Commercial Breeders will have to make important decisions soon about what stallions to use in the up and coming breeding season. The decisions they make will have an impact two years from now during the yearling sales of 2009 and later on at the races. Making such a long-term decision carries with it a huge amount of risk. I will touch upon the main risks to which breeders are exposed to each year and give my opinion on the stud fees that offer the best and the worst values for breeders for 2007.

There are four main risks that breeders face.

First, Breeders must contend with market risk. The thoroughbred industry has been going through a bull market in recent years and as a result stud fees have been steadily rising and outpacing the market, especially in the upper stud-fee ranges. Because of this, breeders are seeing their profits diminish. If the market was to fall, breeders will be stuck with significant losses, as the market would not provide them with enough income to cover their costs.

Second, breeders are exposed to mare specific risk. The risk that a mare will not get in-foal, will abort or produce a stillborn foal. In evaluating risks and costs of a breeding program breeders must take into account the fact that mares do not get in foal on certain years. Virtually every healthy mare will miss a year or more during her productive life. This risk increases dramatically as the mare gets older. Read the rest of this entry »

The new breeding season is almost upon us. Starting in early February, stud farms, that are now quiet and peaceful places, will begin to function with the efficiency of large factories. Stallions all over the US will go to ‘work’ and start covering mares that will produce one of the most expensive and beautiful of agricultural products–the racehorse. As the beginning of the season comes closer, no group of stallions invites more speculation and is awaited with more fervor then the freshman Stallions. Fresh off the racetrack, these stallions have nothing but promise ahead of them. Any of them could be the next Northern Dancer, Mr. Prospector or Danehill.

Unfortunately, the reality is that most of these new stallions will fail at stud. This year will bring them the best book of mares they will ever breed to and the highest fees they will earn. Even those that are successful will still charge a lower stud fee in the next year or two. However, breeders know that market demand will be very strong for the first yearlings out of these stallions. They know that there is no better return on investment available to them than the returns that are produced by the offspring of the first year stallion.

It is important to find value when selecting a freshman sire. Although this group consistently produces superior returns than the general market for breeders, overpaying for a stud fee can greatly diminish the upside of the investment.

There are 58 sires with stud fees above $3,000 that are entering stud in the US this year. Below are my predictions of the best and worst values in this group. Read the rest of this entry »