i’ll have another and the pragmatism of breeding thoroughbreds

Tags

breeding thoroughbreds, economics of breeding, harry sweeney, i'll have another, paul reddam

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.

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kentucky derby winner shows it’s ‘all in the family’

Tags

arch, arch's gal edith, claiborne farm, classic winner, distorted humor, economics of breeding, flower alley, harvey clarke, i'll have another, Kentucky Derby, Rob Whiteley, steve shahinian, three chimneys farm

The following post first appeared earlier this week at Paulick Report.

Winning a classic puts the shine on any pedigree, but the luster from I’ll Have Another’s success in Saturday’s Grade 1 Kentucky Derby at Churchill Downs could not have come at a more opportune time for the colt’s sire, the young stallion Flower Alley, whose second crop are now 3-year-olds.

From the third crop by leading sire Distorted Humor, Flower Alley followed his sire’s classic winner, champion Funny Cide, and second-crop star, multiple G1-winner Commentator, but was the first top-class son of Distorted Humor who was a colt and could go to stud. Now, Flower Alley is the first son of Distorted Humor to sire a classic winner.

The chestnut son of Distorted Humor hit his greatest stroke on the racetrack with victory in the G1 Travers Stakes, and on the basis of that and other good form, he went to stud at Three Chimneys Farm for an initial stud fee of $25,000 live foal.

I’ll Have Another was one of 73 live foals bred on that stud fee from covers of 2008 (in the midst of the world economic crash) that were born in 2009, and the economic nail through Flower Alley’s coffin came the following year at the 2010 yearling sales when 39 yearlings – more than half his second crop – sold for an average of $15,674 and a median price of $11,000.

In one of the ironies of sales statistics and racing lore, I’ll Have Another was the median Flower Alley yearling at the sales. On the track, he has proven something entirely different.

So, for many breeders and observers, it’s a puzzle why Flower Alley’s stock was not better received at the sales.

Rob Whiteley of Liberation Farm bred a number of mares to the stallion from the beginning of his stud career and confesses to being puzzled also. He said, “The sales market is a mysterious thing and is often disconnected from the racetrack and from racing performance. The sales market is driven by word of mouth and hearsay from opinion-makers who often have their own agendas, and rather than cherishing a commitment to facts, seem to look through lenses that do not reflect reality. The one fact about the market that I’ve observed over 40 years is that it’s usually wrong. And breeders and buyers that didn’t line up for Flower Alley sure missed the boat. He earned my full respect when he defeated Grade 1 racehorses like Bellamy Road and Roman Ruler in the Travers, then ran second to Saint Liam in the Breeders’ Cup Classic. Now he looks ready to take off with G1 winner Lilacs and Lace in his first crop and with the Kentucky Derby winner in his second crop.”

In contrast to the later reception of his yearlings at auction, the tall and scopy stallion found interest from breeders in his initial books, and among the promising young mares attracted to Flower Alley’s second season at stud was the dam of I’ll Have Another, Arch’s Gal Edith, a reference to the wife of television character Archie Bunker.

Steve Shahinian, adviser to breeder Harvey Clarke, said that “Freddie Seitz from Brookdale Farm suggested the mating of Flower Alley for Arch’s Gal Edith that produced I’ll Have Another. If you couldn’t breed to Distorted Humor, you could breed to Flower Alley, and he’s a horse who could go a classic distance, which we wanted.”

The dam of I’ll Have Another was always a well-intended young prospect. By the good sire Arch, whose most famous offspring is champion Blame, Arch’s Gal Edith made only one start, winning a maiden special at Belmont by three-quarters of a length in 1:11.58 for six furlongs.

Said Shahinian: “We thought a lot of this filly. I believed she was stakes caliber, and she trained like it.”

She had been lightly raced by chance, but not precisely from unsoundness. The filly showed enough ability at the sales of 2-year-olds in training to sell for $80,000 but, once sent to the trainer, fractured a hock from kicking the wall of her stall. Then after winning her maiden, she developed a small chip in an ankle, and the surgery to clean it out did not resolve smoothly, necessitating retirement.

Although the oddities of chance intervened in what promised to be a good racing career, Arch’s Gal Edith has produced three good winners from her first three foals, and the Kentucky Derby winner is her first black-type horse.

Breeder Clarke still has the mare and has a 2-year-old Tapit filly out of the mare named Gloria S, a reference to the daughter of Archie and Edith Bunker. Arch’s Gal Edith was given the following year off after foaling the Tapit, and earlier this year had a Midnight Lute foal that did not survive a difficult delivery. The mare was bred back to champion Gio Ponti about a week ago.

The sire of Arch’s Gal Edith is the Claiborne Farm stallion Arch, and stepping back a generation on the bottom and two generations on the top, this is a very Claiborne pedigree, as both champion juvenile Forty Niner (sire of Distorted Humor), second in the 1988 Kentucky Derby, and major winner Arch raced for the Hancock family’s Bourbon County operation.

Whereas Forty Niner was a homebred who became a champion and leading sire, Arch was purchased by Seth Hancock at the Keeneland July select yearling sale as a racing and stallion prospect who could offer some bloodlines and aptitude that would suit Claiborne well if the robust colt proved himself the real thing on the racetrack.

Arch was more than capable as a racer, winning the G1 Super Derby at 10 furlongs, and he has been increasingly successful as a sire. From the rather stout male line of Hail to Reason, English Derby winner Roberto, and his son leading sire Kris S., Arch tends to get stock that mature well and show their best form going a mile or more. In amongst ’em, however, Arch will get some speedier animals, such as the European G1 sprint winner Les Arcs, as well as the more typical Alabama winner Pine Island, Donn Handicap winner Hymn Book, Pan American winner Newsdad, and Arkansas Derby winner Archarcharch.

This mating, in general terms, is a matching of speed with stamina, sturdiness with brilliance, and natural athleticism with perseverance. As I’ll Have Another showed through the stretch of the Derby on Saturday, he came to play with the right stuff.

lean times making some changes in the stallion market

Tags

b wayne hughes, bernie sams, breeding rights in stallions, claiborne farm, economics of breeding, ned toffey, spendthrift farm, stallion syndication

The following post first appeared earlier this week at Paulick Report.

The retrenchment in the bloodstock markets resulting from the world economic depression touched all segments of Thoroughbred breeding, even the relatively insulated stallion market.

Not only have stallion prospects been harder to sell in the prevailing economic situation, but stallion farms have had to make cuts in fees and services, a few have adopted different practices to fit the changing economics, and some are even rumored to be precipitously on the edge of default.

The number of new stallions coming to stud has declined significantly, and the prices paid for them have had to decline because farms could not easily stand horses at high fees when prices for yearlings and mares were in a headlong decline.

Whereas just a few years ago, the premium stallion prospects were selling for tens of millions and going to stud for $100,000 or thereabouts, the priciest prospect this year is Uncle Mo (by Indian Charlie), who will enter stud at Coolmore’s Kentucky farm, Ashford, for a fee of $35,000.

The second-highest stud fee this year is $25,000 for Tizway (by Tiznow), who will stand at the Spendthrift Farm of B. Wayne Hughes. Spendthrift has retired more stallions the past few years than any other Kentucky farm, and a significant part of their ability to find breeders to use their stallions in a down market is a program called “Share the Upside” that allows breeders to earn a breeding right in stallions by the purchase of a set number of seasons to the horse.

Rob Whiteley, owner of Liberation Farm and co-breeder of Belmont Stakes winner Ruler on Ice, said that “I give B. Wayne Hughes and his staff at Spendthrift a lot of credit for their innovative thinking. The concept of stallion owners seeing breeders as partners in the success of their stallions and rewarding them accordingly is a long overdue and welcome idea. This approach benefits both sides and builds better relationships and a stronger industry over time.”

Ned Toffey, general manager at Spendthrift, said, “Mr. Hughes feels strongly that we have to offer value and take care of our breeders, especially small breeders. If we are charging as much as we can for stud fees, people are going to go elsewhere after the first or second year to minimize their financial risk. Without breeders, our stallions won’t have a chance to make it. What works for us also works for the breeders. Making this program affordable and something that is attractive to breeders will bring our customers back to breed year after year and instill some loyalty to the operation.”

The purchase of breeding rights, which are not equity in a stallion but are rights of use to him, is a distinct variation on the syndicate shares in stallions that became popular in the 1940s through the early 1980s but have generally fallen out of use since.

Recently, however, some farms have been having luck with their syndicated stallions and attracting attention to this method of sharing risk in a stallion prospect.

Bernie Sams of Claiborne Farm said, “We’ve been lucky. But, overall, I think owning shares has more to do with the farm that’s managing the stallion than anything. It’s about accessibility to the stallion.

“Especially with the less-expensive stallions, syndicates work well to give you a group of people out there talking about the horse, who are fans of the horse and want to help the horse succeed.”

Both stallion shares and breeding rights offer continuing rights of access to a stallion, which is only of continuing significance if the prospect becomes a success. But in the past 20 years, interest in that right of access has eroded, particularly among commercial breeders, as stallion farms, led by Coolmore’s various stallion operations, as well as those of Darley, have bought stallion prospects for very high prices, kept the entirety of the horses, sold as many seasons as possible, and let the chips fall.

Overall, this has proven a highly profitable commercial model for the stallion farms, but it has proven less so for the majority of breeders, and in this contracting marketplace, many breeders are selecting stallions for their management, as well as for their bloodlines and commercial appeal.

temple city: new ky stallions for 2011

Tags

breeding rights, dynaformer, economics of breeding, seasons and shares, spendthrift farm, stallion ownership, syndication, temple city

Temple City (2005 b by Dynaformer x Curriculum, by Danzig)

Spendthrift $5,000

A handsome and sizable individual by the noted Roberto stallion Dynaformer, Temple City has proven one of the most heavily patronized stallions in the Bluegrass this year.

In addition to being out of a half-sister to the fine stallion Malibu Moon, Temple City also has benefited from the offering of lifetime breeding rights in the horse for those who buy a season. (For more information on the program at Spendthrift, see this post.)

The program proved so popular for Temple City, in fact, that the decision makers at Spendthrift increased the number of breeding rights offered to breeders because of the demand.

It will be most interesting to see how programs such as this work out in the coming years, as farms that already own a stallion prospect (as was the case with Temple City) have much greater leeway in offering incentives to breeders and making special offerings for their participation in stallions.

Given the finances of the industry as a whole, some pattern of business will emerge as the preferred way of doing business, and at present, the tendency among many breeders is to shy away from stallions who are wholly owned by farms.

Whether the economic interests of all parties will intersect in old-style syndications with limits on total seasons available for use, lifetime breeding rights with no recurring expenses, or another format will be crucial to the long-term welfare of breeders.

And one thing is certain. The present system of virtually unlimited use, oversupply at every level, and uneconomic pricing is killing us all.

rumblings from the trenches

Tags

changing economics, contraction of the marketplace, economics of breeding, kentucky stallions, reduction of stallion books, smaller books of mares, thoroughbred breeding

Aside from the top 20 or so Kentucky stallions, books are not filling briskly in the stallion ranks of the Bluegrass.

According to sources around the region, this phenomenon began earlier this year during the 2010 breeding season, with some very nice stallions just below the “commercial elite” finding little traction with breeders.

This situation apparently has accelerated for the prospective 2011 season.

Stallion managers are making calls. Owners and syndicates are being polled, and from the evidence so far, it looks like quite a few mares are gone from the Kentucky breeding pool. This was the obvious lesson of the past couple of sales cycles, in which buyers from abroad and from regional domestic markets took home hundreds of mares and broodmare prospects.

The repercussions from the contraction of the Kentucky broodmare pool are varied. Many farms have already felt the contraction as a notable shrinking of their boarding business, and those farms have had to correspondingly reduce their business with vets, builders, fencing companies, farriers, van companies, insurance, restaurants, advertising, staff, and on and on.

Fewer mares, less income, lower profit margins, and a more restrictive yearling environment are making seasons a tough sell.

This could get really tough by March, one stallion manager has suggested. Much depends upon the behavior of regional breeders. If they send a sizable volume of mares to Kentucky to breed, that may soften the blow, but it will not change the direction the wind is blowing.

who wants the breeding industry?

Tags

breeding in kentucky, breeding thoroughbreds, e dubai, economics of breeding, economics of racing, graded stakes, horse chestnut, smart strike, stallion population dat, stallions in kentucky, yankee gentleman

The post following was published earlier this week at Paulick Report.

 

There were four graded stakes this weekend, and all four winners were produced from covers to stallions standing in Kentucky … at that time.

But three of the four stallions are now gone. E Dubai’s son Aggie Engineer won the Grade 3 Native Diver at Hollywood, and E Dubai now stands at Ghost Ridge Farm in Pennsylvania. Yankee Gentleman’s daughter Washington Bridge won the G2 Bayakoa at Hollywood, and he now stands at La Mesa Stallions in Louisiana. Horse Chestnut’s daughter Askbut I Won’ttell won the G3 My Charmer at Calder, and he now stands at Drakenstein Farm in South Africa.

Smart Strike’s son Twilight Meteor won the G3 Tropical Turf Handicap at Calder. Of this quartet of stallions, only Smart Strike is still standing in Kentucky, and as a leading North American sire and as the sire of Horse of the Year Curlin, Smart Strike “ain’t going nowhere” to paraphrase Col. Phil Chinn.

Standing for $75,000 live foal at Lane’s End Farm, Smart Strike is the most commercial and most successful of the stallions above. The rest of the sires of this weekend’s graded stakes winners, however, were not bad stallions. They got winners and good stakes winners.

The primary difficulty for stallions and stallion managers in Kentucky is not that some horses succeed and others fail. The problem is that there isn’t enough market strength to support stallions just a hair below the top of the tree.

If a stallion in Kentucky doesn’t make it big and make it fast, the writing is on the wall, and he will have to find another home. And the pricing and breadth of the commercial stallion market drives the profitability of the horse business overall.

Looking back on this most profitable sector of horse breeding, there are trends over the past few decades that should worry not only breeders and farm owners but also all businesses, local governments, and even the legislators of Nowhereville (sometimes called Frankfort).

As a result of adverse economic pressure, the stallion population in Kentucky has been declining for 20 years. In 1991, the first year for which the Jockey Club Fact Book lists data for stallions and mares bred in Kentucky, 499 stallions in the Commonwealth covered 14,595 mares, which represented 21.5 percent of the North American Thoroughbred population.

In 2001, 449 stallions covered 20,281 mares, which were 32.2 percent of the NA breeding population.

In 2010, using the most current numbers from the Jockey Club, only 271 remaining Kentucky stallions covered 17,085 mares.

During this 20-year span of statistics, the number of Kentucky stallions has declined by 45.7 percent. Those stallions are covering more mares, in line with the expanding stallion books of this period, but those mares covered in Kentucky are producing fewer foals in the Commonwealth.

That means there are three factors all exerting greater pressure on breeding in the Bluegrass. First there are fewer Kentucky stallions to use, then there are fewer resident mares, and finally, a significant part of the cause is that there are more state-incentivized breeding programs in competition with Kentucky that offer more money for less risk.

As one prominent Louisiana breeder said, “I’d be fool to let a mare drop a foal in Kentucky, where there isn’t any breeder money. I have to bring them all back here to foal because they earn me 22 percent of any purse money they win for finishing one-two-three. You breed a handful of decent runners, and you’re into six figures by June.”

Furthermore, most of these “regional” programs offer bonuses for owners who stand stallions in their states.

So, if a stallion is doing well in Kentucky but not well enough to make a lot of money by selling dozens of seasons and getting strong returns at the yearling sales, he is a likely prospect to relocate to a regional market where the incentives are sizable.

A similar but more dramatic change of circumstances has happened to the Standardbred breeders in Kentucky. Although not quite as dominant as Kentucky’s Thoroughbred farms, Standardbred breeding was significant in the Bluegrass, once upon a time.

In 1984, 95 Standardbred stallions covered 2,270 mares in Kentucky, and only 18 years later, 30 stallions bred 680 mares in the Commonwealth. The power in Standardbred breeding is not Kentucky but New Jersey, somewhat less well-known as the “horse capitol of the world.”

Which region will be the power in Thoroughbred breeding in 25 to 30 years? Surely the one that wants this industry the most. It’s as simple as that.

 

inglorious a star amid breeding turmoil

Tags

arosa farms, blackjack williams, donver stable, economics of breeding, fanfreluche stakes, fasig-tipton sales, hennessy, inglorious, josie carroll, kentucky breeding, slots in kentucky, thoroughbred racing and politics, woodbine

The following article was published earlier this week at Paulick Report.

The result of Sunday’s Fanfreluche Stakes at Woodbine in Canada was noteworthy for the owner, trainer, and jockey. The winner was Inglorious, who was anything but in beginning her career with a victory in the stakes.

The daughter of juvenile star Hennessy was bred in Ontario by Arosa Farms, is raced by Donver Stable, and is trained by Josie Carroll. The bay filly won the six-furlong stakes by a length and three-quarters, and she earned $87,624 from her first career start.

Out of the stakes-winning Smart Strike mare Noble Strike, Inglorious is the fourth foal of her dam from five to date and is the second stakes performer. The mare’s first foal, the Cherokee Run colt Sebastian’s Song, ran third in the Plate Trial at Woodbine.

That is a good produce record, but it is sobering for Kentucky breeders to consider that none of the all-Kentucky sires of the mare’s first five foals are now standing in Kentucky. Three of them (Saint Liam, Hennessy, and Dixie Union) are dead. Cherokee Run is pensioned, and Tactical Cat is at stud in Oklahoma.

The stallion population in Kentucky is contracting seriously, and since stallion operations are the most consistent cash-generating segment of the horse business, that is bad news for breeding, sales, and the state government, which depends upon the economic vitality of breeding and racing for layers and layers of tax income.

As the volume of stallions declines, the sales of seasons to stallions must do likewise, the number of mares in the state has declined, the number of foals on farms being cared for and prepped for sales has declined, and the jobs, earnings, taxes, and the vast array of connected services also has shrunk.

This is very bad news for the Commonwealth of Kentucky and the politicians and public servants who try to maintain the infrastructure and provide services to citizens. They will not be getting as much money from the breeding business, and they will not be able to use it for the benefit of Kentucky’s maintenance and public works.

The shrinking of the Kentucky stallion population is closely connected with the enrichment of other state’s breeding programs for Thoroughbreds, which have been augmented with funds from expanded gaming through riverboats, casinos, and slots parlors.

The competing states have vastly enriched the purses at their racetracks, which makes owning a racehorse a more profitable game. It also makes breeding a Thoroughbred in Louisiana, Pennsylvania, West Virginia, or New York a much more attractive option than shipping to Kentucky to breed and raise a foal.

Whether this shift in funding purses is beneficial or not seems unimportant to a small but powerful segment of Kentucky politics, which has managed to prevent Kentucky from competing with other states in this regard. Kentucky Republican pols, led by the infamous David “Blackjack” Williams, have blocked passage of legislation for expanded gaming in Kentucky.

The political gamesmanship of Williams and his allies may or may not be contrary to the long-term best interests of breeding Thoroughbreds in Kentucky.

Their prescription could be seen as an economic parallel to taking an exceptionally large dose of a purgative. The cleansing might just kill you (or the business). If it doesn’t, then the survivors should be somewhat better off at some point in the future.

Well, maybe.

The ongoing yearling sale at Fasig-Tipton’s paddocks on Newtown Pike outside Lexington is a case in point. With more horses being sold, both the gross and the average prices have risen, but the median has dropped from the results of the first session.

But economically, the results are an exercise in loss reduction. Breeders are taking a severe beating of the ego and the wallet, and the obvious question is: “How many of them are going to try this fun again?”

The Jockey Club has predicted a notably smaller foal crop for next year, which is in line with the reduction of stallions and mares in Kentucky.

From the statistics that I’ve worked with over the current yearling sales season, there is a market for about 3,000 commercial sales yearlings, about half of what is currently available as the supply.

With the help of the economy and imprudent political game-playing, we might just reach that number sooner than you expect.

one way forward?

Tags

economics of breeding, profitability study, Rob Whiteley

In a chilling analysis of the profit and loss situation of horse owners over the past several years, the well-known breeder and businessman Rob Whiteley has distilled the bitter essence of the current predicament that producers of Thoroughbred racing stock are in. Read it here.

Each of the segments of the breeding business — stallion farms, veterinarians, sales companies, and many other service providers — plays its own corner of the game. Despite the clarity of Whiteley’s argument, it is hoping against the evidence of previous behavior to expect the other players to balance their interests with the good of the overall scheme in breeding.

So, if other segments of the breeding business will not respond to market forces but will instead keep on perpetuating self-destructive rates and fees, then the only ones who can alter the scheme are breeders themselves.

By banding together, breeders can produce a unified body on many issues and can have an influence in proportion to their contribution to the industry.

This will be challenging, but we have seen similar groups join together for the common good and for the overall health of businesses in other sectors. Whether we work together as a cartel, as syndicates, or as cooperatives, there are established and proven patterns of business that will make breeding Thoroughbreds more rational, more responsible, and more economically sound.

Are we willing to accept the challenge?

pow! take that weenie politicians!

Tags

breeding in kentucky, economics of breeding, racehorse breeding, sport and business

In response to yesterday’s post about the economic challenges facing horse breeders and all small businesses (and that is what almost all farms and horse breeders are), the discerning commentator Observer wrote:

I am not sure our state government will wake up in time to save our beloved horse industry. 

Does Pennsylvania want Kentucky’s horse industry?  They sure seem to be positioning and posturing for a run at it.  And if not Pennsylvania what about Indiana? 

I bet every day there is a breeder in Kentucky who looks at Indiana as an oasis for profit. 

Several years ago George Steinbrenner told the political leaders of New York that he was considering moving the New York Yankees to New Jersey.  Well those politicians were not about to call his bluff.  They helped Steinbrenner build a new baseball palace across the street from the house that Ruth built. 

Don’t think for a minute Mr. Beshear and Mr. Williams that Churchill Downs, Keeneland, Claiborne Farm, Three Chimneys Farm, Gainesway Farm and countless other historic breeding farms can’t move to Indiana or some other state.  Because it can happen and it will happen without your help and on your watch.

Ouch!

how high the fee?

Tags

bloodstock pyramid, breeding thoroughbreds, economics of breeding, interconnections between racing and breeding, pyramid of valuations, stud fees

As noted in yesterday’s post, the health and economic energy of the bloodstock business depends on the results of the September sale at Keeneland to an inordinate degree.

One of the corollaries from the present economic situation in breeding Thoroughbreds is that the value of broodmares and stallions also depends on the value of yearlings … just as the value of yearlings depends on the quality of purses available, the costs of racing horses, and the prospects for profitable racing or resale at the in-training auctions or at the racetrack … and especially on the health of the national and international economy.

Breeding Thoroughbreds is one big, happy, interconnected pyramid, with stallions at the top of the heap. Race a colt who can become an important stallion prospect, and that owner likely has put his racing operation in the black for several years. Stand a stallion who becomes a major sire, and that farm has become a major money earner and likely a major power center in breeding.

If it sounds easy, well it ain’t.

Those who bought into stallions, either in the form of equity or seasons, in 2006 through 2008 are in a painfully precarious spot. And those stallions at the top of the price pyramid are in the most danger because prices of yearlings have dropped too far and too fast to allow many of the breeders and equity holders to get out economically.

With that kind of crush (or at the very least “squeeze”), who is going to buy into stallions? And how much can any horse command as a stud fee under the present economic forecast?

From talking to stallion managers and breeders, the top end would appear to be, at most, $50,000, which is real money in most contexts. That is half, however, of the fee for Smarty Jones, when that once-beaten classic winner went to stud, and that is one-tenth of the fee for Storm Cat, who only stood for a half-million at the pinnacle of his fame and success.

And it would take a heck of a horse to be worth $50,000 live foal and actually get it in these times.

The general consensus is that stallions and stallion prospects priced at $25,000 to $35,000 and under will be the most popular, and in another two weeks, we will know a lot more about how steady those numbers might be.