Leading Sire Stud Fees: Breeding to Sell

The University of Kentucky College of Agriculture's Agricultural Economics program continues to develop state-of-the-art financial tools to aid decision making in the equine industry.

In a recent study forthcoming in Applied Economics, C. Jill Stowe, PhD, an assistant professor in agricultural economics at UK, analyzed the factors that determine leading sire stud fees in the Thoroughbred industry to inform owners and breeders about the breeding decisions made on a daily basis and their impact on the industry.

Data were collected from the "Blood-Horse Leading Sires List" for more than 100 sires that appeared on the list at least twice between 1999 and 2008 and were available to breed during the next calendar year. Stowe found that among this class of leading sires, the most significant stud fee predictor is the mean yearling sales price from the previous year. The next most significant variable is a sire's ability to produce colts who themselves will be successful sires. Other predictors of leading sires' stud fees include total progeny earnings from the previous year, the number of Grade 1 stakes winners produced in the previous year, the percentage of stakes winners a sire has produced in his career, and a sire's average earnings index (AEI). The inclusion of racetrack performance variables, however, only marginally improves the model's ability to explain stud fees; statistically, stud fees are largely determined by progeny sales prices and the "sire of sires" measure.

After identifying these attributes, Stowe estimated each characteristic's market value. The table below provides a general overview of the main results.

Thoroughbred breeders make breeding decisions that involve high stakes and high risk, and rigorous statistical analysis can serve as another tool in the decision-making process. Stallion owners/managers can utilize the results in this study as a benchmark in setting and evaluating stud fees. Mare owners can use these results to become informed about the market value of a sire's genetic traits and to identify sires that are undervalued based on the attributes determined to be significant in this paper.

Leading Thoroughbred Sires
Compared to leading sire A, if leading sire B... B's first-year stud fee exceeds A's by...
...produces yearlings that sell for an average of $10,000 more $1,610
...has one more progeny standing at stud $994
...produces progeny that earn $100,000 more on the racetrack in the previous year $300
...produces one more Grade 1 stakes winner in the previous year $3,122
...produces 1% more stakes winners $2,242
...has an AEI that is 0.01 higher $158

Stowe estimated that, on average, 2009 stud fees fell by more than $6,800 following the 2008 recession.

Thoroughbred breeders make breeding decisions that involve high stakes and high risk, and rigorous statistical analysis can serve as another tool in the decision-making process. Stallion owners/managers can use these study results as a benchmark in setting and evaluating stud fees. Mare owners can use these results to become informed about the market value of a sire's genetic traits and to identify sires that are undervalued based on the attributes determined to be significant in this paper.

The complete version of this article is forthcoming in Applied Economics. For a copy of the entire study, contact Jill Stowe at jill.stowe@uky.edu.

C. Jill Stowe, PhD, an assistant professor in Agricultural Economics at the University of Kentucky, provided this information.


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