Sikura: Deal or No Deal? - Horse Racing News | Paulick Report

Sikura: Deal or No Deal?

John Sikura

The following commentary was submitted by Hill 'n' Dale Farm owner John G. Sikura

I wish to preface this letter by saying that yes I stand stallions, own shares in outside stallions and breed to both race and sell at public auction. I say these things to demonstrate that I am sensitive to the needs of breeders and understand how crucial it is to make a profit when breeding for the market.

Recent trends of market contraction, in terms of auction prices and numbers of foals born, have created intense competition for mares, which has given the breeder many new options to consider before deciding which stallion to select. What started off as innovation and recognition that terms should tilt more in favor of breeders, have now started to erode the stallion market and the essence of 'fair market' competition.

This is a business of risk. Most breeders and race horse owners do not make money. We are not a socialized industry that rewards the 'norm.' We are incentivized to produce the best yearling because the market rewards such and the consequence for not doing so are dire. Providing 'stands and nurses' contracts and reducing stud fees are market driven and absolutely fair for the breeder. Paying me a stud fee in two years, if you make money, is artificial and, in my opinion, misleading commerce.

International trade requires that countries not practice 'dumping,' a term that is defined when a country offers a product at a price that has adverse effect on others in the industry that offer a 'like product.' If you can breed to my stallion and not pay a stud fee unless or until you make a profit that is not fair competition. There is no incentive to breed a market superior horse or suffer any consequence for breeding and/or raising a bad horse.

Furthermore, mares that have gradually exited the commercial market are coerced back into production, as the consequence for breeding a bad horse does not include paying a stud fee. If you think the practice is fair, please pass this guarantee on to the yearling buyer and offer their money back for every yearling you sell that does not earn his/her purchase price or tell your trainer to take your bill out of purses.  That would be unreasonable would it not? If I sold yearlings under that premise I bet fellow breeders and consignors would complain that I have artificially inflated the price of my yearlings as the buyer has no risk. Furthermore I have created an artificial market for my yearlings that precludes competition and has an adverse effect on producers of a similar product within the industry. That by definition is inflationary of my product and distorts the market reality. The same thing occurs if I cover 150 mares but no one pays a stud fee. I can state 'book full' every year.

The effect of such practices goes beyond the economic argument of 'unfair pricing,' which is prohibited in free trade. The reality is that stallion owners buy a horse with the purpose of selling seasons as the method of repaying their debt. Most of us do not have the luxury of buying a stud horse and having no projected rate of return or reasonable time frame to do so. Is the bank going to lend money to purchase a stallion under those terms? Can a farm syndicate a stallion when someone can breed for free? Breeders should be prepared to see increasing books and higher prices on all popular stallions as a reaction to exclusive patronage of the 'deal stallions.'

The days of the 'proven' middle aged stallion, or promising new entry market level stallion standing in Kentucky,  have come to an end. It is ironic that the 'little guy' has been duped into being complicit and will therefore have helped limit his own choices of stallions available and farms to trade with.

I believe in the free market and have a firm belief in my ability to compete, so I write this letter to ask for nothing more than to state my objection to the 'socialization' of the stallion business. The 'upside' we at Hill 'n' Dale provide breeders is that we make stallions and continue to breed, raise and sell prolific race and sales horses.

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