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Updated on 11/30/2012 5:33PM
Stud fees for 2013 indicate market is stabilizing
By Joe Nevills
The Thoroughbred industry has a number of indicators to show where the market stands, those measures include the number of mares bred, prices paid for yearlings at public auction, and stud fees.
Stud fees are a major economic engine of the breeding industry and go a long way toward determining the health of the sector, which has been under pressure since the Great Recession started in 2008. Stud fees have fallen significantly on average over the past four years as prices for yearlings have declined as have the number of mares bred.
To get an idea on where the market is today, we looked at stud fees for 2013 compared with 2012, by using only those horses who stood for a fee of $7,500 or more in 2012 who also will be at stud in 2013.
For the 162 stallions that stood in North America for $7,500 or more in 2012 that will be at stud in 2013, the average stud fee dropped just 4 percent, from $21,935 to $21,098, showing the market is stabilizing.
As can be seen in the accompanying table, 12 percent of the stallions will have an increased stud fee in 2013, with 57 percent commanding the same fee, and 31.5 percent standing for a reduced rate.
“I think people have just come to grips with reality,” said Ben Taylor, vice president of Taylor Made Stallions in Nicholasville, Ky. “The stud fees have fallen and fallen, and now they’ve gotten to the point where they’ve firmed up a little bit.”
The current stallion market is a far cry from the days when champion sires like Storm Cat could command fees as high as $500,000, but Taylor said the national trend of declining stud fees appears to be moving toward stabilization, at least in the upper and middle markets.
“I think it’s in a holding pattern,” he said. “I think we’ve reached a level where you aren’t going to see many significant increases, but you aren’t going to see many significant decreases, either. I think you’re going to see the number of stallions decline and the prices stay stable.”
Taylor said the segments of the stallion market struggling the most are the lower-priced stallions and unproven sires. The shrinking number of mares being bred each year, and rapidly growing books for the name-brand stallions, have created an especially competitive market where stallions who do not quickly prove themselves are sent to regional markets or sold overseas to make room for new stallions.
The figures back up Taylor’s assessment. Of the 51 stallions expected to stand for a reduced rate next year, 35 of them stood for less than $20,000 in 2012.
“The lower end of the market’s tough,” Taylor said. “But that stud fee at $20,000 and up is pretty solid, because those horses are established, and they’re priced at a competitive level, so it makes it hard for a lot of these new horses to get full books, especially when you’ve got these older horses breeding huge numbers for reasonable prices.
“It used to be a few years ago if you were a multiple Grade 2 winner and won a million dollars, people would be lined up to buy the stallion. Now there’s nobody. If you’re not a Grade 1 winner or a horse that showed a lot of brilliance, you basically don’t have a home. The number of mares bred is going down and the stallions that are active are breeding more numbers, so it leaves less room for these middle-of-the-road horses to operate.”
The price is right
While each farm has its own formula and reasoning for setting its stud fees, there are a few factors that are all but universal.
“I think it’s a combination of performance on the racetrack for stallions that have runners, performance in the sales ring in terms of yearling sales, and then how we anticipate demand,” said Charlie Boden, head of sales at Darley’s American breeding operation, Jonabell Farm, in Lexington, Ky. “Then a fourth factor for us would be internal usage, which for us can be significant sometimes. We are here because of a man who has a lot of broodmares and a great passion for raising and racing his own.”
That man is Sheikh Mohammed bin Rashid al Maktoum, who Boden said has the final say on how the stud fees are set at Darley before they are announced to the public.
When considering a fee change for a veteran sire, Boden said he takes the aforementioned factors into consideration, along with input from Darley’s sales team, which keeps year-round contact with breeders to gauge their interest in their sires.
“Hindsight’s 20-20 and that’s what you use to determine – what sales were like, or how tough it was to get a horse to a target number of mares the prior year determines it, along with commercial market demand for the product as a yearling, and racetrack performance all come into play when you determine the upcoming season.”
For a second straight year, Darley is expected to hold the honor of standing North America’s highest-priced stallion in Bernardini, who will command $150,000. He shared the mantle last year with Darley stablemate Street Cry, whose fee was reduced to $100,000 for 2013, and Three Chimneys Farm’s Dynaformer, who died in April.
“He stood for $150,000 last year, so that’s how we arrived at his fee for this year, based on last year, and the demand for the horse last year and what he’s done to back it up,” Boden said about Bernardini’s fee. “We thought it was appropriate to leave him where he is, and he’s going to be used extensively by Sheikh Mohammed this year for his own mares. We felt the commercial market certainly justified the fee staying the same, not needing a change.”
While adjusting a veteran stallion’s fee can be done based on very tangible indicators from his progeny, setting the price for a new sire entering the breeding shed does not come with the benefit of similar information.
Taylor Made was faced with that task for the upcoming breeding season with newcomer Astrology, a Grade 3 winner and earner of $516,977 who will stand for an inaugural fee of $7,500. In settling on fees for their stallions, Taylor said that he and his brothers get together and come to a consensus on the price and then make a recommendation to the stallion’s other investors.
Taylor said that market awareness is important in making the decision for a new sire, and one of the biggest factors can be what other comparable horses have stood for in their first seasons.
“You just develop a feel for the market on what people are willing to pay and what they anticipate with other comparable-type horses, so you just go from there,” he said. “It’s tough, but you’ve just got to get a feel for the market on what things are worth and price them accordingly. The way I like to look at it is if I’m willing to breed my own mare at that price, everyone else will be, too.”
For farms like Darley that prefer to buy the stallions outright instead of partnering with other investors, the cost of doing business can sometimes factor into a debuting sire’s rate as well.
“It’s not an easy formula to use, but sometimes what you pay for a horse determines what he has to stand for,” Boden said. “I think that’s the case this year with some of the new horses coming on. In the case of a horse that may have been generated as a stallion prospect from our own racing stable, it has to do with his peers and new horses coming on the same year and the kind of level the breeders think they’d fit.”
This year’s class of new sires will once again be a large one, with a significant number of retirees from this year’s 3-year-old crop. With so many stallions bearing short résumés on the track, much less in the breeding shed, entering an already competitive market, Boden speculated that the newcomers might face an uphill battle to get mares.
“There are a large number of new sires going online this year, and I think the available mares for those horses may or may not make it tough for those guys to get what they want,” Boden said. “I think what we’re battling in Kentucky is loss of mares and less people playing the game in general. It has been tougher to get mares at all levels as far as I can tell. Our numbers are down, especially at the lower end, and especially more recently with horses that don’t have runners yet. There’s a bit of an aversion to breeding a mare to an unproven horse, so we’ve found.”
Changes in stud fees for 2013
For North American stallions that stood for $7,500 or more in 2012
Biggest change in stud fees, 2012 to 2013
|Flower Alley||Three Chimneys Farm||KY||7,500||20,000||167%|
|Ghostzapper||Adena Springs Kentucky||KY||20,000||40,000||100%|
|Spring At Last||WinStar Farm||KY||7,500||15,000||100%|
|Scat Daddy||Ashford Stud||KY||17,500||30,000||71%|
|Awesome Again||Adena Springs Kentucky||KY||50,000||75,000||50%|
|Proud Citizen||Airdrie Stud||KY||10,000||15,000||50%|
|Harlan’s Holiday||WinStar Farm||KY||25,000||35,000||40%|
|Macho Uno||Adena Springs Kentucky||KY||15,000||20,000||33%|
|War Front||Claiborne Farm||KY||60,000||80,000||33%|
Biggest change in stud fees, 2012 to 2013
|Sun King||Elite Thoroughbreds||LA||10,000||3,500||-65%|
|Harlington||Hill ‘n’ Dale Farms||KY||7,500||3,500||-53%|
|Pomeroy||Vinery New York||NY||10,000||5,000||-50%|
|Fusaichi Pegasus||Ashford Stud||KY||15,000||7,500||-50%|
|Any Given Saturday||Darley||KY||15,000||7,500||-50%|
|Northern Afleet||Taylor Made Stallions||KY||15,000||8,000||-47%|
|Rockport Harbor||Pin Oak Lane Farm||PA||12,500||7,500||-40%|
|Courageous Cat||Questroyal North||NY||10,000||6,000||-40%|
Just read that Zenyatta is confirmed in foal to War Front. Intriguing.