2007 Stud Fees: More Declines than Increases

Published in the Dec. 9, 2006, issue of The Blood-Horse
A few years ago, Jay Brunker believed a breeder could slightly overbreed a mare and not get hurt by the decision. Now, the owner of Grade I Bloodstock is not so sure, and he is cautioning his clients to be conservative in their mating decisions.

"I won't encourage them to stretch a mare to go a bit further in terms of a stud fee than she might necessarily warrant," Brunker said. "In the past, you could overbreed a bit, but those days are behind us now. I'm encouraging them to draw back a little bit.

"Years ago, my formula was 25 to 30% (of the value of a mare toward stud fee). All of a sudden, it was breeding a $50,000 mare to a $35,000-$50,000 stallion and people were getting away with it. But the market is more savvy right now to pedigrees and stud fees have gone up; you have to be careful because the whole thing can put you out on the limb when the limb breaks."

Though the major fall yearling and mixed sales, both in the United States and elsewhere, have been strong, a review of stud fees shows more stallions will stand for the same fee, or less, than will see an increase in their season price next year.

But some of those going up are advancing significantly.

Of the 88 North American-based stallions that stood for $20,000 or more this year and who will stand again in 2007, 20 will stand for more, 31 for less, and 37 for the same amount.

(All but five of the 2007 fees have been publicly released; the fees for those five were determined from discussions with bloodstock agents.)

Of the published fees, percentage wise, the three biggest upward movers are Johannesburg, from $25,000 to $65,000 (160%); Maria's Mon, from $25,000 to $60,000 (140%); and Mr. Greeley, from $35,000 to $75,000 (114%).

Conversely, of the same group, percentage wise, the biggest decrease is 50% for War Chant ($60,000 to $30,000), followed by 40% drops each for Fusaichi Pegasus  ($125,000 to $75,000), North Light, Touch Gold, and Point Given  (each $50,000 to $30,000).

In 2007, there will be 18 stallions in North America standing for $100,000 or more, the same number as this year. Fusaichi Pegasus drops off the list, while first-year stallion Bernardini is the lone newcomer to the collection.

There is no change at the top of the list of 15 stallions that publicly listed six-figure fees for both 2006 and 2007 -- Storm Cat is staying at $500,000 and A.P. Indy will again command $300,000. The other two stallions that stood this year for $300,000 -- Giant's Causeway  and Kingmambo -- are both listed as private for 2007.

Of the others, eight will stand for the same fee, four will stand for more, and just one will see his fee go down.

Bernardini extends the streak to four consecutive years that a horse has entered stud for six figures. Ghostzapper did so this year, Smarty Jones  in 2005, and Mineshaft  and Empire Maker  in 2004.

"Overall, the stud managers are a little bullish," Bob McCann, who owns McCann Bloodstock, said. "We're just starting to plan matings, but some clients are pulling back."

The only question a stallion manager is asking himself, McCann said, is, "What can I get?"

One reason the fees are healthy at the top of the stud fee food chain, McCann believes, is the loss of some stallions that previously stood for six figures. "Only a few people breed at the top, but unfortunately, the pickings at the top are pretty slim. We've lost a lot of horses. Consequently, it makes some look more desirable...and the demand is there."

McCann also pointed to the success of the recent Fasig-Tipton Kentucky and Keeneland breeding stock sales.

"November was as strong as can be, much stronger than September," he said.

The lengthy Keeneland September sale posted record numbers in terms of gross, average, and median. But only 27% of the 3,556 yearlings sold were judged to have been hammered down for a profitable price (two times stud fee plus $15,000).

At Keeneland in November, of the 1,586 broodmares sold in foal, the average stud fee of the covering sires was $32,522. Sixty percent of those mares were sold for a price in excess of the 2006 stud fee of the stallion they are in foal to.

Two things mostly agreed upon are the value of older, proven, stallions, many of whom lack commercial appeal, and the lingering allure of the new, as yet unproven stallions.

"There is still a great demand for new sires," Amy Adkins, a partner with Peter Pegg in Pegg Thoroughbred Consultants, said. "But you have to pay a premium because of how much is being paid for new stallions. (Stallion owners) can't get out in three years; it's more like four or five."

"We're trying to find value and a quality horse, and there is plenty of value for $15,000 and less, because the market doesn't like many of those horses," McCann said. "There is value in the proven horse, but yes, most clients do want to breed to first-year horses. I must like the horse not only physically, but his race record and pedigree as well. You must truly believe he will make it."

The reason proven horses with value are available, Alan Quartucci said, is that so many people are interested in the new stallions.

"There are proven horses that people tend to overlook because they are so focused on the new horses," Quartucci, owner of North Shore Bloodstock, said. "When a horse hits, of course everyone jumps on the bandwagon, that is nothing new. But no stallion can sustain the huge numbers."

What makes the whole exercise interesting, Quartucci said, is that, "It is hard to be an expert on who is going to hit."
The commercialization of the market, Brunker said, is perhaps the biggest factor at play overall.

"It is an exciting time for end users, but a tenuous time for commercial breeders," he said. "There are many stallions that are good value, but something is wrong when you can't breed to good, proven sires because they go wanting in the market. With younger sires, the commercialism is carrying them."

One of those sires with a stud fee rising significantly is Mr. Greeley, who stands at the Beck family's Gainesway Farm near Lexington. Michael Hernon, director of sales at Gainesway, said setting fees means merely being a good analyst.

"The market sets the price really, so you just have to be in touch with the market," Hernon said. "In the case of Mr. Greeley, this was a pivotal year for him, both in the sale ring and, more importantly, at the racetrack.

"He started the year strong, when (2-year-old colt) Belgravia sold for $2 million, and at Keeneland September, a colt sold for $5.7 million. That was further supplemented by a Cartier winner (Finsceal Beo) and horses in this country like Sangrita (gr. II) and Horse Greeley (gr. II).

"We think he is a bargain at $75,000 and the market has responded. The demand is overwhelming."