HORSE RACING : Rock-Bottom Stud Fees Are Raising Hope

When Deputed Testamony won the Preakness in 1983, trainer and breeder Bill Boniface might have thought that he had struck gold.

The thoroughbred breeding business was booming, with the prices for stallions and mares reaching unprecedented levels.

Deputed Testamony wasn’t a fashionable horse, but even he would command a $25,000 stud fee when he was retired to Boniface’s Bonita Farm in Maryland.

According to the rule of thumb that a young stallion is worth 200 times his stud fee, he was a $5 million animal.

Boniface found these figures as dizzying as everyone else in the business. “Everything was escalating,” he said. “I believed there was no end to it.”

Of course, there was an end--a crashing end. By one measurement of the industry’s economic health--stud fees--the horse market has hit bottom in 1992.

Deputed Testamony has proved himself an unqualified success as a stallion, a sire of tough, durable runners, but as Boniface contemplated what the market would bear, he slashed the horse’s stud fee from the 1991 price of $5,000 to $3,500 this year.

That’s an 86% drop from his peak value, and it is typical of what has happened throughout the industry. Even the most famous horses in the world have not been immune from the plunge.

Seattle Slew once commanded a $750,000 stud fee; he is still one of the world’s most important stallions, but breeding a mare to him now costs $120,000.

Conquistador Cielo’s fee has dropped from $200,000 to $20,000 and Spectacular Bid’s from $150,000 to $15,000. The collapse of the market has caused countless bankruptcies and defaults, but now some optimists can argue that the industry is on the brink of a recovery.

The woes of breeders in recent years are a direct result of the excesses of the early ‘80s.

So many people shared the optimism that Boniface described--the belief that “there was no end to it”--that they paid prices for stallions and mares that they could never recover when the market turned downward.

The ones who leveraged themselves heavily to make these purchases--such as Calumet Farm--went bankrupt. Everybody was hurt. And, as a double whammy, changes in the tax laws suddenly made breeding and owning thoroughbreds less attractive.

People who owned mares started to make this calculation: If I pay X dollars for a stud fee and Y dollars to raise the foal, what are my chances of making a profit by selling that foal or bringing him to the races? The answers were often so discouraging that the owners of mares decided not to breed them at all.

“It’s amazing,” Boniface said, “that there are so many people who have broodmares who are not breeding them this year.”

Everybody in the business sees the same attitude. At Country Life Farm in Bel Air, Md., business manager Michael Pons put it simply: “Nobody wants mares.”

He said even the farm’s clients who are solidly committed to the sport may have trimmed the number of mares they own. So there are all kinds of downward pressures on stud fees.

Since the costs of raising a foal aren’t dropping, and purse money he might win isn’t increasing, the only way to make the financial equation more attractive is to lower the cost of breeding a mare to a stallion. Moreover, the laws of supply and demand will drive down fees, simply because there is so much less demand.

Country Life Farm has some young stallions for whom there is a demand, but Pons said the farm has cut its prices or kept them low to keep them competitive.

Allen’s Prospect was so popular last year he was bred to 90 mares for a $7,500 fee, but this year Pons reduced his price to $6,000 anyway. “Darwin would love this,” Pons said. “Survival of the fittest is what we’re seeing.”

Stud fees have reached such a rock-bottom level in 1992 that the prices for many stallions are beginning to look almost irresistible.

Bill Oppenheim, editor of an industry newsletter, said: “If you’re just getting into the market now, or if you have any money left, there are some very positive implications. The odds still aren’t in your favor, but your chances of making money are much improved.”

There is definitely light at the end of the tunnel. But breeders may hope that when the recovery finally occurs, it will be in the form of a gradual, sane pattern of growth instead of the wild boom-and-bust cycle that has left breeders in their present predicament.