February is for Foal Sharing

February is for Foal Sharing
Photo: Anne M. Eberhardt

If you’re a breeder on a budget, a foal-share deal can lower both your front-end costs and your risk compared to the standard “live foal” contract. Front-end costs are lower because you pay nothing until the sale (typically at auction) of the foal produced from the arrangement. Downside risk and upside return are moderated, because the payment for stallion services is proportional (typically at 50%) to the sale price.

February is often a good time to approach stallion managers with foal-share propositions. The breeding season is gearing up, and if a stallion’s book is not full, his stallion manager is looking for ways to attract more mares. Foal-share deals are a time-honored approach to generating incremental revenues.

Finding foal-share seasons involves the same screening procedures that you go through when looking for live-foal or no-guarantee deals, but one part of the search process is turned on its head. Normally breeders are looking for “bargain” stallions that are underpriced relative to their prospects, but your chances of finding a foal share deal increase with the degree to which a stallion is overpriced. Managers of overpriced stallions are more likely to be amenable to foal-share deals to increase a stallion’s book, because they haven’t been able to sell sufficient seasons at the advertised price.

Identifying “overpriced” stallions is part art and part science. Though in today’s highly competitive market for mares, “deals” of all kinds are more plentiful than they were prior to the great recession. Stallions that are less likely to be candidates for foal-share deals include top-class, first-year stallions and stallions high on the leading sire lists. In contrast, third- and fourth-year stallions and stallions that are having atypically quiet years are prime candidates for foal shares.

Though third- and fourth-year stallions are especially risky propositions, the right choice can pay for mistakes. Breeders who signed on for fourth-year Storm Cat, Unbridled, Tapit  , or Super Saver   deals can attest to that. Finance professionals who look for “turnaround” candidates will appreciate quiet stallions. Moreover, a quiet stallion that has produced top-class runners is less likely to suffer from technological obsolescence than a corporation.

Most farms have a standard foal-share deal with respect to shared expenses, often splitting sale expenses and registrations. The most frequent 50-50 split means that foal-share breeders need to breed to a better stallion than what they would breed to if paying the stud fee. If you have an outstanding mare, you might expect that you can negotiate a better split, and occasionally you can, but more likely you will need to shop for a stallion that justifies giving up half the sales proceeds.

There are a variety of ways to start the screening process for foal-share prospects. For proven stallions, I work down from the top of my stallion list (see RLLosey.com), arrayed by adjusted percentage of graded stakes winners, looking for likeable stallions that I consider overpriced. The most recent Jockey Club breeding statistics are also helpful. If a quality stallion bred less than 100 mares, his handlers may be looking for help.