Will the Breeding Business Bounce Back?

Each summer, The Equiery publishes a “Mare and Foal” issue, a companion to our winter stallion issue that serves as a brag book for proud foal owners around the Free State. The issue serves to bookend all the stallion marketing just before breeding season, illustrating the grand results of all that breeding testosterone, giving us a sneak peek at what we will eventually see at keurings and inspections, yearling shows and young horse classes.

The Equiery’s “Mare and Foal” issue also provides a quick snapshot on the state of the breeding business…and truth be told, since the economy crashed in 2007, it is almost hard to qualify it as a “business” at this point.

For those struggling with the consequences of the unwanted horse issue, the decimation of breeding as a business cannot come soon enough. There are enough horses in the world, they argue; and breeding horses on the speculation that they might one day be sold is…(fill in the blank with the derogatory term of your choice). For those intent on seeing the concept “business” detached from the action of breeding horses, these should be happy days.

But for those who earn part or all of their living in the breeding business, be they vets or foal-watchers, trainers or handlers, these are hard times.

“Breeders have been hit on both ends with higher costs for feed, hay and bedding,” explains Claire Lacey (Camelot Farm, Clarksville), “and it’s taking longer to move young stock. I do see a reduction in mid-range ‘speculative breeding’ by people who saw breeding as a quick way to make some money. This is probably a good thing given the current situation with so many adult horses needing homes. Breeders have taken a lot of blame for that situation but realistically we want our offspring to go to good homes where they will thrive, perform to their full potential and fulfill their owners’ dreams. That is good ethics and good business.”

The Warning Signs
Although the economy crashed in the fall of 2007, there had been warning signs of impending doom. A significant number of Cassandras read the tea leaves and the spring of 2007 showed a marked decrease in the number of mares bred. By the spring of 2008, almost no one “in their right mind” (as the saying goes) bred their mares. Not only were the prospects of being able to sell the young stock dim, owners had to invest in the upkeep of those horses until they sold, if they ever did. With the declining foal numbers, we may have almost reached the point of zero equine population growth (in which the number of births each year equals the number of deaths).

And, of course, Maryland’s famed and glorious Thoroughbred breeding farms have had a double whammy. Not only must they bear the brunt of a cruel economy, they must suffer the indignity of mare owners fleeing to the slots-fertilized greener pastures of surrounding states. The Jockey Club, which handles all Thoroughbred registrations, can only give complete breeding statistics through the year 2010, but those numbers are gloomy enough…we probably can’t really stomach the 2011 numbers. Here are a few highlights:

Maryland-bred Thoroughbred Foal Crop
2000: 1,212
2005: 846
2010: 574

In 2000, 115 Thoroughbred stallions stood in Maryland; according to The Jockey Club, in 2009 there were only 46.

And it is not just that there are fewer Thoroughbred stallions standing in Maryland, there are fewer active stallions of all breeds. Some breeders have gone out of business and dispersed their stock. Others have not replaced stallions who have retired or died. And some stallions have been gelded. Others gave up the hassle of promoting and managing a stallion, resorting to just breeding their own farm mares.

Likewise, breeders adjusted their number of homebreds as well.

Making Adjustments

By 2009, Vicki G. Carson (Flying Chesterfield Farm, Middleburg, MD) had plenty of babies and young stock that were not selling, so she did not breed any horses in 2009 for 2010 foals, and stopped taking on any new broodmares.

Joanna Kelly (Blue & White Morgans, Jarrettsville) saw the demand for young Morgan horses dry up almost completely. She has sold her stallion (although she retained breeding rights) and has shifted her focus. “My concern was in helping horses get placed in new homes, when their owners could not afford to keep them any longer,” she explains. “I did not want to bring any new horses into the world when so many needed homes.”

Natalie DiBerardinis, General Manager and Breeding Manager for Hilltop Farm in Colora, concurs. “It’s been a hard couple of years for the industry. Sales of young horses has slowed. People are still breeding, but the economy has made them take a hard look at their mares. It’s a tough breeding market, but still active.” Hilltop cut back on breeding mares about four years ago, and now only plan on about 2-4 foals per year.

Future Demand, Future Supply?
Will demand ever rise again? Horse shows and horse trials are reporting higher entry numbers to The Equiery than last year, and when that happens, demand will follow.
Randy Johnson of Greener Pastures in Clarksburg, who breeds warmbloods primarily for jumpers and show hunters, believes that demand is going to rebound in a few years, and there will be fewer horses available to meet that demand. Therefore, he continues to breed a select number of in-house mares every year.

And Randy is not the only stallion owner continuing to breed homebreds. For the owners of breeding farms, who already had the infrastructure in place to foal the mares and raise the young horses and are not therefore paying the boarding rates that owners of individual mares might pay, maintaining a limited stock of homebreds can be more financially feasible.

Like Randy, these breeders are taking a long view, visualizing the horse industry five years hence, when all the old competition horses everyone had nurtured through the bad times (instead of trading in for a newer horse every other year) finally are pastured, and the demand for young horses already under saddle will increase. Given the recent statistics, the supply will be lean, very lean. For those owners who dared to breed during these times, they might very well be in the catbird seat, the only ones with horses to meet the rising demand.

Natalie indicated that that is precisely part of Hilltop’s long-range business plan, and Hilltop does expect to see the demand (and thus prices) increase in the next few years for horses with about six months under saddle.

However, other breeders have not seen the dramatic decrease that some have seen, and perhaps this was because they were smaller, more specialized breeding farms.
Esther Noiles of Wood’s Lane Farm in Mount Airy (which stands three Elite Hanoverian stallions) has continued their limited in-house breeding program of producing three to four foals each year, and reports that they continue to see a steady demand for young horses.

Finding A Niche
Those producing rare breeds seem likewise to be holding their own in this economy. Gypsy Vanner Horse breeder Virginian Mariam Mortenson has always bred, and continues to breed, four or five home mares each year. She notes that Gypsy Vanners are not common in the states, and they are one of the few providers, so when prospective buyers want one of these unique breeds, they have limited options. Their clients tend to be families with children seeking a romantic-looking, easy-to-handle family horse.

Niche marketing does appear to have been the saving grace for many breeders. Claire Lacey reports that her breeding of warmbloods is slow but steady. “My breedings did cut back drastically initially as people took stock of the situation,” she explains, “but [they] came back to pre-2007 levels fairly quickly. My market has really been custom breeding.”

Claire sees some optimistic signs. “We are all adapting to a new status quo. As we are becoming more comfortable with that, I am seeing an increase in interest from mare owners and people looking for a quality young horse to bring on. I do think people were more cautious in taking on a youngster as an extra mouth to feed for a while but I see some recovery in that. If your resources are limited you think more carefully about what you buy, and quality matters. Ultimately we may see consistently better young horses as a result of the recession.”

However, the pony breeders (who might be considered niche) have not experienced that same kind of interest. Mary Benedict, long-time breeder of Section A Welsh Ponies at her Severn Oaks Farm, explains that she is still selling ponies, but at drastically reduced rates. “I do try to sell the young ponies before they have to be broken. Now I seem to be keeping them longer. [I am seeing a] slight increase in requests [for young stock], but my prices are way down.”

The American Connemara Pony Society reported no Maryland foals this year.

On the Rebound?
Vicki Carson is cautiously keeping her toe in the breeding business. “When you stop breeding for a while, it’s kind of a double-edged sword, especially when you have middle-aged and older mares–once you stop breeding them it can be tough to get them started again! I did breed one young mare last year and had a single foal this year. So far, I have bred one mare this year for a 2012 foal, and I will probably wait and see how the industry is doing next year before breeding more mares.”

Joanna Kelly did have two foals this year, and she notes that “the horse business seems to have picked up in the last year and I have sold [some] young horses, and there is new interest in this year’s foal crop. I anticipate that there will always be a demand for good performance horses.” As a result of this uptick in interest, Joanna bred four mares this year.

Bonnie Lorenzen, who breeds Paints and Saddlebreds at her Frederick farm Just The Right Horse, has likewise seen rising interest. “I do see a huge recovery for the horse sales. My sales of young horses has not diminished, and I actually think that more people are recognizing the value of owning a young horse, versus a turn-key horse with their unknown training and not knowing what they are getting.”

For Wendy Costello, who breeds warmbloods at her Kent Island Sporthorses, “We have two new foals, and the interest in our stallions has remained good. I lowered the number of foals I wanted here a bit, but I was never one to bred more than four a year. I sold all of my 2010 foals quickly and one of my 2011 foals is spoken for. I have been lucky to sell foals pretty well for the last few years, particularly when I pushed a bit with my advertising, and reached out more to clients. I sold a yearling and a two-year-old, a three-year-old, and a couple of broodmares, and three foals at fair prices, and sold them quite quickly. One thing, for me, that the economic changes did was to make me be even more realistic about asking price from the start of the sale.”

Dodon Farm’s Steuart Pittman may be the only Thoroughbred breeder in Maryland to have actually had an uptick in breedings for 2011, but he is not breeding for the track. Before the crash, in

the spring of 2007, his sport horse Thoroughbred Salute The Truth bred 29 mares. In 2008, he bred 20; in 2009, he bred 13, hitting a low of eight in 2010, but this year he covered a more reassuring number of 16 mares. And Steuart has likewise noticed a rebound in sales. “We were [breeding] three or four of our own mares per year and cut back to one. The young horses sold well, but not until age four when they can prove themselves. Not many people buy weanling event prospects. Our training business has grown steadily, and is far more profitable and less risky than our breeding business.”

Meanwhile, Hilltop reports that business has remained steady, but that they have had to really work at it. With cooled and frozen semen, clients have 20 stallions from which to choose. For 2011, Hilltop shipped semen out to about 300 mares.

But Hilltop, like so many other farms, has adjusted their business model. They now accept outside foals to raise. “There is a need for foal raising services for people who want to breed, but don’t have a place to keep a foal,” explains Natalie. In 2010, Hilltop had three outsiders; this year they expect 15. Natalie also notes that sales of young horses are active, but the prices are lower.

Raylyn Farm in Frederick County, which has long bred for international show jumpers, likewise anticipates that the breeding industry will rebound, but is going to look a bit different from the breeding industry of old. The modern competitor interested in breeding a valuable sale or competition mare does not want to truncate the mare’s career in order to breed her, but is keenly interested in perpetuating her talent and ability. Marilyn Meredith, daughter of the founders of Raylyn Farm and an internationally acclaimed show jumper, is adapting the family breeding business to this new market by acquiring a herd of over 30 recipient mares for embryo transplants. Now, owners can breed their mare, transfer to resulting embryo to a recipient mare, and continue to compete the mare while the recipient mare has the foal.

The future of the breeding business in Maryland? It will be there…it will just be a different business than it was prior to the crash of the economy in 2007, and that might just be a good thing!

©TheEquiery2011