The business of standing thoroughbred stallions
/Words - Alysen Miller
Foals gambol in 750 acres of lush green paddocks enlaced by pristine post and rail fencing while the sun glints off the chalky New Forest hills. It’s the sort of timeless vista that could have dripped straight from the brush of George Stubbs. But the bucolic scene belies the harsh reality that the small breeder in Britain is heading towards extinction. “We’re under so much pressure here. On the bad days, sometimes it is tempting to say, ‘Sod it,’” says Ed Harper, director of Whitsbury Manor Stud. “But I have a responsibility to the staff that have been with us for a long time and to my dad, who worked 50 years for this. I don’t want him to see us raise the white flag just yet, so we’re digging our heels in.”
Pressure is, after all, something the denizens of Whitsbury Manor are accustomed to. Harper’s father purchased the farm in the 1980s, having previously managed it for his uncle—the colourful bookmaker William Hill who died of a heart attack while attending the October Sales at Newmarket in 1971. A non-horsey child (“I couldn’t even put a headcollar on”), Harper briefly entertained a career in chartered surveying before the siren call of the breeding shed proved too strong.
Since taking over the reins from his father, Harper has had to get creative in order to keep the bank manager at bay. “I believe that there are different reasons for doing things,” he explains. “I’m very pleased if very rich people want to spend money in our sport and don’t have to make it pay. The more the merrier. But we’ve never been able to do that. My father had to borrow money to buy Whitsbury Manor, and we’ve never been out of debt since. Our choice is not whether to be ultra-commercial or to do it their way. Our choice is to be ultra-commercial or not be in business at all.” He currently stands four stallions at Whitsbury Manor. He has also partnered with the National Stud to stand Lope Y Fernandez in Newmarket. “I think it was a perfect mix of us being very familiar with how to make commercial decisions, and them having the branding and the location,” he explains. “Hopefully Lope Y Fernandez is the start of a really good relationship that can benefit breeders.” But Whitsbury Manor’s flag bearer is undoubtedly Showcasing. After an inauspicious start, “we literally covered a couple of polo ponies with him in years two and three. We were dealing down to £2,500,” Harper says. Showcasing — the son of Oasis Dream — is fast establishing himself as a formidable sire. Currently standing for £45,000, his dance card is full for the current breeding season.
Showcasing’s success has allowed Harper to keep his head above water a little longer. “I think if Showcasing hadn’t come along when he did, we might have 10 mares here and no stallions; and I’d be doing all the mucking out,” he says. But ironically, it has risked pricing out the smaller breeders on whom studs like Whitsbury Manor traditionally rely. “We were dealing regularly with people that would breed one foal every other year, and we were delighted that they were coming to us,” Harper explains. “So it’s a delicate balance.” Harper is aware that in order to survive in the long term, he needs to cater to the smaller breeders as well as those who can afford a £45,000 nomination. “Very much at the front of our minds is that we have to keep the critical mass of breeders alive and breeding,” he says. “They need to have options. When they stop getting the options, they stop.”
Harper’s fears are borne out by the statistics. At one end of the breeding spectrum lies a handful of large operations, many of which have more than 100 broodmares. But the industry also includes around 2,500 small breeders with just one or two broodmares, who operate on a recreational rather than commercial basis. These small breeders account for around a third of the British foal crop each year and so are fundamental to both the breeding and wider racing industries. But the number of small breeders decreased by 5% between 2013 and 2017, according to a 2018 Thoroughbred Breeders’ Association report (the latest year for which figures are available). Of those remaining, 66% were operating at a loss—up from 45% in 2013. It seems certain that if the current trajectory continues, even more small- to medium-sized operators will be forced out of the industry over the coming years. Harper is clear-eyed about what that means for the prospects of operations like his: “We don’t survive unless our clients survive,” he says. “However good our stallions are, if we don’t have clients, no one will know it, and vice versa. They need the opportunities to have stallions they can afford. It goes hand in hand. One can’t do it without the other.”
Of course, nobody ever said that breeding racehorses was easy. “It’s always challenging, even at the best of times, because there are variables that you have no control over,” says Pope McLean, Jr, business manager and co-owner of Crestwood Farm. Some 3,900 miles away in Kentucky, USA, McLean echoes many of Harper’s concerns: “We’re all trying to come up with a good horse that can carry the burden of what we do,” he says. “There are operators that are much smaller than we are who are struggling,” he acknowledges. Founded by Pope McLean père in the 1970s, the McLean family has owned and operated the 1,000-acre facility ever since.
But farms like Crestwood Farm have had to come up with some clever initiatives to support their stallions and the wider breeding industry. This has included jumping on the Share the Upside bandwagon. Originated by the aptly-named Spendthrift Farm in Kentucky, the simple yet innovative concept was originally designed to get more mares for Into Mischief who, in 2010, was entering his second year at stud, and another Spendthrift stallion, Notional. For an initial commitment of $13,000 over two years, breeders could obtain a lifetime breeding right in the stallion. Although met with scepticism from the market at first, both Into Mischief and the Share the Upside programme are now both firm fixtures on the American breeding landscape. “It’s something that’s tangible that can help the smaller breeder,” says McLean. “A lot of farms probably aren’t too keen on it, but I think it’s only fair. You have to have the breeders to move forward. If the stallion becomes successful and the breeders have helped you get there, that’s one way that you can reward them for helping you.”
The Share the Upside scheme has been a lifeline for smaller breeders in the states. Back in the UK, meanwhile, incentive schemes such as the Great British Bonus have started to improve return on investment for domestic breeders, although the potential upside is modest by comparison.
But it is not just a lack of flashy incentives that is driving smaller breeders out of business. The dominance of a handful of powerful owner-breeders means that only around 10% of the 4,000-odd foals born in Great Britain each year are bred primarily for sale, with the result that a dwindling number of breeders must walk an increasingly taut supply-and-demand tightrope. The polarisation between the haves and the have nots is stark.
According to historical data from the Thoroughbred Breeders’ Association report, the average filly sold at the Tattersalls Book 1 sale earned an estimated profit of £118,000. Those sold at Book 3 made an average loss of £23,500. “I suppose that’s the main difference between your market and our market,” says Sam Matthews, general manager of Swettenham Stud in Victoria, Australia. “A lot of the top-end horses—the Dubawis and Galileos of the world—might not have a huge amount of their progeny offered to the trainers and other people in the industry, whereas almost every horse that is bred [in Australia] is offered for sale in some way, shape or form whether offered as a weanling, syndicated privately or offered as a yearling. If a large farm is breeding 100 mares a year, at least 80 of them would likely be offered to the public.” This helps keep supply and demand for stallion services elastic: “It’s almost a year-by-year prospect,” says Matthews. “Certainly, if a horse becomes proven quite early on in their career, they do escalate to the increased service fees quite quickly. But on the flip side, if you don’t have much success, they do drop back quite quickly.”
The effect of a buoyant sales culture means that smaller breeders can still make a profit in an open marketplace: “From our point of view, the smaller breeders are the backbone of what we’re all doing,” explains Matthews. “If somebody can get a return off a $20,000 service fee and get $150,000 for their yearling or weanling, that’s an incredible result and that’s something that we hope to be able to help them to achieve.” It’s all about catering to the market. “There’s not much point in having a Bentley dealership in a low socio-economic area,” says Matthews.
By comparison, the UK racing and breeding industry can appear to be something of an ouroboros. Only six of this year’s Derby field had been through the sales ring at some point in their lives (including an honourable mention for the £3,000-yearling Glory Daze). Frankel and Galileo were responsible for five runners between them. Before Desert Crown’s win in this year’s Derby, you would have had to go back to 2017 to find the last winner of the Epsom Classic that was not bred by Godolphin or Coolmore or one of their affiliates. (Wings Of Eagles, bred in France but snapped up as a yearling for €220,000 by MV Magnier at the Arqana August Yearling Sale. He now stands at stud for Coolmore.)
Back in Hampshire, Harper is clear that he does not believe that the big owner/breeders themselves are the problem: “They’re bringing investment in,” he explains. “[The big operators] want competition. They want to do well, but they also are racing enthusiasts at heart. People soon realise that three-runner races where they’ve got two out of the three runners is not good for anybody.” Like many smaller operations, Harper has adopted an ‘if you can’t beat ‘em, join ‘em’ approach. Of Whitsbury Manor’s four stallions, two—Sergei Prokofiev and Due Diligence—are operated in partnership with Coolmore.
But the consequences of the concentration of power in the hands of a small handful of owner/breeders are not only economic, but genetic. “We’re going down a black hole, genetically,” cautions Harper. “It’s very unwise.” Harper is putting his money where his mouth is: Between Sergei Prokofiev and Due Diligence, Harper reckons he has the highest concentration of AP Indy blood in his corner of the UK. “I’m a big fan of AP Indy blood,” he explains. “That hard knocking tenacity and toughness—the pedigree purists love to throw knives at us, but what they don’t realise is that we’re keeping the bottom half alive. I think it’s important we keep refreshing the genetics in Europe. I’m chuffed that we’re bringing those genes over for people to use. It’s characteristic of breeding in every country that people cherish what’s on their doorstep more than they look over the fence. But I try and have a more global look.” And then there is the pressure to produce early developing horses that trainers can sell: “They’re our shop window, and we’ll do our best to produce what they can sell. There’s no point in producing horses that the trainers are going to struggle to sell to their clients,” says Harper. “The new client is probably shared ownership, and they want instant action. We need to be producing horses that the trainer can sell and say, ‘Hey, look, lads: if you buy this horse, we could be at Royal Ascot in a couple of months’ time.’”
So what is the solution? It is clear that, in the wake of the double whammy of Brexit and COVID-19, the economic situation is more precarious than ever. While the largest operations are probably too big to fail, a swingeing recession could force even more small- and medium-sized breeders to cease their operations for good. In such a scenario, British racing is facing the very real prospect that it will not be able to sustain its racing calendar. Around 20,000 individual runners are needed to maintain the programme, according to the Thoroughbred Breeders’ Association. With fewer races meeting the eight runners per race required for each way betting, the quality of the betting product will deteriorate, along with funding from the gambling industry and media rights payments; and the finances of all racing industry participants will be severely impacted.
Harper is pessimistic about his chances of being able to hand over Whitsbury Manor to the next generation. “I don’t think we will have the client base of small breeders to give our stallions a chance to compete in 25 years’ time if we keep going down this road,” he says. “Our goal is survival. And we don’t survive in this business without our clients. I’ve seen so many breeders stop breeding in this country. Not every foal we produce will make money. But if we can, we will continue to source stallions that we are able to stand at a fee that will give our small-breeding clients an opportunity. Because if we’re not solving that equation and they don’t have options, they stop breeding.”