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Owning Broodmares

The enjoyment of owning broodmares is immense. Imagine making a few trips each year to Kentucky to see your new foals play, and decide on a stallion to breed to your mare. In today's prosperous market, the guideline is recovery of the broodmare's purchase price and first-year expenses through the sale of 1.5 of her foals. In other words, after the sale of the second foal, the broodmare owner should be operating "in the black."

Before potential investors see dollar signs dancing in their heads, it must be remembered how cruel Mother Nature can be with regard to a foal's conformation. They won't all be "beautiful babies," and their structural makeup will greatly affect the sale price. In the formative years, a broodmare portfolio with only two or three mares produces a yield that is more at the mercy of Mother Nature than in later years, when the risk is spread over ten or twelve mares. Other intangible fluctuations in addition to conformation are insurance costs, appreciation or depreciation of the pedigree (based on progeny racing performance), fluctuations in the market, reproductive problems, and Murphy's Law. Horses are predictably unpredictable, and accidents happen.

Public auctions of broodmares are normally conducted in the fall and winter months to minimize interference with breeding activities. The premier broodmare auctions are held at Keeneland and Fasig-Tipton in Lexington, Kentucky, during November and January, although there are sales in other states that might be of interest to us from time to time. Generally speaking, broodmare sales have advanced in most years, as represented by their average selling prices at public auctions in North America. The exception to this was 2001 when Mare Reproductive Loss Syndrome caused a large number of Kentucky based broodmares to lose their foals, negatively impacting their market values. The market rebounded in 2002 and 2003 and, in 2004, experienced an average price increase of 28% owing to the public auction of a number of broodmares at exceptional prices.

Broodmares of interest to Dapple and which influence our investment strategy fall into two primary categories. They can be purchased as maiden, or 'first time', broodmares already in foal or ready for breeding. Another category is established broodmares already pregnant, or in foal, to known stallions. The primary intent when buying a broodmare in foal is to sell the foal as a weanling in the fall following its birth. Alternatively, should foals with quality pedigrees show strong confirmation, or physical attributes, they may be retained for racing or sold later as yearlings or two-year-olds to maximize their economic value. It is important to remember in breeding and foaling that Mother Nature has a great deal to do with how the foal looks as it develops following birth, a critical determinant in their ultimate resale value as weanlings, yearlings or two-year-olds. Professional breeding is not randomly arranged or conducted. Broodmares must apply to and be accepted for breeding by the owners of individual stallions due to their owners desire to maximize the market value of the resulting progeny in the auction markets.

Let's assume a client wants to begin by purchasing a mare or two each year, with the intent to add one or two mares each year over a seven year span. This will allow the client to accumulate 10-12 mares that the investor can sell out of with a profit motive.

Things to keep in mind:
1.The client's mares can be boarded at a Kentucky farm, where Mike Akers can keep a close watch on them, at a cost of about $20 per day. As in most Thoroughbred ventures, capitalization dictates the structure-a farm setup requires more capital outlay and maintenance costs than boarding mares at the day rate, however some individuals prefer the farm development and daily interaction with the stock, finding that most rewarding.

2.Each mare needs to be bred to a stallion with a stud fee of approximately one-third of her value. This will keep the client from "overbreeding" the mare-breeding to an expensive stallion when her value doesn't dictate it. It is very hard to turn a profit when overbreeding.

3.To be assured that the resulting foals will have value, the mares must be bred to stallions with significant market appeal; most marketable stallions stand for a minimum of $10,000.

Let's consider the expenses related in commercial breeding:
$ 9,000 per year in board
$ 2,000 in vet and farrier charges
$35,000 stud fee for a marketable stallion
$46,000 in TOTAL ANNUAL EXPENSES

Given the nature of the commercial market (and the principle that a mare should be worth three times the stud fee of a stallion to which she's bred), each mare will cost at least $100,000-probably more-in order to be marketable enough to recover her purchase price and first year's expenses through the sale of 1.5 foals.

Many of the negatives have been accented in order to acquaint a new broodmare buyer with some of the pitfalls. To emphasize only the positive wouldn't do justice to a potential client. It takes a patient individual to breed, foal out, and then market a new crop of foals while simultaneously trying to predict what the market will be two years from now. Dapple Bloodstock can assist you along the path to success through selective buying, professional matings, and recommending a boarding operation that will handle your needs.

One of the best and easiest avenues to participate in the breeding side of the Thoroughbred industry is through broodmare and stallion ownership. Dapple Broodmares, LLC offers Thoroughbred investors the ability to invest in high quality breeding stock through a diversified pool of broodmares within partnership formats.

Annual broodmares partnerships are offered (10% ownership unit prices are usually $100,000 depending on the market and product availability). These programs are long term and run at least through the first foal. At this point an evaluation determines the profitability of additional foals or selling the mare at auction. Some people enjoy the excitement of the foaling and breeding process more than racing; although longer term and lower risk, these programs can be very rewarding. See the Commercial Breeding investment opportunities page for more information.