Stud Fees

[FiftyYearsPlus]

After reading recent articles in the Blood Horse on stud fees for 2007, I did a few back of the envelope calculations. Here's what I found: Based on the Leading Sires table in the December 9 edition, the aggregate gross earinings before netdown for trainer/jockey % was about $305 M. The aggregate stud fees produced by taking the number of starters times the stud fees was $604 M, or about 2x the gross earnings.
Assuming a two year racing life for these 10,658 runners and factoring in cost estimates for training, boarding the mare and the foal, etc., I arrived at estimated net earnings of $480 M, versus about $1.6 B in costs.
Certainly, the equation looks different for those breeding to sell, but it was noted in the article that "only 27% of the 3,556 yearlings sold (in the Keeneland September sale) were judged to have been hammered down for a profitable price (two times stud fee plus $15,000)."

[Rokeby Forever]

Nice theory, but stud fees are now market driven as opposed to earnings driven. Forestry stands for $125,000 and has only one millionaire offspring (Discreet Cat, thanks to Dubai purses), but his yearlings average 4X the fee and he's capable of siring something like The Green Monkey, so his fee is justified on that basis.

Same with Unbridled's Song - his average runner earns $69,000, but his 2007 stud fee is $225,000. Why the difference? Look at his yearling sales average.

There are some excellent "breed" to race stallions - Evansville Slew, Slew City Slew, Cozzene, Montbrook, even Rahy....but if you're breeding to sell, the value is in the high profile sires with low percentages because everyone is looking for the next two year old breakdown that can get shuttled off to stud (Hennessey, Vindication, horses like that). In sum, don't confuse average earnings with average sales price with foals.

[FiftyYearsPlus]

Ok Rokeby. You are well within the conventional wisdom.
Let's move from the theoretical to a more practical example. Let's skip the also rans and say that I own a mare who has the perfect pedigree and credentials to be accepted to AP Indy. Let's assume further that I pay the $300K stud fee and I sell the foal at the the Keeneland September sale for the average ($519K) or the the median ($450K). Adjusting for the risk that the foal will not be conformationally flawed, have a constricted airway or may become injured or die during the 18 months before the sale, the whole exercise turns into a miniscule return with substantial risk to me the breeder, and a free service to the stallion syndicate.
Once other current and potential market breeders come to the same conclusion, we will all get back to the cash on cash reality of racing earnings.

[ASB]

Its this simple-- stallions in the 20-60 price range return the best bang for your buck in the sales (stallion specific of course). Most newly retired stallions will find themselves in this category as will many of the proven stallions who still have commercial appeal. After foaling, weaning, boarding, etc. costs, a good quality foal out of one of these stallions will turn a profit if spotted right.

Anything at or over 100k fee, is a chance at hitting a "home run". You're playing the cards in hopes that your fee isnt recouped, but quadrupled with a sale-like topper. The past 5 years have shown the best market friendly stallions with little change, and they command the 6 figure fees.

What should be focused on by smaller breeders though, is that investing in a 10k newly retired stallion often pays major dividends. Its almost certainly dependant on the look of the stallion in question and the physical match with your mare, but a large profit can be had quite regularly when playing this level if you use common sense and follow trends.

[Rokeby Forever]

50 Years+ - You're absolutely right, but as ASB points out, the higher priced stallions off the chance of hitting the "Home Run," which every breeder looks for. What I noticed is that conformation ISN'T as critical factor as everyone would have you believe. At Keeneland, i saw A LOT of straightlegged, long pasterned horses bringing BIG $$$....especially true with being straightlegged in the back...I never saw so many as this year and they still sold awfully well. So, the well bred, offset, long pasterned yearling can still well. When you're looking at the "breed to race" type horses, you'll notice that buyers pay a lot more interest in conformation.

[cewright]

This is a great discussion so far. As a newcomer I have struggled to understand the breed to sell market and find it very confusing. Can anyone shed any light on the impact of stallion syndicates and share owners who breed at a price far lower than the so called "market" price? For example take Forestry, was he syndicated and if so what was the price per share?

My hypothesis is the early investors (share owners) in a stud in many cases have bought in at far lower prices than the "spot" or single season buyer who pays a premium for the relatively few breedings that are offered to the general public. The share owners can show an acceptable return and a reasonable profit at a far lower selling price than said spot buyer. Their willingness to accept a lower price then depresses the market making it even more unlikely for the single season buyer to make a profit. Thus, a prudent single season buyer should understand the structure of the syndicate before making the buying decision.

Comments?

Regards

Chuck