02/10/2011 3:24PM

Florida breeding feels brunt of declines

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Barbara D. Livingston
Despite its dwindling numbers in recent years, Florida has produced several top notch racehorses, including Awesome Feather, last year's champion 2-year-old filly.

OCALA, Fla. – Perhaps as much as anyone, Brent Fernung is the face of the horse industry in this sprawling town. Fernung has been an Ocala mainstay since migrating from southern Indiana in 1976, and although his business is faring better than average, he is not without his woes.

“I’m fortunate in that my horses are doing well,” said Fernung, 57. “But it’s sure not like I hit the lottery. I’m struggling to pay my bills like everybody else.”

The horsemen of Ocala, much like their brethren in central Kentucky, have been deeply affected in the last few years by a combination of negative trends in the breeding business. The number of Thoroughbred mares bred in Florida from 2007 to 2010 fell by more than half, from 6,383 to 3,076, according to Jockey Club statistics, a whopping decrease for a breeding state long recognized as second only to Kentucky.

Fernung and his wife, Crystal, operate Journeyman Stud, the former Sez Who property in the southeast sector of Marion County. On a recent rainy morning, as a two-day mixed sale of breeding and racing stock was set to commence at the nearby Ocala Breeders’ Sales Co., Fernung was shuttling between his farm and two barns that he was operating out of at OBS – one for training the 2-year-olds he will ultimately bring to sale and the other for a modest consignment he intended to sell at the Jan. 18-19 mixed sale.

“Everybody knows the industry is contracting,” said Fernung, a member of the board of directors of the Florida Thoroughbred Breeders and Owners Association, whose headquarters are a few doors down from Ocala Breeders’ Sales. “In Florida, it’s contracting quicker because of people trying to take advantage of states up north with the big-money programs from slots.”

States where racetracks offer purses enhanced with slots and other alternative-gaming revenue, such as Pennsylvania, Indiana, Louisiana, West Virginia, and New York, have seen significant increases in interest in their breeding programs because of rich incentive programs tethered to those gambling games. Kentucky, which has no alternative gaming, has been weakened in recent years, in large part because of the recession but also because of what the competing states have to offer. Although Florida does have alternative gaming, its program has still lost ground.

Huge breeding operations such as Adena Springs, Farnsworth Farms, and Padua Stables are no longer in Florida, and other farms that once produced sizable numbers of foals have also closed or left the state.

“Maybe we haven’t sunk to the level I remember here in 1988-89 in the aftermath of the last major crash we had, where a lot of places you went, you saw ‘for sale’ signs or farms boarded up,” Fernung said. “But getting paid stud fees has never been harder. People are struggling to pay them and to stay in business. I know we’re constantly working on getting paid. Our collections aren’t in the danger-danger area, but it’s a lot tougher than it was before. It’s a fairly recent phenomenon since the economy changed. It’s not a lot different than what they’re seeing in Kentucky, although they’re owed larger amounts. There’s major concern going around from everyone in the horse business.”

Fernung owns 45 broodmares – “more than I’ve ever had in my life,” he said – while offering the services of 14 stallions, including Wildcat Heir, Awesome of Course, and Bwana Charlie. Wildcat Heir was the leading sire in Florida in 2010 with nearly $4.6 million in progeny earnings. Awesome of Course is the sire of Awesome Feather, the Eclipse Award-winning filly of 2010, and Bwana Charlie is the sire of Comma to the Top, winner of the Grade 1 CashCall Futurity at Hollywood Park in December.

Despite the dwindling numbers, Florida remains a force in North American racing. Three Florida-breds – Awesome Feather, Big Drama, and Dubai Majesty – were divisional Eclipse winners in 2010, and 3-year-old colts such as Comma to the Top, Mucho Macho Man, Gourmet Dinner, and Decisive Moment are among the hopefuls for the Triple Crown this year.

Florida has a long and proud history of producing great racehorses. The main corridor at Ocala Breeders’ Sales Co. is adorned with several dozen action photographs of Florida-breds, including six Kentucky Derby winners and six of Horses of the Year. But there is no question that Florida horsemen are uneasy about the state of affairs.

“The economy has certainly had a major impact around here, but that holds true for other industries,” said Tom Ventura, sales director for OBS since 1994. “People have just pulled back and lowered their holdings. But we think there are still a lot of good reasons for people to be active in this business.”

Ventura said gross sales at OBS have slumped from about $122 million in 2006 to just more than $65 million in 2010, with the most dramatic drop coming from 2008 ($103 million) to 2009 ($70 million). Likewise, the numbers of horses being sold also have decreased substantially, from more than 4,000 in 2006 to about 2,500 last year.

Including the January mixed sale, OBS will conduct seven sales spread over 16 days this year, with the most lucrative being the March 15-16 sale of select 2-year-olds in training. For 2011, OBS has scrapped its traditional February sale of 2-year-olds, partly because of the lower numbers of available horses but also to make the March sale more attractive to buyers.

Officials with OBS and the owners’ and breeders’ association are guardedly optimistic that fears concerning the breeding industry can be allayed by stimulus initiatives that recently went into effect, such as diverting stallion awards into race purses, along with a reduction of the state tax on slot revenue from 50 to 35 percent.

Leaders of the breeding industry also are operating on the hope that purses at Gulfstream Park and Calder will grow significantly in the coming years now that their slots and card-room operations are becoming further entrenched. Their logical assumption is that more attractive purses and breeders’ awards at Florida tracks will indeed spur sales of Florida-bred horses. Slots revenues are accrued through contract between tracks and horsemen, not through statute.

At Gulfstream, where there are about 850 slot machines, the contribution to purses from net slots revenue was expected to double from just under 7 percent to 14 percent this year. The per-day purse average at Gulfstream, including stakes, is about $350,000.

A 10-year agreement at Calder, where more than 1,200 slots machines have been operational for just over a year, calls for a minimum of 6.75 percent of slots revenue to go to purses, which averaged roughly $175,000 during their eight months of racing in 2010.

Breeders’ awards from slots revenue are about 1 percent at both tracks. Poker revenue from both tracks is minimal in comparison to the slots, with certain percentages allocated to purses and breeders’ awards.

Meanwhile, the malaise that has gripped the breeding market for the last two-plus years is showing signs of easing, according to Ventura. “There certainly has been some leveling off of the market since last fall,” he said. “I think there’s a feeling that we’ve seen the worst of it, and we’re starting to climb our way out.”

Ventura predicted the March sale would be very good.

“It will have about 500 horses – selected, quality horses,” he said. “I’d say the average sales price will be in the range of $100,000.”

The April sale of 2-year-olds, which Ventura said is “a sale with a horse for everyone,” will offer about 1,300 head.

Fred Brei, president of the Florida Thoroughbred Breeders and Owners Association, recently said Florida breeders need to “gut it out” while weathering the recession and looking for the Thoroughbred market to rebound and/or stabilize. Brei bred and owned Awesome Feather before selling her at auction for $2.3 million shortly after the filly capped an undefeated season by winning the Breeders’ Cup Juvenile Fillies on Nov. 5.

“The overall program is still in place and is still successful, given our times,” he said. “Our board is absolutely convinced we need an overall, ongoing racing program in Florida to keep our Florida-breds going. It’s the only way we’re going to get our Florida-bred owners back.”

Get beyond the commercial district on the southern end of town, and there are plenty of open spaces in Ocala. According to the owners’ and breeders’ association, there are about 600 Thoroughbred farms and training centers in Florida, and more than 75 percent are in Marion County. Horsemen here are about to get into their foaling season in earnest, followed by another breeding season. A quiet recent Sunday morning in farm country belied the bustling activity that typically transpires here.

In some stretches, there are obvious clues as to how closely linked one business is to another: a feed store, a tack shop, and a farrier shop are just down the road from the FTBOA and OBS, and there are many other horse-related businesses to be seen in the outlying areas.

“Let’s face it, this is a great place to raise horses,” Fernung said. “You’ve got the farm and training facilities, the service staff, the veterinary services, the farriers, the sales companies, everything to handle the quantity of business that we do here. There’s only one other area in the country like it, and that’s Lexington.

“Right now, people are desperate,” he said. “Somewhere like Indiana or Pennsylvania or Louisiana might look very encouraging to people who have nothing. But if the economy improves and our racing industry keeps holding its own, we’re going to be back where we were, maybe in four or five years, hopefully even before that. I’m very confident of that. I know that at this time of year, in a good economy, you’d rather be down here than in Pennsylvania or New York. I know, because I’ve been there. It’s all set up for the business we’re in right here.”

– additional reporting by Glenye Cain Oakford