At the fine blog Hangin’ with Haskin, owner Paul Reddam has a guest post about his decision to sell Kentucky Derby and Preakness Stakes winner I’ll Have Another to Big Red Farm in Japan.
This is one of the great beauties of the internet and the advent of blogs because the man who made the decision has a forum to express himself directly, and he makes a persuasive and illuminating explanation of his decisions.
It’s even more interesting to me because Reddam’s decision was made in the nexus of other decisions, largely here in Kentucky, about the potential of I’ll Have Another as a stallion prospect.
Reddam writes: “There might have been a lot of talk behind the scenes, but there were only two written offers from American farms, one for 3 million dollars and the other for 2.5 million for half of the rights plus 9 lifetime breeding rights, which puts his value at a little less than 5 million.”
I know there was a lot of talk behind the scenes because I listened to it, and it was no surprise to those who watch racing and breeding daily and who have an understanding of the economics of maintaining a breeding operation that I’ll Have Another would not be a big ticket in the Bluegrass.
He simply was not made that way.
As a yearling, I’ll Have Another sold for only $11,000, and then as a 2yo, he brought only $35,000. Clearly, as a younger horse he was immature, backward, not a “special” prospect that could underwrite huge expenditures that breeders, farm owners, consignors, and others involved in breeding have to undertake to create the next generation of racehorses.
In fact, as Japanese-based breeder Harry Sweeney has said, “The only racing jurisdiction that fully justifies the cost of producing racehorses is Japan.” Sweeney, an Irish-bred veterinarian and horse breeder, is a pragmatist by nature and by the very serious reality that if you don’t make money when you are breeding horses, you starve. Even worse, your horses starve too.
Today, the only part of American breeding that fully justifies its cost of production is the subset of big, robustly made, highly progressive stock that will show speed and early racing ability.
If you don’t believe that is either the right attitude for breeders to take or a correct assessment of the situation, the gentle reader is welcome to buy a dozen mares or two and find out in person.
The situation in Japan is much different. Racing is very tightly regulated by the government bureaus tasked with that duty, and the operations that are licensed to breed or to race have the opportunity to prosper at a rational level … perhaps better.
As a result of this difference, Reddam noted that, “By contrast the offer from Big Red in Japan was 10 million, with another farm bidding just under that. For further contrast, Bodemeister’s rights recently purportedly sold for about 13 million in America.”
How could two horses of nearly equal excellence illustrate the differences of physical type and racing potential or aptitude more effectively?
Reddam answers the emotional question also:
Still, if I loved IHA so much, how could I take the Big Red offer instead of keeping the horse in partnership with a farm in America?
Well, certainly greed has something to do with it. Being that the one offer was four times higher in cash than the best offer here meant that I couldn’t rationalize not selling him overseas. Beyond that however, it should be said that the American offer anticipated a stud fee of $17,500 to $20,000, which means that he wouldn’t get the best mares and thus wouldn’t be given the best chance to succeed as a stallion. In contrast, the Big Red offer means that he will get a much better book of mares, and thus be given a higher chance for success.
Even the emotional decision hinges on the economics of breeding. And why is that so? Because emotion will carry a horse or a breeding project only so far. As breeders and investors found with Flower Alley, the sire of I’ll Have Another, if a stallion doesn’t produce the type of young prospects that buyers want, there is no demand for his yearlings, then there is no demand to breed to him, and his stud fee must be set lower — much lower.
When Flower Alley went to stud, his fee was $25,000. That’s the cost of the breeding that produced I’ll Have Another. The seasons this spring were available for $3,500 live foal, with some selling later in the year for the full advertised price of $7,500.
Economics determine our decisions to a degree that most of us do not appreciate, and they are at the base of nearly all things in breeding and raising livestock.