Service Fees Dilemma Part II
By Tara Madgwick
Sunday, 5 June 2011
Mike O’Donnell of
Fairhill Farm has received much feedback to his article last week on service
fees and has a follow up piece that is a must read for all broodmare owners.
Mike O’Donnell - We are constantly told by stud farms that service fees have
come down. Why is it that when a study
is done on the top 100 stallions that stand in Australia for the years 2003 to
2011 a different picture emerges?
For 2002 the top stud fees ranged from $137,500 down to $8000. The average
stallion service fee for the top 100 was $21,508. The yearlings for that year
were sold in
Average: $37,453 1.74 times service fee
For 2003 the top stud fees ranged from $132,000 down to $8250. The average
stallion service fee for the top 100 was $23,878. The yearlings for that year
were sold in
Average: $41,687 1.75 times service fee
For 2004 the top stud fees ranged from $93,500 down to $8800. The average
stallion service fee for the top 100 was $22,231. The yearlings for that year
were sold in
Average: $48,942 2.20 times service fee
For 2005 the top stud fees ranged from $220,000 down to $8800. The average
stallion service fee was $26,523. The yearlings for that year were sold in
Average: $52,070 1.96 times service fee
For 2006 the top stud fees ranged from $275,000 down to $11,000. The average
stallion service fee was $30,303. The yearlings for that year were sold in
Average: $33,997 1.12 times service fee
For 2007 the top stud fees ranged from $330,000 down to $9900. The average
stallion service fee was $30779. The yearlings for that year were sold in
Average: $39,161 1.27 times service fee
For 2008 the top 100 stud fees ranged from $330,000 down to $12,650. The
average stallion service fee was $37,799. The yearlings for that year have been
sold this year. For this year the figures below do not include MM June sale and
there are 673 catalogued. Last year 66.5% of the catalogue sold at an average
of $29,670. If the same percentage sold this year at the same average, there
would be another 447 sold for $13,262,490.
Adjusted estimates for 2011 including MM June Yearling Sale
Average: $39,430 1.04 times service fee
For the year 2009, the top 100 stud fees ranged from $220,000 down to $11,000.
The average stallion service fee for that year was $31,545. The yearlings for
that year are sold next year, 2012.
bring returns back to 2006 levels, breeders would need to average $55,203, an
increase of 40% on this year.
For the year 2010, the top 100 stud fees ranged from $176,000 down to $11,000,
but the average service fee was up to $32,518. There was a blow out of the
upper mid range fees!! The yearlings for services in 2010 will be sold in
needs to be $56,900!!!!!!! NO CHANCE!
For 2011, the top 100 stud fees ranged from $137,500 down to $8,800 and the
average service fee came down to $28.792.
needs to be $50,386!!! NO CHANCE!
The average is still just 3% under the record levels of 2008 sales. It just
cannot happen. Service fees are sending the breeder broke.
Add to that the costs of rearing at our nominal
$25k for 2011 and take $1k off for every year prior and we have the following
results. Remember that this does not include all costs
2005 $21,508 + $18000 = 39,508 costs/average sale price $37,453 = $2055 LOSS
2006 $23,878 + $19000 = 42,878 costs/average sale price $41,687 = $1191 LOSS
2007 $22,231 + $20,000= 42,231 costs/average sale price
$48942 = $6711 Profit
2008 $26,523 + $21,000= 47,523 costs/average sale price $52,070= $4547 Profit
2009 $30,303 + $22,000= 52,303 costs/average sale price $33,997= $18,306
2010 $30,779 + $23,000= 53,779 costs/average sale price $39,161= $14,618 LOSS
2011 $37,799 + $25,000= 62,779 costs/average sale price $39,403= $23,376 LOSS
When depreciation of the mare is added at a conservative 20% of service fee,
and the sales companies commission is taken off the figures look like below…….
S/price Comm Costs
depreciation Return/Loss R/in
2005 $37,453 - $3745 - $39,508 -
$4301 = -$10,101 79c
2006 $41,687 - $4169 - $42,878 -
$4776 = -$10,136 80c
2007 $48,942 - $4894 - $42,231 -
$4446 = -$
2008 $52,070 - $5207 - $47,523 -
-$ 5,964 89c
2009 $33,997 - $3400 - $52,303 -
$6061 = -$27,767 55c
2010 $39,161 - $3916 - $53,779 -
$6156 = -$24,690 61c
2011 $39,403 - $3040 - $62,779 -
$7560 = -$33,976 53c
2011 gave the average breeder 53 cents back for every dollar spent.
allowance has been made in these results for yearlings that were passed or
didn't make it to a sale.
from others to Part I
The game is now at the tipping point , the
service fees are way over the top ,they have been supported by a
compliant racing media, rorts at the yearling sales to justify massive fees,
mega wealthy owners who don’t mind paying too much and the illusion of ‘increasing
I think the industry has got to the point where if people don’t stand up there
will be little left to argue over. When you think about it the industry has
become quite bizarre, people like us
queuing up to hand money to mega wealthy studs no questions asked !
Clearly the only way to solve the problem is to
stop contributing to it , we all need to say no more often.
Lodge , Romsey
Interesting stats and no doubt what most of us have been thinking for a while
now. Maybe realism has hit home for those who have been living in the dream
world. Why would stallion farms reduce fees if the stallions are filling their
Down here in Victoria we are not exposed to a wide range of commercial
stallions that make our choices even more difficult. Sending mares north is an
expensive exercise especially withexorbitant vet bills added. I do
believe breeders have to be realistic and realise what their mare is actually
worth and consider what they are spending on stallion fees. We all see every
year somebreeders over breeding their mares in the hope they will make a
major sale and get the pot of gold. If it was that easy we would all be the Bahamas
for the winter. There are well priced stallions out there and yes there are
plenty overpriced. All we have to do is work out what the mare is worth and
what should be spent to achieve maximum return.
To put some positive input
that could be achieved, we as a whole industry should take up the issue
of the country racing prize money. If that was higher then
the pond of owners and the possibility of a larger number of horses actually
trying for the win must be maintained at a higher level.
The schism in NSW racing must be overcome. All must be pulled together so
city trainers can drop horses down a class (satisfy the client) with the hope
of winning or some income return. Country trainers would be better placed
to seek and buy. Creating competition.
We expect the wonderful selection of Stallions presented each year and hope not
to use overused coverings. All expect expert care and great
service. It is costly and getting higher every year. Vet costs,
because of new technology and skills, are rising exponentially. Trucking
Anyway we are all in the roasting of this goose. Just remember the bigger
the pond the better the feed.
Timor Creek Stud
Very interesting stats, very hard to see the sustainability in the market.
Across much of the market the problem doesn’t lay in the price for the product
sold at auction but the production and service fee costs. And the biggest
problem there is the mare owners sending moderate mares to over priced horses.
Stallion equity appears to me the only solution for mare owners who want to
stay viable to my mind.