Forget the races, the real money is made from being a stud

Kentucky Derby, horse racing goes mainstream. Owners’ wallets get fat and the horses become media darlings for a while.

Fast forward a few years, when their racing career is over, that may be when you may hear that famous, winning horse “retired to stud.” It could be a dreamy scenario for some, the horses earn a ton of money just for having the ladies line up to have a little bit of (not-so) private time with them.

Horse breeding is a huge $39 billion business and growing.

It used to be common for a lot of top end racehorses to get sold in retirement but today, many owners are hanging on to horses with the idea that a bigger pay day may be coming down the road through stud fees.

Eric Mitchell, BloodStock editor at BloodHorse says if a stallion is doing well, and has the potential to get bigger and better, then some owners want to retain the bigger share. “They may take in partners. Some of those partners come in when the horses are racing. They do that with the idea that if this is going to be a potential stallion, I’m going to get in and buy in before his career is over and maybe I’ll pay a little less than I would if this horse goes on and becomes a superstar, and then I’m going to have to pay maybe three or four times that amount to try and get in on the horse,” says Mitchell.

It’s a timely and potentially risky investment though. The only thing that matters to guarantee a stud fee though, is that he can produce a foal (young horse) that can stand and can nurse.

It’s at least a three-and-a-half year investment before knowing if you’ve got a potential star athlete on your hands. After breeding and pregnancy, the foal has to be at least two-and-a-half years old before it could potentially get started on a racetrack. .

There’s also the risk, even with the perfect pedigree, that the animals could get sick or injured.

In a stallion’s first years at stud, the fee starts on the lower end. It typically takes about 5 years to prove he can produce top class runners and consistent winners.

There are 21-thousand foals born in the United States and Canada every year and out of those born, owners need to decide what to do with them. Owners could sell the offspring or keep for themselves to race.

Some breeders will sell their crop to market as weinlings in the fall. Weinlings are usually between 6 months and 1 year old.

“They’ll do that if they those horses are pretty valueable as they are and people will take the chance. A lot of people will wait for the yearling sale when you can usually command a little more for well-bred horse and a well-conformed horse and then some people will wait until horses are two-years old,” Mitchell says.

And out of the 22-thousand foals, about 40-percent of them are sold at the yearling sale. Last year, the average price of a yearling was about 75-thousand dollars, according to Mitchell. (Yearlings are young horses between one and two years old).

Finally, for those that don’t go to the auction market, they’re owned by the people that bred them, and they’ll go on and race their own stock or they may be sold privately.

Northern Dancer was one of the dominant sires in American pedigrees and was responsible for a boon in the breeding business in the 1980s. “He had more than 22 percent stakes winners from his foals,” says Mitchell. “Typically if a stallion has 10-percent stakes winners, that is considered very successful and his was over 22 percent.” His stud fees were commanding more than 1-million dollars.

Today, Tapit is the most expensive thoroughbred stallion in the United States and Canada. He was the leading North American sire for three consecutive years and set proginy records from 2014 -2016, according to BloodHorse. His breeding fee is $300-thousand dollars and he breeds about 125 mares a year.

Mitchell says Tapit is a proven commodity, so a mare’s owner doesn’t mind paying $300 thousand in stud fees knowing that the foals he produces will likely be bought for a sizable sum. In 2017, his yearling were sold for more than 791-thousand dollars on average.

Tapit himself was bought as a yearling for the hefty price of 625- thousand dollars in 2002. That’s because he comes from a fashionable pedigree, including his sire Pulpit, and relatives Tap Your Heels and Ruby Slippers. His parents were champion thoroughbred racehorses.

Tapit had a successful racing career, coming in 9th in the Kentucky Derby, earning $557,300 overall.

Today, Tapit stands at Gainesway in Lexington, KY and is on course to make $39 million in one year.

Breeding horses can be expensive and risky, but when that train gets rolling, it can run quite a while.

source : www.cnbc.com