Best and Worst Stud Fees Values for 2007

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.

Third, breeders also have foal specific risk that they must contend with. Foals can be born with deformities, bad conformation or be too small in size to be commercial. Even the best matings produce less than ideal offspring. In an environment were only 23% of foals produced are actually profitable for breeders, anything less than an ideal foal can create a loss for breeders in the sale ring.

Finally, there is stallion specific risk, which means the risk that the stallion used will fall out of fashion. Many stallions that are ‘hot’ or commercial at the time that the breeder pays the stud fee can have a couple of off years and lose commercial appeal by the time the yearlings hit the sale ring.

Breeders may diversify and diminish the last three risks by increasing the number of mares they own and breeding to different stallions, this is why partnerships make sense in the breeding business. But breeders will always be exposed to market risk. Because of this, it is important for commercial breeders to carefully monitor the costs of their operation. The single largest cost that a breeder faces, by far, is the price of stud fees. Therefore, it is critical for breeders to demand value when selecting a stud for their mares.

The single best investment for commercial breeders in recent years has been to breed to first year stallions and selling the resulting foals in public auction. Breeders that breed to race, however, would be well advised not to use first year stallions; there is little value in them if you do not offer their first foals for sale because of their high initial stud fees. Rather, if a breeder feels strongly about using a recently retired race horse, it would be better for them to wait until the sire’s third or fourth season at stud. The gamble is better because breeders would have more information on the sire, for example by examining the weanlings or yearlings of that sire and they would be able to purchase the season at a discount since most sire’s fees are reduced during their third or fourth season at stud.

There are still very good values to be found in proven older stallions for both commercial breeders and those that want to breed to race. The following list provides my analysis of the best and worst stud fees of 2007. This list does not mean to criticize the quality of a given stallion but rather explore the value that the stud fee provides to breeders. I have divided the list in two, one for stallions whose stud fee is above $25,000 and one for those whose stud fee is below that amount.

Stallions with Stud Fees Above $25,000

Worst Values

Maria’s Mon ($60,000) Having produced stakes winners like Strong Contender, High Limit and the sensational Wait a While in 2006; the stud fee for Maria’s Mon has increased a whopping 140% from the previous year, the largest fee increase of any stallion. He has an average earning index of only 1.61, the lowest of any stallion standing for over $50,000. He produces only 5% stakes winners from foals, also one of the lowest percentages for stallions in his price range. Maria’s Mon represented very good value last year when he was standing for a $25,000 stud fee. This year’s increase has gone too far and offers absolutely no value to breeders whether breading to race or to sell.

Mr. Greeley ($75,000) One of the best and most valuable labels a stallion can receive is to be deemed a ‘sire of sires’ by the market. And so it has been with Mr. Greeley and the success of one of his sons, El Corredor. As El Corredor established himself as a very useful sire, Mr. Greeley’s foals began to exceed all expectations in the sale ring, with yearlings selling for as much as $5,700,000. Before all this happened Mr. Greeley had been struggling and he had seen his fee dropped to $35,000, and he was a great buy at that price. His current fee represents a 114% increase over 2006 but his fundamentals have not changed much. His Average Earning Index of 1.46 is pathetically low for a $75K sire. He also produces only 4.9% stakes winners from foals. He represents an extremely poor value for breeders that breed to race and commercial breeders may find the market disenchanted with Mr. Greeley if those high priced yearlings do not perform to expectation.

Best Values

Smart Strike ($75,000) what a terrific stallion this guy has been! 2.60 Average Earning Index, his CI is 2.07 so he continuously brings up his mares. He produces an astonishing 10% stakes winners from foals, half of which win graded stakes. I predict that this stallion’s stud fee will soon be in the over $100,000 range as buyers begin to figure out his true value. He is versatile enough so that his progeny win on dirt and turf. He is ideally suited for European buyers and his progeny will probably do very well on polytrack. His only down side is that his foals only sold for a median of $75,000 but these numbers should improve as foals by him out of better mares hit the track.

Successful Appeal ($40,000) what can you say about a sire who produced 9.4% stakes winners from foals and that has an Average Earning Index of 2.50 that were produced from very mediocre mares with a CI 1.35? Answer: That he is a fantastic buy at this level. We are certain that Successful Appeals numbers will improve as the products from better mares hit the track. Whether a breeder breeds to race or sell, he offers great value.

Cozzene ($35,000) there seems to be a bias against older stallions and Cozzene is definitely getting up on years. I personally do not believe that the age of a stallion is such a big issue as long as the stallion is still healthy. So breeders should take advantage of this very low stud fee. With a 2.42 AEI and 8.4% stakes winners from foals breeders cannot go wrong with this guy at this price.

Stallions with Stud Fees Below $25,000

Worst Values

Buddha ($10,000) has gotten to an awful start at stud with only seven winners from 120 foals. He has currently an average earning index of 0.32. Dramatic improvement may be needed for him to maintain any hopes of remaining in KY and even then, Breeders should not be jumping to send him mares at this price after the dismal performance of his two-year olds.

Doneraile Court ($10,000) with a 1.13 AEI he is considered a bad value even in Chile where he has done southern hemisphere duties.

Golden Missile ($10,000) this guy has been given plenty of opportunity as he boast a CI of 2.10 but has not done anything with those opportunies. He only has 2% stakes winners from foals and is another overpriced stallion at Adena that is not worth the asking price.

Best Values

Dehere ($20,000) with an AEI of 2.04 and 5.4% stakes winners, the return of Dehere to KY is good news for breeders. He is very well priced at this level and judging from Dehere’s accomplishment breeders should take advantage of this great value.

Five Star Day ($20,000) has 7.4% stakes winners from foals and consistently improves his mares. Even with a 33% fee increase this year Five Star Day remains a solid purchase at this level.

Mutakddim ($12,500) he has always been very solid and has gotten some high-class runners. It has taken breeders in the US some time to realize just how much quality this guy has. With 1.93 AEI and 5.7% stakes winners, he is worth the price.

Hold that Tiger ($10,000) great looking son of Storm Cat with a fantastic family, he is ¾ brother to Hennessy and ½ brother to Editor’s Note. Won the Grand Criterium G1 in France before placing third in the Breeders Cup Juvenile (after a horrible start). He has plenty of 2yos around who should come out running early. The stud fee for this guy will not stay this low if his first crop shows any ability whatsoever. It is not out of the question that he will be fighting for top honors among his freshman class next year with horses like Empire Maker and Mineshaft producing more late maturing foals. This horse could be the best deal at the price range. This is the year to breed to him and take a chance.

Exchange Rate ($10,000) has done wonders in Florida and remains at the same level as last year. With a 1.90 AEI he should improve by getting better mares than he has so far since his CI is only 1.37. One of the best values today especially for the regional breeders.