Fee Feasibility - By Dan Liebman

re: Fee Feasibility - By Dan Liebman

Horseguy — Sun, 13 Dec 2009 19:13:00 GMT

BridleOaks makes very valid points. Yes, stud fees need to be a smaller percentage of production costs on average. And this is the part of the production costs that breeders have a direct say in. Unlike the demand for land, utilities, the ingredients of horse feed, skilled employees, etc, all of which have other usage the retired race horse has but one. As stallion managers have said time and again the stud fee is set by the buyers. Clearly, for a number of years now the industry has been dominated I would argue by hobby breeders. Breeders who do not rely solely on the breeding, raising and marketing of Thoroughbreds for a living. I am not saying that by in large they are not well versed at their endeavors. But as Greenspan once said "irrational exuberance" may have been at play. Fixed cost such as board, feed and employee compensation have been pretty keep as low as they can be in recent years. I can not say the same for veterinarian fees which can be a substantial amount of a monthly bill with racing and breeding stock. Without having to use charts, graphs, spread sheets and 8X10 glossy photos. A few numbers will make my point. I only work off of median yearling averages. I use median averages because the spread between the median average and the average is so wide due to the nature of the business that it is a useless number for planning a business around. The Keeneland Sept yearling median average for the last 9 years is $34,000, (average $90,000). Keeping the production costs numbers simple and on the low side, from last cover to fall of the hammer, $30,000, with an average stud fee of $23,000 total production cost are $53,000 with a very good chance of only getting back $34,000. And this does not take into consideration the purchase cost of the mare, barren years, etc. A simple example of the Keeneland January and November sales. Some would say that I am comparing apples to oranges with the following example. I say the numbers are close enough. That even if extrapolated out the end result would not be dramatically different. Taking the Bloodhorse's 07 average stud fee in KY of $23,262, multiply by the number of horses SOLD, 5,243, add $25,000 production cost, subtract the total from the gross of both sales in 2007 and those horses had an average profit of over $30,000. In 2009 4,117 horses had an average profit of $1,463. Dramatic to say the least. Again, this does not take into account the purchase price of the horse. Not an easy business to pitch. Have we hit bottom? In this business it always comes down to two things, demand which is stimulated by purses. Granted, the great recession had a lot to do with the dramatic down turn. But it also had a lot to do with people taking a close look at the numbers and doing the math

re: Fee Feasibility - By Dan Liebman

da3hoss — Fri, 11 Dec 2009 18:32:58 GMT

I don't know anything, but personally I think the huge fees for hiring someone to "sales prep" your yearling or 2 year-old has turned into a monster you can't get away from...it's like looking at a fat, shiny, over-supplemented, creatine laced halter horse when what you want is a cutting horse on the ranch...this garbage of a 2 year-old having to be "let down" after the sales is ridiculous.

Only the owners can turn it back around...don't know how you can do it, because novices to the sales ring sure do like those fat babies...

re: Fee Feasibility - By Dan Liebman

Pa. Quandary — Wed, 09 Dec 2009 02:17:58 GMT

Larry is right !

re: Fee Feasibility - By Dan Liebman

BridleOaks Farm — Tue, 08 Dec 2009 23:04:29 GMT

"Lest anyone think the decrease in stud fees is enough to make breeders whole again, they would be wrong."

Well said. The stud fees are just a part of the expense. As a commercial breeder, we have to look at the entire cash outlay we incur while bringing our product to market, and then make decisions and adjustments accordingly. Quite frankly, our vet fees have not come down (we just use them a fraction of what we have in the past...and then pray for nothing complicated to affect our babies & mares. But we all know how that goes...). Farrior fees have not come down, feed, bedding & hay prices are still exorbitant. Diesel & fuel prices keep going up along with the prices for fencing and barn materials. Fees for sales prepping yearlings ($30-$50/day) and 2 yo's in training($50-$75/day) sure as *#&%@ aren't going down either. Those horses that we take to the track...well purses are coming down, but all of the expenses associated with racing continue to increase.

After 2 years of this market (and we're still standing), the impact of every decision we make is immensely magnified, not only by the stallions to which we send our mares, but to those farms we can work with in order to survive. We are "all in" with breeding our mares this year. Breeding and developing commercially viable race horses is who we are and what we do. Hopefully, the farm managers can realize and appreciate that by working with us and enabling us to survive today, we can then grow & prosper together again when this market is turned around.

To the farm managers...it is the relationships forged during these tough times that we remember later on down the road when business is good and prosperous...And one day we will be there again.

re: Fee Feasibility - By Dan Liebman

Byron Rogers — Tue, 08 Dec 2009 19:47:58 GMT

Dan,

Interesting and valid observations. You missed one point though.....

With less stallions, less mares being bred, less foals and less money, how is the Breeders' Cup going to be funded?

re: Fee Feasibility - By Dan Liebman

FiftyYearsPlus — Tue, 08 Dec 2009 19:23:04 GMT

Considering that that the median earnings for the top 50 sires range from $25K to $35K, even the reductions to date do not provide an attractive proposition to most breeders when you factor in all the other costs of getting a foal to the races.