Marked Down - by Dan Liebman

Just a few weeks ago, this column opined that some stud fees were coming down in 2009, but it was not enough. They needed to be reduced more.

Since then, the Keeneland November sale has come and gone, the nearly 50% drop in gross clearly illustrating the global economic downturn has not only reached the Thoroughbred industry, but had a clear effect upon it.

There was no reason to think the insular world of Thoroughbred breeding and racing would be immune to economic pressures. With less expendable income, people are wagering less. With more stock market worries, people are wanting to pay less for racing and breeding stock. With lower returns at public auctions, breeders must decide if they should breed fewer mares and spend less on stud fees.

It should not have been hard for stallion managers to come to the realization that they would have to re-evaluate stud fees. Other than the cost of the mare, this is the biggest expense a breeder has every year. In a competitive business, where stallions that don’t attract mares don’t last long, it is imperative to price each stallion correctly.

The telltale sign for the owners of stallion farms has been the silence of the telephone. At a time when mare owners should be calling to secure seasons for the 2009 season, they are not doing so. Many have been quoted as saying they will postpone booking mares until January or February, with a longer wait for those not due to foal until late spring.
Things are happening very quickly in today’s economic climate, as evidenced by the bank failings, bankruptcy filings, and government bailouts. Things are happening quickly in the Thoroughbred industry as well.

On Nov. 4, Lane’s End Farm released its stud fees for 2009, keeping A.P. Indy, Smart Strike, and Kingmambo the same at $300,000, $150,000, and $250,000, respectively. Of the farm’s 20 stallions, one fee went up (Lemon Drop Kid), while six were lowered.

Just 20 days later, Lane’s End made another announcement, becoming the first farm to further reduce some advertised fees. A.P. Indy dropped to $250,000 and Smart Strike was lowered to $125,000. Eleven other stallions had their fees reduced, including six for the second time in three weeks.

Buying a season to all 20 Lane’s End stallions Nov. 4 would have cost a breeder $1,150,000, while that amount following the Nov. 24 announcement was 16% less, or $967,500. (Between the two press releases, it was announced Curlin would stand at Lane’s End in 2009 for $75,000.)

Lane’s End owner Will Farish had the courage to be the first stallion manager to react to the economic pressures affecting the breeding of Thoroughbreds. On Nov. 25, WinStar Farm announced Distorted Humor, who stood for $300,000 in 2008, would not stand for $225,000 as previously announced, but instead for $150,000. The following day, Taylor Made Farm announced the fee for Unbridled’s Song would drop from $150,000 to $125,000.

Farish understood it was not enough to drop a stallion like A.P. Indy, affordable to only a few breeders to begin with, but also to adjust the fee for a stallion such as Mineshaft, who stood last year for $75,000, was first announced as dropping to $40,000, and then saw another adjustment to $30,000.

For Mineshaft, when selling a yearling in 2011 and trying to get twice the stud fee, there is a big difference between needing the bidding to reach $60,000 rather than $80,000.
Of course, like every other farm owner that stands stallions, Farish is also a breeder, meaning he, too, is cognizant of the fees he will be paying to breed the mares he and his partners own.
Remember the old commercial: “When E.F. Hutton speaks, people listen?” WinStar and Taylor Made heard Farish, who is one of the leading owners, breeders, consignors, and stallion managers. Breeders now wait to hear if other stallion farms listened.

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