Market Changes Affect Breeders' Decisions

With the auction business slowing down and the costs of production rising, it isn't an easy time to be a Thoroughbred breeder. Horsemen who profited from rallying bloodstock prices for much of the 1990s are being forced to reevaluate the financial health of their operations and revise economic strategies.

The situation is particularly difficult for farm owners who derive most of their income from horses that fit into the middle and lower levels of the market. While top-quality animals continued to command big prices in 2000, demand decreased for weanlings, yearlings, and broodmares without the very best credentials.

As a result, many breeders are reducing the size of their broodmare bands and sending more of their young horses to the racetrack. They also are waiting later than usual to book their mares to stallions, hoping to get better deals on inflated stud fees.
Jim and Pam Robinson of Brandywine Farm in Kentucky plan to focus less on breeding their own horses and concentrate more on the service end of the Thoroughbred business.

"Basically, what we are going to be doing is boarding, sales prep, and quarantine work," Jim Robinson said. "We've been advertising for clients, and, so far, it's been fairly successful. My wife has become the assistant farm manager at Hopewell Farm, and I am going to be managing our farm."

The rising cost of stud fees, according to Robinson, was the main reason for the changes at Brandywine, which include cutting back on the number of broodmares owned by the couple.

"We probably will have six to eight mares," he said. "We had 32 mares, and we were enjoying the business. But it got to the point that we had a lot of money just sitting there in stud fees, which were escalating in price. It was very difficult. If the individual you got was not correct, if the X rays weren't clean, if everything didn't fall into place, you were having to push it to get your stud fee back from your foal at the sales."

Among breeders who are racing more of their young horses is Robert Anderson of Canada. The lure of the racetrack in his native land has been strengthened by slot machines, which have fueled higher purses at Woodbine. The Toronto track paid nearly $76 million in purses in 2000, up from $58.4 million the previous year.

Such riches are particularly enticing to breeders with useful horses that lack the fancy pedigree or perfect conformation needed to bring top prices in the auction ring.

"If you've got a solid Canadian-bred horse that should be in the middle range of the market, you are better off racing than selling," Anderson said. "There is more earning potential, and it's more fun. We've got 16 horses in training, and that's the most that we've had in a long time. The ones that make it at the races are worth a lot of money. You keep the fillies and breed them, so you still have a great way to keep producing good stock."

Dr. Gordon Layton of Loch Lea Farm in Kentucky has five 2-year-olds in training in Florida. He hopes to offer them at juvenile auctions or sell them privately early in their racing careers.

"I've never had that many 2-year-olds in training before, but I decided there was no market for them any other way," Layton said. "It was either that (put them in training) or give them away. At the yearling sales, the middle market--that's me--on down was terrible. When you've got a normal horse, and you can't even get the stud fee you've got in him, you've got to try something. I think there is a fair chance this will be successful. There are plenty of examples out there where people have sold young horses with high potential at the racetrack for a lot of money."

Concerned by stud fee increases, Kentuckians Lonnie Owens of Katalpa Farm and Henry White of Plum Lane Farm delayed booking many of the mares they own or manage until after the Keeneland January horses of all ages sale. They thought the weaknesses that developed in the fall breeding stock market would continue in 2001 and eventually convince stallion managers to lower season prices. Their hunch turned out to be correct.

"I booked three mares yesterday, and I've got about eight more left," said White on Jan. 17. "You can get a little better deal on a stud season now than you could in November. I'm not talking about the $100,000, $200,000, or $300,000 horses; I'm talking about the $10,000 to $25,000 horses."

Said Owens, who also was interviewed in mid-January: "Usually, I would have been done in October, but I just started finishing up my mares the first of this week. There are price breaks out there, and many books are not full. I've paid less money to breed to some horses than I did in 2000."