeding yearlings, change in yearling sales, commercial markets, criteria of yearling selection, fasig-tipton company, hyper-selectivity of yearling buyers, oversupply of yearlings, selling yearlings, yearling sales
The yearling sales in Kentucky are clearly defined as a much improved marketplace over 2009 and 2010. The statistical guidelines show nice percentages of gain over last year’s heinous sales results, and they hold promise for better things in 2012.
Well, it’s about time because that’s about all the good news.
The yearling market is still seriously oversupplied, and the percentage of profitable yearlings is still very low and is fundamentally unhealthy for everyone: breeders, stallion owners, and sales companies.
Not to pummel Fasig-Tipton, which put on a heck of a positive sale with essentially every horse that wanted a new home finding one, but let’s dissect the profit line for their October sale, which concluded a three-day run yesterday.
With an average price of $24,010 and a median of $12,000, the numbers improved massively over the 2010 stats ($13,616 and $5,000), but one must consider expense and profitability even in light of the much improved stats. With a median of $12,000, there is no chance that even half the animals sold made a profit. By the lowest estimates of cost for raising a yearling, a breeder is perched right on the median figure. And probably more if it is raised in Kentucky.
Then there is the cost of the stud fee. And sales expenses that will run between $1,500 and $2,000 per horse.
So the least expensive yearling that could have made a profit brought a hammer price in the neighborhood of $17,000 to $20,000. But a lot of the yearlings commanding that price or higher were also bred on the higher stud fees.
Some of those who probably were profitable around $20k were hips 427 (Sightseeing), 245 (D’Wildcat), 851 (Run Away and Hide) or 56 (Put It Back) because of the lesser cost of the stud fees.
But quite a lot of the yearlings bringing the sales average or less were bred on stud fees equal to or higher than the hammer price for the yearlings.
Now, we are getting to the point of recognition about why this situation is unhealthy for all parties.
Even with an improved sale that was well attended, the difference between profit and loss was not the difference between good horses and poor horses. The issue is the volume of yearlings on the market, and the excess of yearlings creates a hyper-selectivity among buyers.
The average hyper-selective yearling buyer wants a colt that is big enough to be a 2-year-old, even if it scarcely grows between now and next year. The buyer also wants thickly muscled, well-defined, powerful-looking prospects with no comments on the vet report and a sheen or glow to them that attracts the eye.
If a breeder misses any of those markers, he is selling in the no-profit category.
The horses who managed to tick all the boxes, however, did very well at this sale.
Overall, 23 yearlings sold for $100,000 or more at FTK October, a remarkable achievement in contrast to the results from last year’s yearling environment. A bit more than 100 additional horses sold well enough to turn their breeders a profit, taking the price list down into the $40,000 range. Between that level and the $25,000 barrier, profit or loss is too fine to estimate by statistics. The yearlings that cost less to produce in that range made their breeders some level of profit; the rest did not.
This should be viewed as truly horrifying news by stallion owners and managers. From 885 horses through the ring, fewer than a quarter made a profit. How can stallion farms then expect to buy new stallions, collect currently owed fees, or to amortize their own debts?
The results offer stern indicators to breeders. In no uncertain terms, the dictum is CULL!
If a breeder’s program isn’t producing big, very strong, very well-balanced and athletic yearlings, the place to start changing is with the elimination of producers that do not meet those criteria.
The more positive news is that Fasig-Tipton has managed to make its October sale something of a hybrid between the Keeneland September books 3 and 5, with very nice yearlings that everyone wants and few can afford, along with an oversupply of average to good yearlings that are only infrequently capable of bringing a profit.
bloodstock in the bluegrass 
+Lots of things to ponder here. But despite over supply do we not also see some short fields on HRTV and TVG? A $50 a day training fee at the track applies to a horse bought for $5,000 as well as one bought for $150,000. And if the $5,000 horse ships to a $30 a day trainer at a lesser track it’s still a fixed overhead that has to be met with smaller, sometimes much smaller purses. No wonder some smaller tracks have trainers who mostly own their own livestock.
If culling is needed, then breeders need to face reality on more than mare qualilty and stop paying such high stud fees. Withhold money until fees deflate to more realist market levels. Or form co-ops and buy promising sires and breed their mares to just their own studs to control costs. Or buy shares and only use their shares,, buying mares to match the stud they have interests in.
As for mare quality I see in the sales results a mare prospect that had won $118,000 at the track sold for $1,000 at a Texas sale, about the same price a winless or unraced mare will bring. Studies show racing class in the dam holds up pretty well in overall production quality…. though the variances of course keep the specculative alchemist breeders in the game too with occasional surprises.
We all saw the nearly instant collapse of Windfields after Northern Dancer left the breeding shed. Sure, age of the owners was a factor, but there was no accumulated wealth to keep the enterprise going in successor hands? (Most of us should remember the Blood Horse analysis that the Northern Dancers averaged $50,000 overall, well below purchase prices. So earning back your investment has always been a challenge at all levels, though the Dancers usually had some residual value and maybe the dominance of the line now in graded stakes is as much the result of having to breed to the Dancer line to get your money back, ignoring Man o’ War and Polynesian and Hyperion lines over time…. the same way the Denver Broncos have to use Tebow now instead of less costly but more conventional quarterbacks because they have so much franchise money invested in him and have to use it to see if they can get something back.
Back on track, the sport of kings may have to devolve back to the sport of kings and moguls, and not so much a sport of business. Or have the business side devolve to mostly breed to race, which will force the business plan to control costs at every step of the process.
The bottom line is that the articlle complains not enough people are making enough money off the horses…. when originally it was primarily a sport for mostly the rich who were not desperate to recover costs and with fewer professional breeding farms on the margins like the Spendthrifts and Hamburgs and Claibornes who had insight and less competition…. and Claiborne has lasted and lasted with some ups and downs and thrills and heartbreaks.
How did Mereworth Farm stay in business year after year years ago selling to the mostly medium price market as I recall. Can’t recall if Mereworth traced back to the Great Depression, but it lasted through many business cycles. Didn;t the unlucky breeder of Lil E T put out a lot of money and he came up with lightning in a bottle, that he sold for $1,100?
I Am not an expert, not a good handicapper, but owned pieces of horses over the years and from the viewpoint of the sport, was unsuccesful in trying to add a few more marginal horses to the pool via breeding. So I am not a cause of the problem, though I could have been. Thoroughbreds are seductive to so many who come in contact with them.
Short fields are caused mostly by horses racing every four to eight weeks, or less. There are tons of racers available, just not filling the starting gate.
Perhaps some gentle readers will kindly enlighten us about some of the details regarding Mereworth and Windfields. Very different operations but also both largely responsible to a single, highly motivated and highly competitive individual who had serious cash flow from other interests.
I can only point to the observation, this blog, 17 Jan 11. Those of us too stubborn to do our accounting should hire a bookkeeper. Whether this is part of a cycle or a permanent correction of the market, a smart farmer would use the opportunity to cull to the bone and upgrade to proven marketable stock.
How many of these buyers at fasig tipton will turn a profit? I hear that the breeders are all going broke. Stud fees to high, production cost, sky high. BUT WHAT ABOUT THE PEOPLE THAT FORK OVER 20000.00 FOR A YEARLING/ what is their chance by the numbers to hit a nice horse? Buying a horse for 20000.00 is just the start of the bleeding. 65.00 per day in ocala , 2000.00 per month for six months, then send to racetrack, 3000.00 per month. By the time you have your first start, you have 40 k in one horse. What are the %s that you will have a horse win 40 k in the first yr? Not very good, thats why you sell them as breeders, and choose not to race them.
Buyers and sellers both have bills. The days of walking over there with a donkey and getting 50 k are over, no matter what the stud fee is. Stop paying this crazy amount for these stallion fees. To pay more than 10 k is insane. If everyone felt this way the stud fees would come down in a hurry. Dubai has more than enough money. Why help the wealthy become more wealthy at your peril. I like badge of silver, henny hughes, roman ruler, el correodor, . Would it not be great if you owned these stallions. No stud fees. But one would have had to have retained ownership and raced them, and that is risky and costly.
And the surest way to improve the economics of racing a horse is better purses, right? They seem to be trending the right way, except in Kentucky. So let’s dis-elect David Williams, who has made himself the number one obstacle to improving purses in Kentucky through slots legislation.
Except purses go up, and then breeding fees go up, and then purchase prices go up, and stable costs go up…. and then still no one makes money. If purses fell, then breeders and buyers and owners might try hard to make costs fall even faster.
If racing is going to be a business instead of a sport, then the cost of the whole infrastructure has to come down. If racnig is just going to be a sport as it started out, then costs are immaterial. As would be purses.
Williams is out, bank on it. But when the purses go up the big trainers will double their stock. The big owners r not interested for the most part in the type of horses that you breed. They could care less about 5-5 to bourtai. They will look down their noses at yearlings out of old mares. They will all be looking for strong first dams by the best stallions. The big purses will polarize this game even more. It will make me a spectator and not a player. I will not be able to afford the babies that lexington will be breeding. I was sad about fasig tipton and the prices. It has always been a place where a poor guy could go and have a shot to buy a yearling for 5000.00 and have a shot. At this past sale for 5k all you could buy were donkeys. Now I have to resort to sight handicapping to earn a living. One group , on the way up, the other on the way down. For me Williams was a help. He kept the price down of what I wanted, yearlings.
My sense of FT October was that there were a lot of bargains still to be had. Going against the grain, the horses without the brand-name sire, with an unimportant vet comment that knocked $10k or more off their value, or with just an average prep that kept them from shining so much as the top 100 was the way to find some real value for racing stock.
Frank,
Thanks for your down-to-earth analysis of the yearling market. The auction houses are striving to present us with the theme that everything ‘s coming up roses. Reality is, except in one or two gardens, the roses did not bloom this year
Somehow my previous comment was shuffled in the chronology.
No matter.
Carlingford Castle (someone from Antrim ?) has neatly summed-up the situation in his last paragraph.
Rob Whiteley has written another sobering article in today’s TDN. It is recommended reading.
Moron: You missed a nice colt of mine at F-T. $12,500 Stud Fee o/o a half to a stakes winner – SOLD $2,000 !
I do wish every Kentucky voter would wake up to reality about Williams. As a senator, he represents a constituency that regards gambling of any type as sinful (Stock Market excepted). An attitude similar to that of the Taliban in Afghanistan. As Governor he would not be beholden to them. Apart from that, he sincerely feels the TB business will not be saved by being a dependent on casinos. Too easy for casinos to castoff racing as an undesireable dependent. Many agree with him on that point.
Beshear has not kept his promise to the casino advocates. Moreover, his appointees and retainees at KHRC have given Kentucky a bad name.
It is about time all incumbents were tossed out. However a vote for GG would be wasted. We need a change and we cannot do worse with Williams.
Ancestor from County Down, south of Belfast, Greencastle, but not the Greencastle with the castle. Kept trying to post as Swaps but someone else uses it too.
The Whitely essay referred to is here
Click to access rob_whiteley-Part-2.pdf
He really points out the stud fee component of the problem. But his list of suggested stud fees based on median yearling averages – the break point for a breeder to have a 50 – 50 chance to break even is eye opening. Elusive Quality would come down a tad. But some syndicates are asked to take steep haircuts.
Giant’s Causeway, cut 55 percent suggested.
Medaglia d’oro 70 percent cut
Unbridled Song cut 50 percent
Elusive Quality cut about 70 percent.
etc etc. The full list is really inflammatory in what it suggests should be done.
(A more telling analysis might look at the top 50 stallions and compare stud fees with not what the foals sell for but for the earnings of the median horse. Then factor in three years of breaking and training and boarding and vet bills and transportation….. and see how much more fees should come down so more would stop selling and breed to race, a more accurate feel for the health of what should be a sport first and a business second.)
The whole point of modern racing is make a lot in a little amount of time of a horse that has curb appeal. Thus the six start wonders that burst on the scene and then quickly retire to the breeding shed due to injury or to avoid injury or to avoid image shattering losses as the race career extends.
If a syndicate has a hot horse it will charge as much as it can for as long as it can….it’s all about money and not sport. Cheap fiat money from the banks allowed commercial breeders and second mortgage speculators to borrow what was needed to meet the demanded stud fees from the syndicates and owners. Cheap fiat money only creates the illusion of richness and prosperity for the hustlers who have to live off the speculation surrounding the breeding “business”.
Whitely points out though that the stallion owners’ greed now will devastate the breeding base over the next two years…. and then I add the syndicates can jack up fees all they want… but there will be far fewer mares around to book.
But assume the top level books will still book 125 mares and thus these stalliions will become even more concentrated in the gene pool as the overall foal crop plummets.
The prospects are bleak in many respects for both mare owners and stallion owners. The latter simply MUST not buy stallion prospects for irrational sums because that commits them to standing the horse for $XX or standing the horse as a public service. Egads!
Mare owners simply MUST not pay more for stallion services than the marketplace will reasonably offer.
Oh my! oh my! This could become a conundrum.
But if both groups hold the line at reason and probable expense to profit ratios, they will benefit EACH OTHER, as well as THEMSELVES.
There was a comment requiring moderator’s approval (first time post), and that’s why your previous comment was reordered by the omniscient computer at WordPress.
I think Mr. Whitely is an interesting writer, but the article could have been condensed to the following. Dear stallion owners, please, please reduce the stud fees so I can make some money or some more money. You guys are killing me with these high fees. I would love to see Mr. Whitely breed all of his mares to 7500.00 horses. Chances are he would fare just as well. The stallions genetic material would not be so diluted from 300 covers. Majestic Perfection is the fastest horse I have ever seen. But a horse of few races.
I looked up Majestic Perfection, a horse I never heard of out here in the sticks of Colorado. Wow He was fast. and he raced six times at four, won five including one Saratoga Stakes. then retired.
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That is one of my points. The modern TB has an abbreviated career and the cognescenti can sort out good potential sires – his fee by the way is a greedy 10K in my opinion. But to boost racing and generate passion the casual fans and public will have to be aware of high octane horses that race often over extended periods of time.
Swaps ran six times at Hollywood park just his four year old year, setting track, American and world each time he ran, except for his lone loss to Porterhouse by a nose. And even that helps the drama and reputation of the sport.
Bupers ran something like 20 times at 2 with a bad back, winning the Futurity in one of those starts. A flukey up and down horse, but the kind of horse that at least register in people’s minds. Secretariat ran 10 times at 2 and 11 times at three, or the other way around, but anyway despite occasional losses he ended up on Time magazine and Sports Illustrated covers. majestic perfection did not.
I did not intend to say that as foal crops fall and top sires continue to cover big books that the breed would be diluted. But the laws of math shows that the big books for a few sires as crops sizes fail will mean further concentration of the gene pool, less there for outcrossing and correcting what might be a latent disastrous gene. for the breed.
Note how one big sire, Impressive, affected the Quarter Horse breed:
Dominant. Genetic mutation of sodium channel in muscle membranes that results in zero to severe muscle symptoms and possible death from heart failure. All affected horses trace back to the Quarter Horse Stallion “Impressive.” AQHA registered horses have a designation of N/N for normal, H/N for single gene and H/H for both mutated genes on the registration papers. Prevent HYPP by testing all Impressive-bred horses and not breeding horses with H/N or H/H designation. Management of affected horses is possible with medication from a veterinarian and/or carefully balanced low-potassium rations.
close quote the quote was taken from here
http://www.admani.com/AllianceEquine/TechBulletins/InheritanceOfGeneticDisorders.htm
Impressive was the big horse for show people to breed to and they did in droves…..
A note of caution about what can unintentionally happen.
If we hold the line at paying a third of the median yearling price for stud fees, that is about what stallions are worth. For most stallions that is going to be less than $5,000. Perhaps a lot less. Depends on the horse.
Carlingford , the majestic perfection horse is also offset in one front. The 10 k , maybe too high. But if you led one over to the back ring at keeneland and they have that quarter horse meat hanging on them, the pinhookers will trip over their skoal cans to get to them. 1/8 sub 10, 1/4 sub 21. He has that meaty sprinter look. When he won at the spa, he sprinted from the gate like freaky at los alamitos, and never looked back. Just a thought.
A brief discussion with a horse science professor here in the Nashville basin indicated 5 to 10 K less to raise a yearling outside of Kentucky. What the penalty in quality of care and sale price is, I couldn’t say.
Farm livestock breeders retreated from “that quarter horse meat hanging on them” because that stock couldn’t stay sound on hard surfaces despite being unraced. See any trends here?
The blog is about the market, not soundness. At the fasig sale a dixie union colt sold for above 200 k. He looked as a qhorse. He was muscled, shiny, tall, energetic, he put on a show. What will he end up as , who knows? I would think majestic perfection would have been this type as a yearling. A pinhooker will sell him early 12 and more than likely if Matz does well and this colt can run, he will bring half million. With this type of body it will be hard for the pinhooker to exhaust this colt and hurt him. He wont feel the rider for an 1/8 of a mile. I do agree that heavily muscled horses have soundness and distance limits. But the markets goes crazy when they show up with clean vet report.
You got it! The “look” plus a vet report with no comments is the ticket to a good sale. Extra shiny helps!
Sorry Mo, being a working stiff, I always figure breeders better able to influence production cost than to sway a bidder.
I would love to see a blog on the education of buyers on the minutia of the formula. Some of you proven guys, opening up, helping the folks with questions that keep them from investing. It seems like anymore if you want an opinion , everywhere you look , they want 800.00. Help a guy for free to make money. After he is loaded, then charge him or her. There is enough brainpower on this blog to start a syndicate. I will put in the first 500.00. Syndicate name, Blogpowerequine.com . Do not be sorry I have enjoyed this blog. Jim
Being a total outsider gives me perspective, most of it dense. It escaped me that you can “cull” other breeders stallions right now, I somehow failed to see it as culling.
This is my only chance in several days to read this column.
Moron’s proposal to form a syndicate caught my attention. The Consignors and Breeders Group has published several booklets on buying. I believe Frank Mitchell wrote or edited the booklets. Perhaps they do not serve what you have in mind – check with Frank.
No need to check with any one about how to buy a horse. Just write out a check. The concern is the right horse. If you write out a check for a fast one, everything else falls in place. I did not know a book had been written on horse buying. The guide I am thinking of , basically gives names of yearlings that were bought with vet issues, that went on and performed well. The guide basically was, do not worry about vet issues, just look at the great performers with chips, fractures , avulsions, ocds, bone cysts, throat problems, bowed tendons, slab fractures, dont worry, just buy, even if the mare is 26 yrs old when she had the foal. When there is money on the line , people get very intelluctual. In this game , better lucky , than smart.
If you show a proposal to more than ten people or whatever, you have to have a prospectus that details all the risks. And you may have to qualify the investors so they can’t come back on you for losing their life;s savings if it was only $500. Although the way the federal rgevernment doesn’t regulate anything = one of the causes of our ecomomic disaster – maybe there is no need to worry.