Posts Tagged ‘commercial breeders’

In the most simple terms, without mare owners, stallion farms would have no customers. If stud fees were not reduced and payment schedules relaxed, there would be fewer breeders around for the 2009 breeding season. The changes were fueled by a survival instinct.

There are only a handful of stallion farms continuing what in recent years was the widely accepted policy of stud fees due in September or November of the year of conception. Even some of those holdout farms are showing flexibility on payment schedules. Most stallion operations have changed to a payable when foal stands and nurses program; some in that category offer discounts for breeders who are willing to pay stud fees early. Although the stands and nurses policy has been in place for years at some farms, a number of breeders pointed to the decision by Lane’s End to adopt that policy for 2009 as a bellwether move. Others quickly followed suit.

Two relatively new stallion stations, Darley and Stonewall Farm, have created unique incentive programs for many of their stallions. Some farms that reduced 2009 stud fees in September during the Keeneland yearling sale have come back with a second round of fee reductions because bookings were coming in at an alarmingly slow pace.

“Changing from payable on Sept. 1 to out of proceeds is a huge difference,” one breeder told the Paulick Report. “It gives a breeder two years of the use of his money. It should be the universal policy. It gives breeders the chance to stay in business. And let’s face it, the stallion farms need us. I guess you’ve got to really worry when stallion farms are hit; they’ve been in total control.”

“All the stallion managers announcing reduced fees want to be seen as benefactors,” said breeder Garrett Redmond. “In fact, they are trying to preserve their own business. Mare owners will be short of money next year because their 2008 sales were for less than needed or horses were not sold at all.  They need help to pay fees due when foals stand and nurse in 2009.  Reduction in fees due in spring 2010 will not help.”

“There’s a tendency to think the stallion guys took it to us for a long, long time and we overpaid, and we get even now,” said breeder Craig Bandoroff of Denali Stud. “That’s not totally fair. It’s a market economy ruled by supply and demand. I love the idea of stands and nurses, but if you want to pay on Nov. 1 you get a discount. That’s the best deal going. Payable Sept. 1 was terrible; you hadn’t sold your yearlings yet.”

“The pendulum is definitely swinging back from stallion farms to the mare owner,” said Olin Gentry of Gaines-Gentry Thoroughbreds. “Popularity and demand has allowed some farms to get away with Sept. 1, but there’s more and more pressure to give stands and nurses. There aren’t many holdouts.”

One farm staying with a Sept. 1 policy on some of its stallions is Airdrie Stud. “We believe that everybody has the right and should have the opportunity to set their stud fees according to the way they are the fairest relative to the product they are selling,” said owner Brereton Jones. “We raised Indian Charlie’s fee 50% and he’s already booked full; his fee is due Sept. 1.”

Jones said some other fees will be due at time of foaling. “We work with each breeder who calls in here, and it depends on the stallion they want to breed to; it’s the free enterprise system at its best. We’ll discuss packages with anybody; if someone wants to breed three mares to a stallion, we will work out an arrangement. I think the general attitude of breeders is that Airdrie’s fees have always been extremely fair, and consequently they’ve been successful.”

The key to Airdrie’s fees and schedule, Jones said, is flexibility. “Our policy is geared to the success of both the owners of the stallion and the owners of the mares.”

Darley set all stallion contracts for stands and nurses when it was established at the former Jonabell Farm Sheikh Mohammed purchased in 2001. In 2007, the farm introduced pay from proceeds fees that stallion nominations manager Charlie Boden said is actually a “pay when you sell with forgiveness” policy. “We try to assess the risk on the front end,” Boden said, “but if we’re wrong and the resulting offspring brings half the stud fee, we don’t bill them for the difference.” The policy was introduced a few years earlier at Darley’s stallion operation in England.

“We’re trying to help breeders make a prudent decision in not overbreeding a mare,” Boden said. “It makes more sense to people these days. I think the days of overbreeding mares should be screeching to a halt unless the stallion is overpriced.”

Darley’s policy lets breeders decide whether to pay from proceeds of a weanling or yearling sale. Not all stallions are eligible for the program; Boden said he tries to limit it to stallions standing for $20,000 or less.

Boden also said Darley has offered what he calls a “Grade 1 club” on certain stallions, giving a free season to mares that were Grade 1 winners or Grade 1 producers.

In light of Sheikh Mohammed’s enormous wealth, Boden was asked if these policies were designed to put the squeeze on competing stallion farms. “Sheikh Mohammed wants breeders to make money,” Boden said. “He wants the business to thrive. He’s a fan of the sport and the industry as a whole. He’s not trying to put anyone else out of business. He’s trying to help a breeder raise a top horse at a competitive price. His goal is to perpetuate an industry that he loves.”

Stonewall Farm’s first breeding season was 2006, and in order to make a splash in the industry it adopted several creative incentive plans for breeders. One offered free seasons (for stallions the farm owns wholly) to graded stakes-winning or graded stakes-producing mares. Another provides a free return season to stallions for mares that produced a stakes winner from that stallion. A third policy permits a breeder to come back for a free mating for a mare if it produced a top three weanling price for that sire.

In an effort to reach out to some of the lucrative state incentive programs, Stonewall is now offering a complimentary no-guarantee season for approved mares that will foal in Louisiana, New York or Pennsylvania, in exchange for being named co-breeder (the mare owner would remain the full owner of the foal). By so doing, Stonewall would be eligible for half of the breeders awards in those states.

The programs evolved from Stonewall’s owner, Audrey Haisfield, and her husband, Richard, according to Clark Shepherd, a Stonewall manager and pedigree analyst. “They looked at how things were done in the business and decided it didn’t have to be that way,” he said. “We’ve since seen a lot of other outfits begin to follow suit.”

Will the innovative policies, fee reductions and relaxed payment schedules be enough to help breeders return to profitability?

There seems to be no consensus on that question.

“In the face of the financial crisis, a lot of syndicate managers might be a little too dramatic in fee reductions,” said Olin Gentry, “particularly some of the ones that announced a second round of cuts. People are going to breed their mares; they’re just coming in slower because they are tentative, waiting to see if there are going to be more reductions.

“It’s all a cycle. If you put pressure on stallion values, what people are willing to pay for yearlings is affected. You need a happy medium where it’s fair. You don’t want the stallion owners to make all the money and you don’t want it too easy for the breeder. “

Another breeder boiled it down to a simple good news/bad news scenario.