Published in the Nov. 24 issue of The Blood-Horse
Fact or fiction: The typical Central Kentucky Thoroughbred farm owner has a palatial spread, hundreds of horses, and money to burn?According to the results of a demographic survey commissioned by the Kentucky Thoroughbred Association and the Kentucky Thoroughbred Owners and Breeders, it's fiction. The general population, though, may believe it to be true.The perception of untold wealth and riches on many horse farms in and around Lexington can spell trouble for the industry when it calls on lawmakers for financial assistance. So the KTA decided it needed to dispel the myth with some hard numbers."We hope to squelch some of the misconceptions the industry is confronted with, including the perception that everyone in the Thoroughbred industry is a rich hobby farmer," said David Switzer, executive director of the KTA. "We do have people of wealth in this industry--and thank goodness for them--but the demographic study shows the majority of people have small mom-and-pop operations."The survey, conducted by the KTA, KTOB, and the Lexington accounting firm Dean, Dorton & Ford, was sent to 460 Kentucky Thoroughbred farms. The response rate of about 32%, or 150 farms, was healthy enough to be considered a good gauge.
In addition, three Central Kentucky banks that provide financial assistance to Thoroughbred operations "provided confidential data about their outstanding industry loans," the study said.Here are some of the findings from the survey:
o More than 87% of farmers own some or all of the land used for their operations.
o The average farm is 356 acres, but about 57% operate with less than 250 acres.
o The median farm has 34 horses, with only 13 wholly-owned by the farm.
o The average number of full-time farm employees is 12.2, while the median is 4.
o With average gross income of $1,889,451, and average gross expense of $1,839,662, average annual net income is only $49,789.
o More than 64% of farms have debt related to the horse business, and the average amount of debt per borrower exceeds $1 million.
o Annual non-farm income averages less than $50,000 for 53.8% of the farmers.
o About 59% of the farmers have a net worth of less than $2 million.The KTA plans to use the survey results for lobbying efforts on the local, state, and national level. In Lexington, the purchase of development rights is an issue. In Kentucky and Washington, D.C., a major issue is the impact of mare reproductive loss syndrome (MRLS) on Central Kentucky farms.The federal farm bill, which cleared the Senate Agriculture Committee Nov. 15, would make low-interest loans available for eligible horse farmers affected by MRLS (a 30% loss of foals in mares they own or board). Another provision with more long-term impact would make horse owners eligible for emergency loan programs provided to owners of livestock and other crops.Switzer indicated the results of the survey--or any economic impact study, for that matter--are invaluable when it comes to lobbying efforts. Congress is becoming more aware of the scope of the Thoroughbred industry, but there's more work to be done."We had to argue about getting ourselves into a disaster relief bill," he said.Keeneland president Nick Nicholson said the study is important to the entire Thoroughbred industry."One of the strengths of the horse business is that it encompasses all the diverse elements of the economic ladder," Nicholson said. "We deal with virtually all of the farms. Some are wonderful mom-and-pop operations, and some are wonderful multinational operations. We need them all."The demographic survey said three major lending institutions reported $320 million has been loaned to 294 borrowers, yet about 36% of the farmers surveyed said they had no debt. Their net worth may chiefly be tied to actual farmland.Switzer said if the median farm is 200 acres, and land is valued at, say, $10,000 an acre, that equates to $2 million. But in most cases, that asset can't be liquidated quickly. The bottom line is that "most farmers are land-rich and cash-poor."In regard to MRLS, the American Horse Council said Kentucky's farm loan program office would assist the United States Department of Agriculture to write regulations for the loan program. Loans may not be available for up to six months after passage of the bill.
