(Photo : Greig Muir)
“Against the average price of a sire’s progeny,
breeders should be able to make a profit.”
Summerhill Stud CEOSomebody asked at one of our management meetings recently, how it is that some studs are consistently successful over decades, and how they survive on the takings of less fashionable stock, in a business where the highest prices are generally reserved for those with the progeny of the most expensive stallions of the moment.
The logic that the big spending producers seem to apply, is to follow fashion at all costs, which effectively means sending your mares to the horse or horses that have just posted the best figures at the premier sales of the year. That means, in the context of the just-concluded Tattersalls Highflyer Sale in England; Galileo, Montjeu, Oasis Dream and Dansili. Just a year ago, it was Galileo, Dubawi, Shamardal, Pivotal and Oasis Dream, which illustrates how fickle we can be. Just two of the hot markers of last year were still the “flavour” a year later, while the evergreen Pivotal, Dubawi and Shamardal were hardly sighted, despite their obvious class. If you’re looking for value today, as a European breeder, you could probably get yourself a pretty good deal right now to the “discards” (Pivotal etc) for the 2012 season, and catch the market on the stallion’s rebound.
The problem with the “fashion” approach, if you’re in the game to last, is that to get to the high-flying stallions you have to pay a king’s ransom, and that means devoting an awful lot of money towards their service fees, a gamble which is almost as capable of delivering ordinary results, as it can the superior individual. Of course, when you get a good one, you hit the jackpot, and that sometimes makes up for the sins of the others, but it doesn’t always work out that way. Another way of expressing the risks associated with visiting the most expensive horses, is that fashion comes and fashion goes, as evidenced by the example of Pivotal and co, and you end up carrying the baby.
At the same time, if you have a budget to live by, dedicating too much of it to a single mare in an attempt to hit the jackpot, means betting the farm on one outcome alone, whilst denying the broader church in your broodmare band access to less expensive, but legitimate stallions. It is true, stallions like Galileo (or in South Africa’s case, his counterpart, the “poor man’s” version; Jet Master) consistently produce the goods, but over a period of years, the difference between the very top and the next tier, is not that pronounced, whilst there’s often a chasm between what you pay for the one and the relatively sober cost of the other. If you do the arithmetic on their rate of return (income against service fee), most times, you’ll find you’ve done better with the less expensive sire.
There are not too many operations in South Africa, which concentrate their resources on the acquisition of high-class broodmare prospects, and specialize in breeding quality racehorses by outside stallions. In the process, these operations allow themselves the liberty of choosing from year-to-year the stallions they wish to use, as opposed to being bound to their own in-house horses, or of patronising stallions in which they own shares, either because they stand the horse or happen to own the share.
In the UK and Ireland however, there are several of these specialist operations which have been breeding fine racehorses for many years and these include David and Diane Nagle’sBarronstown Stud, Egon Weinfeld’sMeon Valley Stud, and Pat O’ Kelly’sKilcairn Stud in Ireland. These famous operations have never stood a stallion, and so they have the pick of the British Isles and Ireland when it comes to the selection of mates for their mares, and it’s quite amazing how, year after year, they churn out some of the best horses in Europe. While they’ve occasionally succumbed to the temptation to stand the odd stallion, the Niarchos family’s Haras de Fresnay Le Buffard is very much in the same mould; the Niarchos female lines are so good, several of the leading operations in Europe have acquired some of their best mares from Niarchos culls. To illustrate the depth of the Niarchos families, the accomplished local stallion, Mogok, is an unraced cull from their European operation.
Since he appears to be the horse on everybody’s lips because of the trials his Ready To Run horses have posted, it’s worth mentioning that Mullins Bay is another distinguished product of Meon Valley, and it’s enlightening to look at what they consigned to the Highflyer Sale a fortnight ago, as an indication of the strategies they’ve employed in sustaining their position at the forefront of European breeders.
Their consignment included sons and daughters of the established (but slightly off-the-top) stallions, Cape Cross, Danehill Dancer, Singspiel, Medicean and Footstepsinthesand, with a sprinkling of first season sires in Dewhurst and Derby hero, New Approach (who enjoyed a wonderful start at the sale) and another Dewhurst and Derby winner, Sir Percy (emphasis here on two major racehorses, and winners of the same two events at the top level, at two and three). All the proven sires have strong track records at stud, and might have been champion sires in a less competitive environment, each having displayed the ability to produce the outstanding horse when the chips are down, whilst not commanding the heady stud fees of a Galileo. Don’t get me wrong: anyone who tells you he wouldn’t want to breed to Galileo is a “fibber”. If you can afford it, it’s the greatest no-brainer in the game. The question is, can you, or better still, can your broodmare band, afford it. Of course, if John Magnier is your mate, fill your boots, or go the other affordable route, and do a foal share, which means he contributes the stud fee.
To bring this issue closer to home, we revisit our own domestic scene. Given their pre-eminence as the leading sires of Stakes winners Western Winter, Fort Wood and Jet Master richly deserve their place at the top of the stud fee table. The question is, what should the top stud fees be?
We’ve always lived by the adage that, against the average price of a sire’s progeny, breeders should be able to make a profit. In the end, it’s the only sustainable solution. That won’t stop some horses failing to return a positive outcome, but in broad terms, it gives most producers a chance. In the context of a stud fee approaching a quarter of a million Rand (as it was at the time of conception), payable upfront, (with a live foal guarantee it should be said,) and adding a R100,000 to R120,000 for the costs of the keep and amortization of the broodmare, the foal, the holding cost on your money, the cost of marketing and the commission payable to the sales company, we would estimate an outlay of the order of R370,000 for the progeny of such a stallion. It’s illuminating, in that context, to visit the results of the National Yearling Sale, where the combined offering for the three top stallions was 74; 69 of which were sold, and a disappointing 41 failed to make their costs of production. There will be those who’ll tell you, that’s how markets work. And if you buy at the top, it’s the risk you take. Having attended the 2011 AGM of one of the world’s best risk managers, Warren Buffet’sBerkshire Hathaway, I’m tempted to remember, “Price is what you pay. Value is what you get”, and another pearler, “It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.”
Twenty years ago at an international breeder’s conference in Paris, I was asked by Sir Ivor’s celebrated breeder, Alice Chandler (whose Mill Ridge Farm has been perennially among the top breeders in the United States) what strategies we employed in the selection of stallions, and whether our game plan included the patronage of those horses whose service fees had reached the stars. It seemed we were both on the same wavelength. Our search was for horses whose service fees represented value, and upon whom we could rely for a stream of good horses, without breaking the bank. Both of us are what Bob Marley called the “buffalo soldiers”, fighting for survival. The fact is we’re still going, as are most of the top studs in Europe, following a similar approach. By contrast, the “fashionistas” tend to have a shorter life expectancy: they either adapt, or they die.