Stallion Sale - By Dan Liebman

The six week period between the Keeneland September yearling sale and Keeneland November breeding stock auction is typically when stallion managers announce stud fees for the coming season. Well, maybe not this year. Several have hinted they might wait until after the November sale.

There is a high degree of nervousness right now in the breeding industry, and the operative word in the previous sentence is “might.” The fact is no one knows exactly what to do in relation to stud fees, and no one wants to be the first to pull the trigger.

As expected, when fees were announced last fall many went down, but following the November sale many fees were cut again. Breeders were balking at the prices, showing their disdain by not booking mares. Those who were booking mares were demanding deals; others merely waited until the season had begun, figuring the odds were more in their favor at that time for a favorable rate.

Breeders spoke of sending fewer mares to the breeding shed, and indeed they did. The Jockey Club recently announced a projected drop in the 2009 foal crop of more than 8%. One would expect a further decline in the foal crops of 2010 and 2011.

Fewer mares bred; fewer stud fees; fewer stallions needed; fewer horses to sell; fewer dollars to deposit.

Now the commercial market has experienced a sharp decline, accentuated by the September sale, the largest in volume by far.

(The September sale was going to show declines simply because of market conditions, but other factors caused it to drop further. Keeneland officials need to hold a serious meeting to discuss ways to revamp the auction. One thing is for sure—Keeneland is lucky there aren’t more barns at Saratoga.)

Next to the value of a breeder’s mares, his biggest expense is the amount he pays for stud fees. For those who stand stallions, the amount they can charge for stud fees is their greatest source of income.

For years now, however, the breeding industry has run amok, driven by the commercialization of the breed. More mares thrown into production; larger books for stallions; growing catalogs assembled by sale companies.

The industry went through a correction in the mid-1980s, caused by a change in the tax code, and it took many years to reach stable ground again. Now comes a correction that is much more severe. And this correction is not forced by actions of the federal government, but rather by self-inflicted wounds such as greed and gluttony.

During the next few weeks, farm owners, stallion managers, and shareholders will be discussing stud fees. The decisions they make will affect not only their income, but the income of everyone in the industry, and perhaps even the sustainability of the industry.

Asked during the September sale about the expected drop in stud fees for 2010, one stallion manager said simply, “It will be unprecedented.”

Another, though not as succinct, was just as pointed, saying, “For some stallions, a 50% cut will not be enough. They will have to either be cut more, be relocated, or be pensioned.”

Congratulated on the successful year a stallion’s runners were having, one farm manager said, “Three or four years ago I would be drooling thinking about how much I could raise his fee. Now, I would be a fool to raise it at all.”

Indeed, common sense says that in all but the most extraordinary case, it would be foolish to raise a stallion’s stud fee. Breeders must cut costs; stallion managers must help them do so.

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