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Businesses tied to breeding feel ripple effect in Kentucky
LEXINGTON, Ky. − When Thoroughbred numbers and prices go down, breeders and stallion farms are among the first to suffer downturns. But they’re not the only ones. In central Kentucky, Thoroughbred breeding and racing drive a less obvious but large economy, from the companies supplying farm equipment to horse van drivers to veterinarians.
As Kentucky’s active Thoroughbred population has dropped, these supporting industries have also had to adjust to leaner times. Their experiences illustrate how entwined Kentucky’s Thoroughbred and general economies are; in addition to making their livings from racing and breeding, many of those vendors, service providers, and business operators also are Thoroughbred owners who have cut back on buying or breeding bloodstock in the face of economic uncertainty and dwindling disposable income.
Daily Racing Form asked people in three Thoroughbred-related industries − farm real estate, equine equipment wholesale, and veterinary practice − how their businesses are faring and how the recession has changed the way they run those operations.
The Realtor: Bill Justice, Justice Real Estate
Justice Real Estate has specialized in farm properties since Bill Justice founded the company in 1980. Justice, who also owns Thoroughbreds, said he believes Kentucky politicians should be mindful of the Thoroughbred industry’s impact on the state’s economy and do more to help keep racing and breeding stock in Kentucky.
“There’s certainly an uptick in foreclosures, and there’s probably also an uptick in properties for sale, whether they’re actually listed or for sale privately. There’s no doubt there’s an increased inventory on the market and not a lot of interest. I like to say we’re hitting a few singles but not a lot of home runs.
“This downturn has been different and more difficult even than the one in the eighties. Back then, there were still interest levels. There were deals. This is completely different. I think it’s probably due to several things. I think one is that a lot of people don’t think we’re at the bottom yet in land prices, and the horse business is really, really tough. And there’s a perception the banks aren’t lending, and that’s probably true. A lot of people are still expecting more foreclosures, and they’re just waiting. Most of the lookers today don’t seem like they’re wanting to deal; they’re wanting to steal.
“Ever since they announced the World Equestrian Games and the increased facilities at the Kentucky Horse Park, we saw a deluge of sport-horse people. But the past year, they sort of stopped buying. Lexington, Kentucky, is the Thoroughbred capital of the world and will always be. But the other disciplines have certainly helped our economy. But our land prices are still Thoroughbred-driven, and we’re losing market share as we speak. Everybody’s affected: vets, hay people, barn builders, not to mention real estate agents. But it’ll come back.”
The Veterinarian: Dr. Stuart Brown, Hagyard Equine Medical Institute
Brown is a field veterinarian and partner in Hagyard Equine Medical Institute, one of Lexington’s internationally renowned veterinary clinics with about 140 employees. Brown estimated that he sees between 150 and 200 patients a day in his field practice as he drives from farm to farm, fulfilling his clients’ needs for everything from vaccinations and deworming to more specialized reproductive techniques or referrals for surgery. Brown says clients are being more conservative about everything from diagnostics to cosmetic surgery, a conservatism that also affects the clinic’s bottom line. Brown estimates the practice’s charges billed dropped between 12 percent and 14 percent in 2010, a decline he said has been consistent over the last several years.
“We see a lot of people making economic decisions about how much cost they want to put into horses that may be marginal investments. Somebody that in the past would refer foals they thought might have a prospect of being saved but it would have been debatable whether they’d have an athletic potential, now they’ll either stop on them or they’ll send them for x number of days or x amount of money. And if they use up that budget, they’ve decided they have to stop.
“On my side of things, the ambulatory part of the practice where we do a lot of reproductive work, we’ve found last year and this year people don’t send barren mares in to be bred as early as they did in the past. Consequently, those mares get a later start in the breeding season because people are saving on their board bills. A lot of people with mares who have spotty produce records, where in the past they might have looked into working up video endoscopic exams and things like that, now they’re evaluating the likely returns. They might decide the returns on that mare’s progeny haven’t been satisfactory to me to incur a $500 or $1,000 investment in diagnostics. For some mares that are valuable enough to do those things, a client might do them, but people are taking things step by step rather than a carte-blanche for diagnostics.
“Some of the cosmetic corrective procedures, some people are backing away from it to save money if they feel they haven’t gotten a lot of return in the past on those things. Some people are relying more on what their blacksmiths might be able to do for them, and other people are just letting those yearlings be what they’re going to be.
“We’ve been fortunate enough to retain our full-time staff, but we’ve really had to cut back on seasonal, part-time staff. You see veterinarians leave the area that aren’t able to stay in this particular economic climate, and that’s tough. But the population of horses is in flux, and you’re filling the need that’s here and supporting what you can support. We’re still hiring a fair number of interns in the hospital, but for field internships, I really only need a couple a year, where at the height of the industry I was hiring five to six interns a year.
“I’ll be able to say it’s stabilized when my clients say they’re not down more this year than last year in numbers. But right now everybody I’ve got says they’ve got fewer mares. That’s fewer foals from last year and fewer yearlings. There’s been a good volume contraction, and I don’t sense that it’s finished.”
The Supplier: Nancy Clinkinbeard, Breeder’s Supply Company
Nancy Clinkinbeard and her brother Ted operate the wholesale distributor Breeder’s Supply Company, which provides a variety of equipment and feed supplements to retailers that serve the racing, breeding, farrier, and cattle industries. The company is located in Lexington but also supplies stores beyond Kentucky’s borders. Clinkinbeard says collections are up, and she has seen some dealers fail during a recession she believes is broader and more severe than other downturns, such as the one in the late 1980s.
“We sell a lot of merchandise that is strictly racetrack-related, and that definitely has been impacted. I see my customers on the track not ordering nearly what they used to. I attribute some of that to competition; I have more competitors coming into Kentucky because we’re so centrally located, and that’s downturn-driven, too, because companies are going farther afield looking for business. But Turfway is running three days a week right now when they used to run five days in the winter. That’s fewer races where a horse doesn’t need Vetrap, doesn’t need liniment, doesn’t need this and that, that we sell. The number of horse blankets we sell for the winter going into the November (breeding stock) sales, and that number is down. Everything across the board is down because the number of horses is down. One of the first things we saw when the downturn started is that people quit buying feed supplements. They could only afford to buy hay and oats, so the first thing they did was to cut out some of these expensive supplements.
“Farriers definitely also are seeing an impact. Their work ebbs and flows with the weather, too, but I do know of people who maybe used to get their broodmares trimmed every month to six weeks, and now they’re skipping a rotation.
“We’re seeing a real uptick in generic products. We’re a member of a buying co-op, and we’re increasing our horse-care line with them. They have good, generic joint supplements and electrolytes and basic vitamins. People are gravitating toward that.
“We’re seeing a lot of our dealer stores that used to buy a lot of stuff ahead, they’re buying smaller amounts and turning their inventory more. They can’t afford to take the chance on sitting on inventory.
“Last year, our business was off a little, but pretty flat. Flat is good right now. We’re working on much tighter receivables and keeping a much tighter hand on people.
“It’s not fun right now, but, being a horse breeder, you’re always eternally optimistic that something good is coming down the road. Every year, we’ve got the new foal crop coming, and everybody thinks, ‘There’s your Derby winner,’ you hope. If you’re not optimistic, you can’t be in this business.”