Minnesota Thoroughbred Breeding

For many years I have suggested that Minnesota breeders need to take action if they want to make our breeding environment "competitive" with other racing states. Curiosity and questions finally got the better of me so I recently completed an in depth 26 page comparative analysis of available Jockey Club state data. This work simply verified my view.

Breeders need to realize that their economic needs are not always fully represented by organizations that are dominated by owners. Breeder needs and motivations are different than horse owner needs. Thoroughbred racing owners are attracted to racing activity by the lifestyle. While economics matter to owners, the elite lifestyle nature of racing ownership is the greatest appeal. Successful owner marketing efforts focus on the “owner lifestyle” associated with racing. Breeders on the other hand see their activity in racing as an agricultural activity. This agricultural activity is far from an elite lifestyle but much more akin to a classic “crop” farming lifestyle. Economics are consequently more important to the Thoroughbred breeding segment of the general racing industry than they are to owners, many of which could never see themselves cleaning stalls, dealing with equine sickness or birthing foals.

Based upon my study of variation, certain jurisdictions design economics, marketing, breeding incentive programs and even breeder representation, to recognize the unique needs of the breeder segment of the racing industry. Jurisdictions that create economic environments that not only appeal to the occasional breeder but to commercial breeders, effectively drive crop production. The horse crop is, in economic business terms, the core raw material of racing and exactly why breeder optimism is vitally important. 

The seven summary findings of my analysis were:

Fact 1: Over the last decade, inflation adjusted nationwide "paid" purses have declined by 16%, and Minnesota’s inflation adjusted "paid" purses have increased 15%. Minnesota has closed the gap on a nationwide basis however the gap was large to begin with. Some people presumed that the 2012 Mystic Lake racing subsidy arrangement created a “substantially” favorable breeding environment. A large competitive gap only became smaller.

Fact 2: Minnesota post Mystic Lake paid purses have gone up 118% since 2011, but “state bred horse” total Minnesota paid purses have only gone up 36%. Minnesota “state bred horse” earnings are not competitive, and in fact they are the lowest in the Upper Midwest. The desire to attract non-Minnesota bred horses to Minnesota racing resulted in near 5 times more “additional” Mystic Lake purse funding being directed toward non-Minnesota bred horses than Minnesota bred horses. The Minnesota paid purse distribution methodology had the expected effect of increasing non-Minnesota bred starters, by paying the lion’s share of additional purse monies to non-Minnesota bred horses. In 2015, the lowest percentage of total state purse dollars paid, in all Upper Midwest racing states, was directed to Minnesota state bred horses (31%). For example, Illinois, Indiana, Iowa and Oklahoma all paid more than 47% of their state purses to their state bred horses.

Fact 3: The short term benefit of attracting non-Minnesota bred horses to Minnesota was clearly beneficial to the Minnesota racing! It was a smart short term move that generated immediate Minnesota racing revenue and a higher quality racing product with non-Minnesota bred horses filling out racing programs. Non-Minnesota bred horse starters shipped in to race in Minnesota, and the non-Minnesota bred starter volume increased 76% from 2011 through 2014. Meanwhile, Minnesota state bred starters declined 23% over the same time period.

Fact 4: Interestingly in 2015, non-Minnesota bred horse starters declined by 8% from the prior year, and Minnesota bred horse starters increased for the first time in 7 years! This may indicate a tipping point related to the need to rely “more” heavily on Minnesota bred horses to create a competitive future racing product. (Full fields and full racing programs.)

Fact 5: Low Minnesota state bred earnings have driven low realized value in state breds, whether they are sold as yearlings or kept and raced as home breds. Comparatively, Minnesota state breds ranked last in auction price per yearling and state bred earnings among all Upper Midwest racing states. Even though Minnesota has the lowest state bred earnings in the Upper Midwest region, Minnesota was amazingly the only Upper Midwest state with average yearling sale prices under the average earnings per state bred starter!

Fact 6: Over 90% of all Minnesota state bred horse earnings are earned in Minnesota, which exhibits the captive nature of this population. The Minnesota state bred horse population should be nurtured, as it is in many other states to a much greater degree. A current sensitivity analysis suggests that for every $1,000,000 of additional Minnesota state bred earnings, 50 more state bred foals will be born annually, with each crop running between 3 and 4 years on average.

Fact 7: Minnesota breeders breed in the “highest volume in the Upper Midwest”, once breeding volume is properly indexed against state bred earnings. Surprising but true!

Based upon clear comparative evidence, the Minnesota breeding environment could be much more competitive. Redesign of existing "non-competitive" state programs and methodology is the key. 

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