Increasing stud fees at the top of the market will test the business acumen of breeders

We've seen this before. And we have a hunch about how it will end. Escalation of stud fees, for both proven and new stallions, is sweeping the breeding industry. The increase in stud fees at the upper end of the market is a double-edged sword: It suggests that there is a lot of optimism in racing and breeding and that opportunity on the racetrack appears to be very good, but it also means that higher stud fees will make it harder for both commercial and home breeders to make a profit.

We saw this happen in the 1980s, and the inception of the Breeders' Cup could not stem the inevitable boom-and-bust cycle.

Stud fees are on the rise once more, particularly at the upper end of the market. Evidence of the trend can be seen in some of the fees for first-year stallions. Already announced as headed to stud next year are Fusaichi Pegasus, who will stand the 2001 season for $200,000 live foal, Lemon Drop Kid, who will stand for $100,000, and Dubai Millennium, who will stand in England for $100,000.

For the 2000 breeding season in North America, just 11 stallions stood for a fee of $100,000 or more, and all were established, proven stallions: Storm Cat ($300,000), Danzig ($275,000), Seeking the Gold ($225,000), Deputy Minister ($150,000), A.P. Indy ($150,000), Kingmambo ($150,000), Seattle Slew ($150,000), Gone West ($125,000), Nureyev ($100,000), Broad Brush ($100,000), and Unbridled ($100,000).

The retirement of two six-figure, first-year stallions in North America in 2001 is the first time in a decade that a horse will stand his initial season for $100,000 or more.

At the start of the 1990s, the highest-priced horse retired to stud was Easy Goer, who went to stud in 1991 at a fee of $100,000. Stud fees at that time were still on the downward slope of the slide that began in 1986.

A look back through the last decade at the top horses retired at the end of each year illustrates the upward drift in fees.

For the 1992 breeding season, Kentucky Derby (G1) and Breeders' Cup Classic (G1) winner Unbridled had the highest fee of any first-year sire at $35,000. Summer Squall was second highest at $30,000, with Housebuster at $20,000 and Black Tie Affair (Ire) $15,000.

For 1993, A.P. Indy, a $2.9-million sales yearling by Seattle Slew who won the Belmont Stakes (G1) and the Breeders' Cup Classic and was voted Horse of the Year, went to stud at a fee of $50,000. Next-highest stud fee of newly retired horses for 1993 was $15,000, with Rubiano, Pine Bluff, and Sky Classic all at that fee.

For 1994, just two horses retired with a fee of more than $10,000: Kingmambo at $45,000 and Strike the Gold at $15,000.

For 1995, 14 horses retired with a fee of $10,000 or more, headed by Lure at $50,000, Dehere at $25,000, Miner's Mark at $20,000, and Brocco, Colonial Affair, and Bien Bien at $15,000 each.

For 1996, 14 first-year stallions were retired with five-figure fees, headed by Thunder Gulch at $40,000 and Tabasco Cat at $25,000.

For 1997, the number of first-year, five-figure stallions increased to 18, headed by Cigar at $75,000, Hennessy and Smart Strike at $30,000 each, and Grindstone at $20,000.

For 1998, there were 15 five-figure, first-year stallions, headed by Spinning World at $50,000, Pulpit at $35,000, Alphabet Soup at $30,000, Boston Harbor at $25,000, and Atticus, Langfuhr, and Louis Quatorze at $20,000 each.

For 1999, Coronado's Quest at $60,000 headed 23 first-year stallions with five-figure fees; others in the group were Skip Away and Awesome Again at $50,000 each, Kingmambo and Swain (Ire) at $35,000 each, Favorite Trick, Gentlemen (Arg), and Touch Gold at $30,000 each, and Deputy Commander and Souvenir Copy at $20,000 each.

Last year, 15 horses were retired with a first-year fee of $10,000 or more, topped by Forestry at $50,000, Event of the Year at $40,000, Charismatic and Stravinsky at $35,000 each, Artax and Exploit at $30,000 each, and Old Trieste, Silver Charm, and Victory Gallop at $25,000 each.

Breeders prospered in the early 1990s due to the lower relative stud fees to average yearling prices. The prosperity breeders may be enjoying today with higher prices attained at yearling sales and in higher purses at the track will be tested if they end up paying higher stud fees on average.

There is always a delicate balancing act in racing, and breeders will have to be particularly nimble to keep from taking a big fall.