01/11/2013 12:30PM

Breeders enter 2013 with tempered optimism

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The North American Thoroughbred breeding sector arrives on the cusp of the 2013 foaling season with rising expectations. After two years of double-digit percentage declines in registered foal crop production in 2010 and 2011, the latest Jockey Club figures estimate a 3 percent drop for 2012. That mildly encouraging data, coupled with the results of last year’s stable – albeit far from spectacular – bloodstock auctions, offer breeders mounting evidence that the worst of the recession is over.

Finding a way to make a living in a more austere economic climate offers challenges to breeders already accustomed to turning a slim profit even in good times, but those who have endured the five-year dip have made many, often painful, adjustments and are facing the new year with a positive outlook tempered by recent experience.

Actually, 2012 offered breeders more cause for optimism than any time since before the recession hit in 2008. Jockey Club statistics released in October, which cover an estimated 90 percent of breeding activity for the year, indicated that the number of active stallions declined nearly 4 percent from 2011, and the number of mares bred fell 3 percent. Contrast that with an 11 percent decline in stallions and a 10 percent decline in mares bred from 2010 to 2011 – and similar swoons from 2009 to 2010 – and it appears to many that necessary market corrections have finally taken hold and that the breeding sector is poised for modest but sustainable growth.

Two important states, New York and Florida, enjoyed increases in the number of active stallions and mares bred in 2012, with New York breeders reaping the benefits of added video lottery terminal revenue in the form of a more robust statebred racing program and strong activity at Fasig-Tipton’s New York-bred yearling sale. New York rapidly reversed what had been a steady decline in breeding activity, and the one-year upsurge is remarkable: 18 percent in stallions and 43 percent in mares bred, according to Jockey Club statistics.

“When you consider how much [the industry] has changed in the last five years and how difficult it got for a lot of people, I think that there were real positive trends [last year],” said Joe McMahon, who with his wife, Anne, has owned and operated McMahon of Saratoga Thoroughbreds in Saratoga Springs, N.Y., since 1971. “We saw a 35 percent increase in book size at our farm. We added stallions last year and this year, so I think that all of the indicators are there that say things are going in the right direction.

“There are definitely more people shipping mares to New York. Our farm gets requests every week for people that want to send mares into the state, foal, and then breed back, to make the foals eligible as New York-breds.”

Despite Gov. Andrew Cuomo’s takeover of the New York Racing Association and increased competition within the state for possible future casino development separate from racetracks, McMahon believes that the positive returns from the initial influx of video lottery revenue into New York’s horse industry have created a larger economic benefit to the state – particularly as it relates to the world-renowned Saratoga racing, sales, and breeding community – and that the funding mechanism will remain in place for the foreseeable future.

“The equine segment of the agricultural industry in New York is very significant, and the state has been on a long-term goal, going back to the 1970s, to preserve farmland and create rural employees,” McMahon said. “I don’t see any major change in that position.”

Florida uptick

Unlike New York, Florida breeders did not benefit from a massive dose of gaming revenue in 2012, but the state’s activity rebounded in 2012 with increases of nearly 9 and 7 percent in stallions and mares bred, respectively. Florida’s growing breeders’ incentive program and its spring juvenile sales calendar, which posted strong overall gains in 2012, helped Sunshine State breeders attract some of the business they had lost in the previous years. Brent Fernung, president of Journeyman Stud in Ocala, Fla., and an industry presence since the 1970s, sees 2012’s positive numbers as indicative of a growing trend where Florida’s natural advantages will once again draw in sizable business from out of state.

“I think the [rebound] is not necessarily an indication of just a change in Florida but a change in the [national] economy somewhat,” Fernung said. “I think we’re in better shape than we were in 2011 – and I think that when you get to that point, people will breed where they want to rather than where they think they can make a few extra bucks. I think Florida came through that end of [the recession] pretty well, and we have some good programs down here.

“Our breeders’ program is strong and moving on, and we have pretty strong purse additions for Florida-breds. . . . This time around, if you look and check out the way the 2-year-old market has behaved, it’s been the strongest sector as far as holding its own or coming back is concerned.”

Many states and regions are still facing difficult economic challenges this year. California, like New York, lost nearly half of its stallions from 2007-2011 but, unlike the Empire State, did not reverse the slide in 2012. Thoroughbred and Standardbred breeders in Ontario suffered perhaps the cruelest blow after Ontario’s government decided to end the slots-at-racetracks program.

Kentucky still No. 1

Kentucky remains the dominant state for Thoroughbred breeding, and posted approximately 2 percent drops in both stallions and mares bred in 2012 after suffering drops of 14 and 9 percent, respectively, in 2011. Kentucky stallions covered 43 percent of all mares reported bred in 2012 and the state is home to 16 of the year’s leading 20 general sires (including the late Dynaformer). Seventeen of the 20 most active sires resided in the Bluegrass.

The ongoing uncertainty involving Kentucky racetracks and their quest to add gaming revenue is well-documented, but regardless of when – or if – that situation is resolved to the industry’s benefit, major commercial breeding operations in Kentucky are moving forward to compete in a new, smaller, but still potentially rewarding economic climate.

“I think we’ve certainly reached a point of stability,” WinStar Farm’s general manager, Chris Baker, said. “I think the attrition or constriction of the business overall, in the number of mares bred, in the number of horses sold . . . I think those major adjustments have been made, and I think the fluctuations going forward won’t be great.

“You know, the people that are left that are playing are serious about it. They’ve got money to spend, and they just want to spend it wisely, whether it’s on stud fees or at public auction. I think that people are ready and willing to spend, and are still excited about this industry. They’re just being a little less risk-tolerant0 and a little more calculating in how they do spend. [The industry] is becoming more accentuated. What’s deemed to be desirable, people are competing for, and what’s not as desirable . . . you know, there isn’t a lot of demand for that.”

wolves More than 1 year ago
how about an article titled "Bettors enter 2013 with tempered optimism"? Discuss the unlikehood of lower takeout and how funneling a portion of the slots windfall towards the player will never happen, expanded betting menus at NYRA, 4 day per week racing so we don't have to suffer through 5-6 horse fields every other race, getting rid of coupled entries, the pros/cons/likelihood of exchange wagering in the US, and which jurisdictions may or may not participate, etc. That is something I think most readers of DRF would be interested. I did find the breeding article interesting, I just saying a large portion of DRF readers are players.
imaxfli tds.net More than 1 year ago
Here, here......why don't they address these issues...because they are like politicians, real solutions that might work and actually favor the masses are ignored!