Recession hits home.... wanna buy a horse mister?

[Boscar Obarra]

Stallion Fees Sink as Financial Crisis Hits Thoroughbred Market

By David Papadopoulos

Oct. 16 (Bloomberg) -- Claiborne Farm, the 93-year-old breeding company that housed Triple-Crown winner Secretariat, slashed mating fees this month, a move that may signal the start of the thoroughbred industry\'s biggest slump in two decades.

``We decided to show some concern and cut where we can,\'\' said Bernie Sams, who oversees Claiborne\'s stallion operation in Paris, Kentucky. Sams lowered fees on five of the farm\'s 13 sires by an average of 30 percent for the 2009 breeding season.

The global financial crisis that has erased trillions of dollars in stock market value is curtailing demand for thoroughbreds in auctions across the U.S. and Europe as breeders flood the market with record numbers of horses. As auction prices plunge from near-record highs, so do the fees of up to $300,000- per-mating that breeders can charge.

``That discretionary income just isn\'t there for horses anymore,\'\' University of Louisville basketball coach Rick Pitino, who owns thoroughbreds in a racing partnership, said in an interview in New York. ``It\'s difficult.\'\'

Thirteen yearlings, or one-year-old horses, fetched more than $1 million at a sale last month at Lexington, Kentucky-based Keeneland Association Inc., the world\'s biggest thoroughbred market. Last year, 24 horses topped that price.

Demand was also weak for the cheapest horses. The average price on the sale\'s final day was $7,621, down 16 percent from 2007. Keeneland catalogued a record 5,555 yearlings this year as a 15-year sales boom fueled in part by purchases by Sheikh Mohammed bin Rashid al-Maktoum, the billionaire ruler of Dubai, prompted breeders to ramp up production.

`Ride Them or Eat Them\'

``We are plagued by a vast oversupply,\'\' James Squires, a 65-year-old breeder, said in a telephone interview from his farm in Versailles, Kentucky. He managed to sell one of the seven yearlings he took to auctions this year. ``You can\'t give them away. We\'re going to have to ride them or eat them.\'\'

Squires, who bred 2001 Kentucky Derby winner Monarchos, said he\'s pared his operation to stem losses. He and his wife today have full or partial stakes in 10 broodmares -- female horses used for breeding. Three years ago, they had 20.

Claiborne\'s stud fee reductions will set a precedent as broodmare owners such as Squires scale back, Baden ``Buzz\'\' Chace, a 67-year-old bloodstock agent who buys thoroughbreds for clients, said in an interview on his way to Monmouth Park Racetrack in Oceanport, New Jersey.

`Too Many Bad Horses\'

``There are too many bad horses out there,\'\' said Chace, whose clients include Barry K. Schwartz, co-founder of Calvin Klein Inc., and Norma Hess, the widow of Leon Hess, former chairman of the oil company now known as Hess Corp.

Chace predicts a 30 percent average stud fee drop for the 2009 season, which runs from February to July. A sire can produce 100 foals or more in those months. That adds up to annual revenue of about $30 million on the most expensive stallions, such as WinStar Farm LLC\'s Distorted Humor.

WinStar is considering cutting fees on some of its five sires, Doug Cauthen, president of the Versailles-based farm, said in a telephone interview. ``It\'s too soon to say\'\' whether Distorted Humor\'s $300,000 fee will be lowered, said Cauthen, who forecasts an industrywide decline of up to 20 percent.

The sales slump halts a surge in the thoroughbred market that was driven in part by bidding wars between Sheikh Mohammed, the world\'s biggest buyer of racehorses, and his main rival, Irish breeder John Magnier.

Record Prices

Tussles between the two left several records: highest price for a yearling in two decades; highest price ever for a two- year-old; most ever paid for a broodmare.

Sheikh Mohammed has pared his spending at auctions the past two years as he boosted investment in his breeding operations. He spent an average of $18 million at Keeneland\'s September sales in 2007 and 2008, down more than half from a $39 million average over the previous four years.

The sheikh\'s retrenchment has helped make the ``very top\'\' of the market one of the weakest segments, said Olin Gentry, president of Gaines-Gentry Thoroughbreds, a Lexington-based company that owns about 100 broodmares and has minority stakes in more than 25 stallions. Gentry said he\'ll breed fewer mares next year to sires with fees over $100,000, opting instead for mid-market stallions -- those in the $20,000-to-$100,000 range.

The ``very bottom,\'\' where small-scale breeders such as Squires often sell, has also been hard hit, Gentry said.

``There are some horses that should become pets,\'\' Gentry said in a telephone interview from Newmarket, England, where he was attending a sale at Tattersalls, the world\'s oldest thoroughbred auctioneer. ``I don\'t know how they can be bred in the best of times. It\'s really impossible to make a return.\'\'

It has been for Squires.

He said he needs to generate $600,000 a year to cover his costs. So far this year he\'s taken in just $20,000. He\'s considering selling his best broodmare to pay down a credit line of almost $400,000 that he\'s maxed out.

``Guys like me,\'\' Squires said, ``are doomed.\'\'

[sighthound]

Unfortunately, nobody wants to buy a horse.  It costs just as much to feed the $2500 claimer as it does Curlin.  Plenty of horses available for free.  

\"Killer prices\" used to always be about $500.  Now the killer man isn\'t at sales, so that last resort isn\'t there for sellers.  Horses (of a variety of breeds) are getting turned loose in the west to fend for themselves, they are abandoned at auction houses when they don\'t sell, they are found starving in back fields.  

There are too many horses, there are far too many bad horses, and it\'s going to get worse and more ugly over the short term.   The TB foal crop numbers need to drop by a significant number, probably 20-30%.

What do you do with a healthy, sound young horse you can\'t afford to feed, but nobody will take off your hands for even $1000? or $500?

[miff]

\"There are too many horses, there are far too many bad horses, and it\'s going to get worse and more ugly over the short term. The TB foal crop numbers need to drop by a significant number, probably 20-30%\"


Hi Sight,

The main problem is the States encourage breeding mostly garbage with their State Bred incentive programs.Anyone with a mare, a few grand, and a decent sized back yard is a breeder.

The State Bred program in New York, for example,is responsible for the embarrassing quality of many weekday race cards put on by NYRA at Aqueduct.Breed less and race less is partially the answer.The money hungry politicians(bleeding the game) won\'t reduce the number of mandated racing dates, so these slow NY BRED rats are needed to fill the entry box.

Mike

[richiebee]

Miff:

Nobody has hammered the NY Greeders and the quality of day to day NY racing
more than I have.

That being said, the NY Showcase races being run tomorrow present some
interesting wagering opportunities and some good sized fields.

[marcus]

IMO - Maybe making arrangements for a Thoroughbred Race Horse\'s retirement etc in advance of purchase for purposes of racing is the way to go .  Why not get more of these Equine Rights groups involved to actually help in the ( retirement from racing ) process or take an over-site position ...

[miff]

Check out DRF,the PETA animal loons are at it again.They are requesting that the owners of Big Brown neuter him instead of sending him to stud.Their reason is because he is a descendant of Native Dancer who they believe has an unsound lineage.

Hee Hee,love those loons,thinking of joining PETA myself.

Mike

[marcus]

Point well Taken - talk about a conundrum ... Doesn\'t sound like your average \"Lunch At The Opera\" crowd - Sign me up !
Big Brown\'s really hearing foot steps now away from the track ...

Just found this interesting \"Nevada horse\'s brush with fame \" story link . http://today.msnbc.msn.com/id/27241113?GT1=43001

[sighthound]

I like the local breeder incentive programs - it\'s old-fashioned.  Stand a good stallion at your farm, breed your mares to him; trade out a few seasons with your neighbors stallion when you need new blood.   It\'s what was there before stallion stations and making money came in, before Leslie Combs went into syndication of stallions in a big way.

I think the problem is more the second part you touched upon - too many racing days, no time off, need horses to fill that.

I agree that anybody with any mare has bred her in the past 10-15 years.  There is no market for breeding cheap mares any more, unless you intend to race them yourself.

Like the financial markets, I think it\'s an equine market correction long overdue.

[miff]

\"Nobody has hammered the NY Greeders and the quality of day to day NY racing
more than I have.

That being said, the NY Showcase races being run tomorrow present some
interesting wagering opportunities and some good sized fields.\"

Bee,

...these are the exceptions, they can run.


mike

[richiebee]

Miff probably could shed more light on this than I can, but NYRA has announced a
purse cut for winter racing months.

Also announced, free parking and admission for winter racing, which allows NYRA
to...

...also announce layoffs, mostly of the people who take admission money and park
cars.

Also announced, NYRA has no intention of going synthetic, and Mr. Charles
Hayward told DRF that there seemed to be no strong proponents for synthetic on
the NYRA backside or within the NYRA organization.

Seen this week in the Daily News, pictures of a futuristic Aquacino.
Documentation of millions of dollars to be spent on casino, hotel, restaurants,
bars,entertainment venue, etc. The Stronach model if you will, the difference
being that Frankstro ruined a beloved race track, but any improvements to the
current AQ will be welcome. And by the way, there was not a single mention of
Racing in the entire article.

[Boscar Obarra]

\"And by the way, there was not a single mention of
Racing in the entire article.\"

 Probably because the slot players won\'t notice the racing as they gaze lovingly at the cherries. Mensa crowd, ya know.