Breeders Get a Break - by Eric Mitchell

(Originally published in the December 1, 2012 issue of The Blood-Horse magazine. Feel free to share your own thoughts and opinions at the bottom of the column.

By Eric Mitchell - @BH_EMitchell on Twitter

By Eric Mitchell

A common refrain heard among Thoroughbred mare owners at this time of the year is that stud fees are too high.

This year, however, breeders should be feeling a bit less economic pressure. A cursory glance at the stud fees announced to date by North American stud farms shows the average stud fee among 289 stallions standing for $4,000 or more has decreased 6% to $14,590, down from an average of $15,525 for the same group during the 2012 season.

An average decline is good collectively for breeding farms’ bottom lines, but during the past few years declining stud fees have been largely among stallions that didn’t possess the greatest commercial appeal.

On this front there is more good news. Among 33 stallions (excluding first-year sires) that will stand for $30,000 or more in 2013, only eight are having their fees increased while six will have their fees lowered. The stallions with higher fees aren’t going to surprise anyone.

Ghostzapper (Awesome Again—Baby Zip) leads the pack by percentage change with a fee that is doubling from $20,000 to $40,000 for 2013. The 2004 Horse of the Year and champion older horse standing at Adena Springs, however, is represented by 13 new stakes winners in 2012, through Nov. 26. His stakes winners include 10 graded stakes winners, second only to Giant’s Causeway who has 13. Ghostzapper’s top earner of the year is the outstanding sophomore filly Contested, who won the TVG Acorn Stakes and the Test Stakes (both gr. I) and who later sold for $2.3 million at the Fasig-Tipton Kentucky November sale.

Hard Spun and Scat Daddy, who are battling it out at the top of the second-crop sire list just as they did as freshman sires last year, will have their fees increased by 50% and 71%, respectively. Darley’s Hard Spun will stand for $60,000 following a year that has produced 12 new stakes winners. The son of Danzig’s top runners include grade I winners Questing and Zo Impressive. Hard Spun’s career Northern Hemisphere progeny earnings through Nov. 26 (excluding Japan and Hong Kong) are $5,609,197. He will stand for $60,000 in 2013.

Ashford Stud’s Scat Daddy is $108,718 behind Hard Spun by progeny earnings and more than $2.7 million ahead of third-place sire English Channel. The son of Johannesburg has picked up four new stakes winners in 2012 and has six lifetime stakes winners with one of those being the brilliant Daddy Long Legs, who won the UAE Derby Sponsored by The Saeed & Mohammed Al Naboodah Group (UAE-II) and the Juddmonte Royal Lodge Stakes (Eng-II). His career earnings are more than $1.33 million. Scat Daddy’s fee will rise to $30,000 from $17,500 for the coming breeding season.

Other top sires with rising fees are Awesome Again (up 50% to $75,000), Harlan’s Holiday (up 40% to $35,000), War Front (up 33% to $80,000), Arch (up 33% to $40,000), and Exchange Rate (up 20% to $30,000).

Among the top stallions with fees coming down, Darley’s Street Cry is making the biggest drop. The 14-year-old son of Machiavellian is having his fee lowered 33% to $100,000. All of Street Cry’s group winners in 2012 were overseas—Carlton House in England, Princess Highway in England and Ireland, Falls of Lora in the United Arab Emirates, and Zaidan in Hong Kong. Still, Street Cry can warrant a six-figure fee with 61 career stakes winners and three champions.

Other top sires offering breeders a break are Stormy Atlantic (down 25% to $30,000), Unbridled’s Song (down 21.5% to $60,000), Candy Ride (down 20% to $40,000), Blame (down 14% to $30,000), and Mineshaft (down 14% to $30,000).

Not much has changed price-wise among the horses entering stud in 2013. Belmont Stakes (gr. I) winner Union Rags commands the top fee of $35,000, the same top-of-the-class price placed on Uncle Mo last year and the same levied for Blame, Lookin At Lucky, and Quality Road when they entered stud in 2011.

The market is still rewarding proven quality in favor of the promise of quality.

With the weanling market a bit softer than expected, breeders should relish a year with fees largely stable or even decreasing on some of the most desirable stallions.

The industry can only keep growing if the manufacturers are making profits that can be reinvested. The 2013 breeding season should be another positive step in that direction.

9 Comments

Leave a Comment:

sceptre

As I read through some of these blog editorials, I'm immediately reminded of Fox News, and their distorted version of reality. I wouldn't necessarily characterize  many of your pieces this way, but the slant and take-away from this one fits the analogy.

A few specifics:

"The industry can only keep growing..." ? This implies that it has been growing. I suppose one could locate some small pieces of data to support such a slant, but the overwhelming picture reflects quite differently. Also, while this may be termed an "industry" for some of the suppliers such as yourself, it's hardly an industry/viable business to those who own the end product, or, ever more now, for the vast majority of those who directly manufacture that end product. Rather, they should liken their "business" here to nothing more than entertainment expenditure. This is a "business" that cannot sustain itself on its own financial merits, and owes essentially its existence to the very wealthy and others less informed who are often guided by false hopes-of the variety appearing in your piece. While it may be good "business" to stroke some of your "suppliers", consider the harm to the novice "investor".      

27 Nov 2012 1:02 PM
Pedigree Ann

Why do you report averages, which can be distorted by a few exceptionally large numbers, and not the median? The vast majority of racehorses in this country are gotten for less than $15K; their breeders are part of the 'manufacturing' end of the business, too, yet they seem to be invisible to reporters such as yourself. Fees remain inflated top to bottom.  

I was lucky this year; I bought an in-foal mare in 2011 for half the stud fee she was carrying. The weanling made me back the expense of raising it and a couple thousand beyond; if I had paid the stud fee myself (as I have done for my mare this year), I would have lost around $5000. Mid-range stud fees are still too high for the market that exists for the offspring, but that doesn't seem to register on your radar. The big players are not the only players, you know.

28 Nov 2012 9:00 AM
John from Baltimore

It's time for the Jockey club to allow artificial insemination.  If A.I was allowed mare owners would have the opportunity to breed to any stallion in the world and any stallion would have all mares as customers.  The increased competition would reduce prices.  The argument of over breeding could be controlled simply by limiting the number of foals if you use A. I. The only reason for not using it now is to protect the Kentucky board business.  Since the Jockey Club is controlled by the big breeders they to seem look after themselves.  They don't seem to mind if a stallion gets drugs to help it breed 200 mares.

28 Nov 2012 6:37 PM
FiftyYearsPlus

Owners are the diminishing breed in racing, be they breeders or buyers. Both are subjected to stud fees often set at two or more times median foal earnings and ridiculously antiquated claiming prices. The former need to be cut in half and the latter need to be doubled.

I project that starters for 2014 will be 25% less than 2012, with a commensurate loss particularly in regional audiences and simulcast revenue due to yet shorter fields and abbreviated race meets.

29 Nov 2012 12:37 AM
Bethany Loftis

The Jockey Club should not allow artificial insemination to take place. The average covers per season per stallion would increase drastically and flood the market; as is what happened with the Quarter Horses. If owners/breeders find it hard to make money commercially now, the average value of horses will drop making it even harder. If you allow A.I, you might as well allow embryo transfer as well. I agree with FiftyYearsPlus. There has to be a balance between the stud fees and foal earnings as well as claiming prices.

02 Dec 2012 3:12 PM
AngelaInAbilene

"It's time for the Jockey club to allow artificial insemination."

Take a look at what the AQHA has become since AI has become so prominent.  Do you also advocate ET's & multiple ET registrations.  What about cloning?  AI has done NOTHING to decrease stud prices!  

Mare owners CAN breed to any stallion in the world.  If you can't afford to ship your mare to the stallion of your choice, perhaps you shouldn't breed her.

The Jockey Club's mission statement is to preserve the integrity of the breed.  To my knowledge, the Jockey Club is the ONLY breed registry that actually has that keeps that in mind.

The very idea of the Jockey Club having any reseblance to the AQHA is revolting and repulsive!  

03 Dec 2012 7:47 AM
Drugfree

John There is currently a court case in Australia challenging the A I Rule as restraint of trade. Arguments have been over for some time, we are all awaiting a verdict. While it may not change the current N A rule it will sure open the door to litigation. I would hope our Jockey club would rule in favor of A I before it becomes a court case and we end up like the Quarter Horses with the door wide open, Embryo transplants, the whole enchilada which I hope no one wants. But to be able to breed your mares to any stud in the world ans she never leaves your pasture could resurrect the Thoroughbred breeding business to an affordable business or even hobby. Funny what the Jockey club fears the most could be it's salvation.

04 Dec 2012 1:02 AM
dsarnoldjr

It seems as though the Bloodhorse is simply a propaganda tool for those running sales companies, i.e. Keeneland, and those at the top of the market. It is hard to believe that a "credible" source could put out information such as this, as well as stories claiming the horse business is back on track; solely by distorting numbers to coincide with their facts. In no way is this information substantial, nor is it an accurate representation of the breeding industry. The fact remains that breeders are struggling significantly with no relief in sight. Can we please here from an educated, non-bias journalist?

05 Dec 2012 2:06 PM
EJMitchellKy

I reviewed the column and I didn't see a reference to the industry making money hand over fist, only that stud fees will be a bit lower on average in 2013 compared with 2012.

Give all the comments, however, on the lack of information, let's consider the following, which will run in the next issue of The Blood-Horse MarketWatch.

Here are seven stud fee range categories and the percent drop in average stud fee between 2012 and 2013:

$100,000+ (-8%); $50,000-$99,999 (+4.9%); $25,000-$49,999 (+6.2%); $15,000-$24,999 (+5.1%); $10,000-$14,999 (-12%); $5,000-$9,999 (-11%); and $2,5000-$4,999 (-9.1%)

So, stud fees declining in four of seven stud fee categories.

The greatest number of sires in are found in the categories under $15,000. Here are some other interesting numbers regarding yearling average to stud fee ratio for these three categories.

$10,000-$14,999 (3.14); $5,000-$9,999 (2.96); and $2,5000-$4,999 (3.98). Now these are comparing 2012 yearling averages with 2012 average stud fees. If we look at stud fee for year of conception for the 2012 yearlings, then the ratios look like this:

$10,000-$14,999 (3.56); $5,000-$9,999 (3.72); and $2,5000-$4,999 (4.45). In 2006, when Keeneland September reported its peak average and median the price to stud fee ratio looked like this:

$10,000-$14,999 (2.59); $5,000-$9,999 (2.61); and $2,5000-$4,999 (3.07)

I look forward to continuing the discussion.

06 Dec 2012 4:48 PM

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