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14 July 2006

How Do We Price Foals?

by Tom Reed

I start in my mind with a price of euro 0.

Why euro 0?

Because the market does not care how much the broodmare cost. The market does not care how much the stallion (or his stud fee) cost. The market does not care how much it cost to feed and care for the mare during the pregnancy and nursing period. The market does not care how much it cost to care for the foal prior to weaning. The market does not care about vet bills, feed bills, farrier bills, dentist bills, advertizing bills, etc.

All these costs have no impact on how I price a foal because they have no impact on how sophisticated purchasers will determine the probability that this foal will become a super athlete, a super stallion, or a super breeding mare.

And since sophisticated purchasers will value the foal based on the potential he or she perceives in the foal as an athlete, stallion, or broodmare this is how I price each foal.

I assess potential in two ways.

The first way is the paperform: the foal's bloodlines and the breadth and depth of its genetic endowment. Since I require evidence of performance in sport in the motherline of all my mares and stallions (except in special circumstances when the right kind of TB blood is being infused) each foal's potential ON PAPER is high. The greater the breadth and depth of the foal's genetic endowment, the higher the potential price of the foal.

But the paperform is not the only issue.

Even more important is the actual foal before you: the realization or expression of the genetic potential possessed by the sire and dam. If based on its athleticism (the absolute first priority), type, and conformation I believe the foal has a very high probability of being an exceptional athlete (or it has a very high probability of becoming a sire or dam of exceptional athletes) then I price the foal high.

If I believe the probability is low, I price the foal low. (And re-read my blog essay on culling.)

No formulas, no simple metrics, just critical judgments about potential.

In practice my decision-making process is a bit more complicated when pricing foals by our young stallions. If I am using one of my own young stallions for the first season I may sell his foals to very good homes that will produce the foals correctly for sport and/or breeding for less than what I think their real value is. I did this in 2005 with two foals by Ulysses M2S and this year with two foals by Conspiracy M2S. So for these first-crop foals my compensation is the sales price + the value of the expert care, attention, and education the foals will get -- which hopefully will bear fruit a few years from now when these youngsters are old enough to compete and/or be used in breeding.

In practice in our dressage breeding program I also will price super colt foals low because I am not interested in owning a dressage sire. If I use an outside sire in my dressage breeding program I am hoping to produce a filly foal. If I get a colt I price him low to move him on. We did this is 2006: we had a super dressage filly sired by our stallion Ulysses M2S and a super colt sired by a Trakehner stallion. Both foals were superior. But I advertised the filly at 3 times the price of the colt. Both foals sold at the advertized asking price (we don't negotiate on price) to an international dressage rider based in Germany. The rider paid a fair price for the filly and got a real bargain on the colt.