Monday, April 20, 2009
Recession Ripples Throughout Horse Industry
From time to time, I'm asked how the downturn in the economy has affected the horse industry. Here's my perspective as an equine attorney.
Boarding
Although Equine Legal Solutions always receives a lot of calls from boarding stables about boarders who aren't paying their bills, the situation seems to have reached nearly epidemic proportions, particularly in California. Our practice spans California, New York and Washington, and most of the calls about past-due boarders come from California, with an increasing number from Washington. Over half of our free phone consultations are now about non-paying boarders, whereas those calls typically represent more like 20% of our call volume.
In more and more of the non-paying boarder cases, the boarding stable has no way of reaching the boarder. Sometimes, the information the boarder gave the stable was completely fictional - the boarder intended to dump the horses on the boarding stable from the very beginning. (Note that screening potential boarders would help eliminate this problem.) In other cases, the boarder's contact information was initially good, but the boarder's phone has now been disconnected, and the boarder hasn't visited the stable in quite a while. Often, the boarding stable has sent the boarder a certified or registered letter, which has been returned unclaimed. The boarding stable is often desperate for solutions and wants to know when the boarder's horses are considered abandoned and what the stable can do with them.
Now more than ever, the boarding stable is usually better off not executing on its agister's lien. The horse market has declined significantly due to the slaughter ban and the recession. Horses that would have brought at least $500 at auction a few years ago now have no value at all. Meanwhile, hay prices have increased dramatically, making it more expensive to feed horses while waiting for foreclosure proceedings to conclude. And, the chances of being able to collect past due board through traditional methods are slimmer. The boarder may be out of work, with no wages to garnish, and/or may be preparing to file for bankruptcy. Usually, the best thing a boarding stable can do is to get the boarder to come and take the horses, even if the boarder owes the stable money. Getting the horses off the property stops the meter from running on the hay bill and it also cuts off the stable's potential liability for the horses' care.
More boarding stables are having to enforce the payment, lien and eviction portions of their boarding contracts. Unfortunately, many of them are finding their contracts don't adequately address the issues they face. These old, outdated contracts have unwieldy and difficult notice procedures for eviction involving certified and/or registered mail (which most deadbeat boarders will not claim). Often, they require the stable to give the boarder 30 days' notice of termination, even if the boarder owes the stable thousands in back board, effectively making the stable feed the boarder's horse for free for yet another month. And they contain virtually no practical remedies for collecting past due board and getting rid of abandoned horses and tack. As a result, more boarding stables are weighing the high cost of dealing with boarding problems, and deciding that having a boarding contract they can rely upon to protect their interests is well worth the relatively small price.
Breeding
Most breeders booked fewer breedings in 2009, and many of the bookings were made later than usual, simply because mare owners needed to wait to make sure they had the money to breed this year. Mare owners are being more selective, opting to breed fewer mares. Large breeders are downsizing their broodmare bands, keeping the best and offloading the rest. Many smaller breeders are exiting the breeding business altogether, finding that it's less expensive to buy young stock than it is to breed their own. As a result, there's a glut of broodmares on the market and prices are at historic lows.
Given the significant costs associated with shipping cooled semen and artificially inseminating mares, some breeders are finding that offering live cover and on-site artifical insemination services is drawing more local breedings. Breeders are also keeping costs down by doing more of the work themselves and involving veterinarians and stallion stations less frequently.
As usual, discounts are available to mare owners who book early, book multiple mares and/or have mares with proven production or show records. However, these discounts are more widespread, the discounts are deeper, and even the top stallion owners are offering them. Hoping to draw budget-conscious mare owners, some stallion owners are waiving collection and shipping fees on initial shipments, and others are significantly reducing stud fees and eliminating booking fees. Other stallion owners are offering enhanced live foal guarantees, some with no stud fees due until a live foal is born.
Horse Sales
It won't be news to anyone that horse sales are down, and so are horse prices. Craig's List abounds with free horses, and not just junk. More and more of those free horses are sound, registered and/or well-trained. Breeders are having more dispersal sales, and sending more young stock and broodmares to auction.
At the same time, there are fewer buyers at those auctions, and the buyers who do attend buy fewer horses. Sellers are less likely to "no sale" low-selling horses, opting not to haul them home.
Some horse buyers are being more careful. They're making fewer impulse purchases, not buying as many horses sight unseen over the Internet. They're using horse purchase contracts, insisting upon some accountability from the seller. Some horse buyers are taking horses on trial and/or making payments in installments. More sellers are agreeing to these relatively risky terms because they have no other buyers, but conscious of these risks, they are seeking out higher quality horse sale contracts in an effort to protect themselves.
Other horse buyers are cutting costs unwisely, opting not to get a pre-purchase vet exam or not have radiographs or blood draws done during the exam. And some horse sellers are also accepting risky deals that they wouldn't have even considered in a better economy, simply because they need to move some horses, and they need to do it now.
Riding Lessons
It should come as no surprise that many families consider riding lessons a luxury, so children's lessons are eliminated or reduced when a family experiences financial difficulty. Adult amateurs are also doing without lessons, opting to ride on their own instead.
Training
A lot of horse owners who would have sent young horses to a trainer are now either letting those horses sit, selling those horses as unbroke or greenbroke, or doing some of the training themselves. As a result, I think we can expect to see even more untrained young stock for sale in the coming months. Other horse owners who normally keep their horses in full-time training are bringing their horses home, or cutting back to part-time training, filling in the gaps themselves. Fewer training clients are going to shows, and many of those still showing are opting to attend fewer shows and show in fewer classes this year. More and more trainers are opting to use training contracts, fearful that they won't get paid, or will get stuck with a client's horse.
Boarding
Although Equine Legal Solutions always receives a lot of calls from boarding stables about boarders who aren't paying their bills, the situation seems to have reached nearly epidemic proportions, particularly in California. Our practice spans California, New York and Washington, and most of the calls about past-due boarders come from California, with an increasing number from Washington. Over half of our free phone consultations are now about non-paying boarders, whereas those calls typically represent more like 20% of our call volume.
In more and more of the non-paying boarder cases, the boarding stable has no way of reaching the boarder. Sometimes, the information the boarder gave the stable was completely fictional - the boarder intended to dump the horses on the boarding stable from the very beginning. (Note that screening potential boarders would help eliminate this problem.) In other cases, the boarder's contact information was initially good, but the boarder's phone has now been disconnected, and the boarder hasn't visited the stable in quite a while. Often, the boarding stable has sent the boarder a certified or registered letter, which has been returned unclaimed. The boarding stable is often desperate for solutions and wants to know when the boarder's horses are considered abandoned and what the stable can do with them.
Now more than ever, the boarding stable is usually better off not executing on its agister's lien. The horse market has declined significantly due to the slaughter ban and the recession. Horses that would have brought at least $500 at auction a few years ago now have no value at all. Meanwhile, hay prices have increased dramatically, making it more expensive to feed horses while waiting for foreclosure proceedings to conclude. And, the chances of being able to collect past due board through traditional methods are slimmer. The boarder may be out of work, with no wages to garnish, and/or may be preparing to file for bankruptcy. Usually, the best thing a boarding stable can do is to get the boarder to come and take the horses, even if the boarder owes the stable money. Getting the horses off the property stops the meter from running on the hay bill and it also cuts off the stable's potential liability for the horses' care.
More boarding stables are having to enforce the payment, lien and eviction portions of their boarding contracts. Unfortunately, many of them are finding their contracts don't adequately address the issues they face. These old, outdated contracts have unwieldy and difficult notice procedures for eviction involving certified and/or registered mail (which most deadbeat boarders will not claim). Often, they require the stable to give the boarder 30 days' notice of termination, even if the boarder owes the stable thousands in back board, effectively making the stable feed the boarder's horse for free for yet another month. And they contain virtually no practical remedies for collecting past due board and getting rid of abandoned horses and tack. As a result, more boarding stables are weighing the high cost of dealing with boarding problems, and deciding that having a boarding contract they can rely upon to protect their interests is well worth the relatively small price.
Breeding
Most breeders booked fewer breedings in 2009, and many of the bookings were made later than usual, simply because mare owners needed to wait to make sure they had the money to breed this year. Mare owners are being more selective, opting to breed fewer mares. Large breeders are downsizing their broodmare bands, keeping the best and offloading the rest. Many smaller breeders are exiting the breeding business altogether, finding that it's less expensive to buy young stock than it is to breed their own. As a result, there's a glut of broodmares on the market and prices are at historic lows.
Given the significant costs associated with shipping cooled semen and artificially inseminating mares, some breeders are finding that offering live cover and on-site artifical insemination services is drawing more local breedings. Breeders are also keeping costs down by doing more of the work themselves and involving veterinarians and stallion stations less frequently.
As usual, discounts are available to mare owners who book early, book multiple mares and/or have mares with proven production or show records. However, these discounts are more widespread, the discounts are deeper, and even the top stallion owners are offering them. Hoping to draw budget-conscious mare owners, some stallion owners are waiving collection and shipping fees on initial shipments, and others are significantly reducing stud fees and eliminating booking fees. Other stallion owners are offering enhanced live foal guarantees, some with no stud fees due until a live foal is born.
Horse Sales
It won't be news to anyone that horse sales are down, and so are horse prices. Craig's List abounds with free horses, and not just junk. More and more of those free horses are sound, registered and/or well-trained. Breeders are having more dispersal sales, and sending more young stock and broodmares to auction.
At the same time, there are fewer buyers at those auctions, and the buyers who do attend buy fewer horses. Sellers are less likely to "no sale" low-selling horses, opting not to haul them home.
Some horse buyers are being more careful. They're making fewer impulse purchases, not buying as many horses sight unseen over the Internet. They're using horse purchase contracts, insisting upon some accountability from the seller. Some horse buyers are taking horses on trial and/or making payments in installments. More sellers are agreeing to these relatively risky terms because they have no other buyers, but conscious of these risks, they are seeking out higher quality horse sale contracts in an effort to protect themselves.
Other horse buyers are cutting costs unwisely, opting not to get a pre-purchase vet exam or not have radiographs or blood draws done during the exam. And some horse sellers are also accepting risky deals that they wouldn't have even considered in a better economy, simply because they need to move some horses, and they need to do it now.
Riding Lessons
It should come as no surprise that many families consider riding lessons a luxury, so children's lessons are eliminated or reduced when a family experiences financial difficulty. Adult amateurs are also doing without lessons, opting to ride on their own instead.
Training
A lot of horse owners who would have sent young horses to a trainer are now either letting those horses sit, selling those horses as unbroke or greenbroke, or doing some of the training themselves. As a result, I think we can expect to see even more untrained young stock for sale in the coming months. Other horse owners who normally keep their horses in full-time training are bringing their horses home, or cutting back to part-time training, filling in the gaps themselves. Fewer training clients are going to shows, and many of those still showing are opting to attend fewer shows and show in fewer classes this year. More and more trainers are opting to use training contracts, fearful that they won't get paid, or will get stuck with a client's horse.
Labels: agister's lien, horse boarding, horse breeding, horse sales, horse training
Thursday, May 1, 2008
Equine Economics: Breeding Dollars and Sense
While it is tempting to succumb to a Chicken Little mentality when the horse market takes a dive, a market correction can actually be healthy for the long-term future of the horse industry. Breeders will react to market conditions and breed fewer horses. The horses that are bred will likely be of overall higher quality. If demand for horses remains steady or increases going forward, horses prices will eventually rise in response to the limited supply.
However, most breeders cannot afford to think about supporting the future of the market, and must instead think about supporting themselves. Many smaller breeders are rethinking their breeding strategy, and even whether to breed at all. Here is a basic breeding financial plan to help you evaluate your own plans.
First, look at young horses on classified ad sites such as Dreamhorse.com, and search by the bloodlines you plan to breed. Are representative examples advertised for near or less than your chosen stallion's stud fee? If so, that's a sure sign the market is already saturated with horses bearing the breeding that interests you.
If the available young stock is priced significantly above the stud fee of your chosen stallion, the calculation becomes more complex. Attached is an Excel spreadsheet listing many common costs of breeding, from mare care to vet bills. Note that there are two tabs - one for initial expenses, and one for ongoing expenses. To calculate whether it makes economic sense to breed, complete both sheets of the attached worksheet. If you anticipate not having a particular expense (say, if you already own the broodmare), then you can enter a zero in the appropriate blank. If your total expenses are greater than, equal to, or slightly less than what it would cost to purchase a foal, you are better off not breeding.
Even if buying vs. breeding looks fairly even cost-wise, you still bear the risk that your mare won't become pregnant, won't carry the foal to term, will have foaling complications or that the foal will have health issues. If you breed, you also run the significant risk that the foal will not have the temperament, movement, conformation or color that you desire. When you purchase a foal or young stock, you can select exactly the horse you want. Buying a foal also allows you to avoid ongoing mare care expenses (which of course continue on after a foal is weaned). But, you say you want to witness the miracle of birth? That's what MareStare.com is for!
Breeding%20Cost%20Worksheet
However, most breeders cannot afford to think about supporting the future of the market, and must instead think about supporting themselves. Many smaller breeders are rethinking their breeding strategy, and even whether to breed at all. Here is a basic breeding financial plan to help you evaluate your own plans.
First, look at young horses on classified ad sites such as Dreamhorse.com, and search by the bloodlines you plan to breed. Are representative examples advertised for near or less than your chosen stallion's stud fee? If so, that's a sure sign the market is already saturated with horses bearing the breeding that interests you.
If the available young stock is priced significantly above the stud fee of your chosen stallion, the calculation becomes more complex. Attached is an Excel spreadsheet listing many common costs of breeding, from mare care to vet bills. Note that there are two tabs - one for initial expenses, and one for ongoing expenses. To calculate whether it makes economic sense to breed, complete both sheets of the attached worksheet. If you anticipate not having a particular expense (say, if you already own the broodmare), then you can enter a zero in the appropriate blank. If your total expenses are greater than, equal to, or slightly less than what it would cost to purchase a foal, you are better off not breeding.
Even if buying vs. breeding looks fairly even cost-wise, you still bear the risk that your mare won't become pregnant, won't carry the foal to term, will have foaling complications or that the foal will have health issues. If you breed, you also run the significant risk that the foal will not have the temperament, movement, conformation or color that you desire. When you purchase a foal or young stock, you can select exactly the horse you want. Buying a foal also allows you to avoid ongoing mare care expenses (which of course continue on after a foal is weaned). But, you say you want to witness the miracle of birth? That's what MareStare.com is for!
Breeding%20Cost%20Worksheet
Labels: horse breeding
Tuesday, January 15, 2008
Breeding Farms and Mistaken Identity
One of today's callers had a very complicated situation involving a horse that had been switched at birth as a foal on her breeding farm. The foal's true identity was revealed only when its DNA was submitted for registration over a year after it had left her farm.
What can breeding farm owners do to protect themselves against situations of mistaken identity? The caller and our attorney discussed this question, resulting in the following suggestions:
-As soon as each foal is born, take a digital photo that clearly shows the foal's markings and keep it in the mare's file.
-Rather than having the client take the DNA sample and send it in to the registry for testing, do it as early as possible (and before the foal leaves the farm). Specify in the mare care contract that the farm will perform this service and the client will be required to pay for it.
-Include a clause in your mare care contract limiting liability for all claims to the amount paid by the client under the contract.
What can breeding farm owners do to protect themselves against situations of mistaken identity? The caller and our attorney discussed this question, resulting in the following suggestions:
-As soon as each foal is born, take a digital photo that clearly shows the foal's markings and keep it in the mare's file.
-Rather than having the client take the DNA sample and send it in to the registry for testing, do it as early as possible (and before the foal leaves the farm). Specify in the mare care contract that the farm will perform this service and the client will be required to pay for it.
-Include a clause in your mare care contract limiting liability for all claims to the amount paid by the client under the contract.
Labels: horse breeding
Tuesday, July 24, 2007
A Good Horse Doesn't Have a Bad Color...Unless He's Not a Blue Roan
One of today's callers presented an interesting question. She sold a yearling colt that she thought was a blue roan. It was certainly possible for him to be a blue roan, as his sire had been a blue roan. She told the buyer she thought the horse was a blue roan, and the buyer agreed with her. After purchase, the buyer decided that the colt was really gray instead of blue roan, and demanded his money back.
As we all know, horse sales are customarily "as is" and buyer beware, unless the seller knowingly misrepresents the horse. Here, it doesn't appear that the seller knew that the horse was really gray rather than blue roan, so the seller didn't knowingly misrepresent the horse. In fact, the buyer had not yet obtained a professional opinion on whether the horse really was gray or roan - he was just stating his opinion.
Every year, we receive a few calls on genetic mistakes. Typically, the call is from a buyer who has purchased a stallion or mare to use as a breeding prospect, and the horse doesn't turn out to be the color the buyer thought or be homozygous for a particular trait (such as the tobiano coat pattern), or the horse does turn out to be a carrier of undesirable conditions, such as overo lethal white syndrome, HYPP or HERDA. Unless the seller knows (or has reason to suspect) the horse's genetic status and misrepresents it to the buyer, the buyer will have no recourse against the seller. It is typically the buyer's responsibility to thoroughly examine the horse before buying, including any genetic testing that may be necessary.
As we all know, horse sales are customarily "as is" and buyer beware, unless the seller knowingly misrepresents the horse. Here, it doesn't appear that the seller knew that the horse was really gray rather than blue roan, so the seller didn't knowingly misrepresent the horse. In fact, the buyer had not yet obtained a professional opinion on whether the horse really was gray or roan - he was just stating his opinion.
Every year, we receive a few calls on genetic mistakes. Typically, the call is from a buyer who has purchased a stallion or mare to use as a breeding prospect, and the horse doesn't turn out to be the color the buyer thought or be homozygous for a particular trait (such as the tobiano coat pattern), or the horse does turn out to be a carrier of undesirable conditions, such as overo lethal white syndrome, HYPP or HERDA. Unless the seller knows (or has reason to suspect) the horse's genetic status and misrepresents it to the buyer, the buyer will have no recourse against the seller. It is typically the buyer's responsibility to thoroughly examine the horse before buying, including any genetic testing that may be necessary.
Labels: horse breeding, horse sales
Wednesday, May 30, 2007
The Surprise Foal - Bonus or Boat Anchor?
Spring has finally arrived here in the Pacific Northwest and with the arrival of spring comes a flood of inquiries to our practice about "surprise" foals. Typically, an unsuspecting purchaser has bought a mare without knowing she is in foal. Sometimes, the mare owner doesn't even suspect pregnancy until WOW!! one morning the mare is not alone...
The arrival of a foal is not always cause for celebration. Usually, the mare owner had plans for the mare that didn't include time out for foaling. Often, these plans are time-sensitive, such as futurities. Sometimes, the mare is very young and the owner is justifiably concerned that pregnancy and lactation will stunt the mare's growth. The mare owner incurs unexpected expenses, such as vet fees, supplements and extra feed, sometimes far in excess of the original purchase price of the mare. With the average market value of a grade weanling being just a few hundred dollars, the mare owner is unlikely to recoup his or her expenses by selling the foal at weaning time.
When the mare owner calls the seller, the seller's reaction varies, but interestingly, they are rarely surprised or apologetic. Often, the seller views the foal as a "bonus," and takes the position that the mare owner should be (financially) grateful for this unexpected surprise. Sometimes, the seller has the chutzpah to ask the mare owner for stud fees! Occasionally, the seller even claims that the foal is their property and that the mare owner should care for the foal until weaning (at the mare owner's expense, of course) and then turn it over to the seller.
Does the mare owner have any recourse against the seller? If the seller knew or had reason to know that the mare was pregnant and failed to disclose that fact to the buyer, the seller has a claim that the seller materially misrepresented the mare (or even committed fraud). The buyer can seek rescission, which means that the contract is void and the parties are each returned to their original pre-sale position (seller gets mare and foal, reimburses buyer for buyer's expenses). Alternatively, the buyer can seek damages (i.e., the additional expenses they have incurred in connection with the pregnancy and foaling). In the rare instance where the seller had no reason to know that the mare was pregnant and neither did the buyer, either party may seek rescission based upon a doctrine known as "mutual mistake."
Who owns the foal? In most cases, unless the original purchase contract for the mare is rescinded, the buyer will own the foal.
Does the buyer have to pay stud fees to anyone? Typically, no. In most cases, the buyer has no contract with the stallion owner (whether it is the seller or a third party) to breed the mare and pay stud fees. However, unless the seller fulfilled his or her obligations under the breeding contract (e.g., paying the stud fees and informing the stallion owner that the mare is in foal), the stallion owner is not legally obligated to file a breeding report with the appropriate breed registry for the breeding. Without a breeding report on file at the breed association that includes the mare, the foal will generally not be eligible for registration. What that means is that it may be in the mare owner's best interest to negotiate with the stallion owner to get the foal registered, as registered foals are typically worth far more than grade foals.
The arrival of a foal is not always cause for celebration. Usually, the mare owner had plans for the mare that didn't include time out for foaling. Often, these plans are time-sensitive, such as futurities. Sometimes, the mare is very young and the owner is justifiably concerned that pregnancy and lactation will stunt the mare's growth. The mare owner incurs unexpected expenses, such as vet fees, supplements and extra feed, sometimes far in excess of the original purchase price of the mare. With the average market value of a grade weanling being just a few hundred dollars, the mare owner is unlikely to recoup his or her expenses by selling the foal at weaning time.
When the mare owner calls the seller, the seller's reaction varies, but interestingly, they are rarely surprised or apologetic. Often, the seller views the foal as a "bonus," and takes the position that the mare owner should be (financially) grateful for this unexpected surprise. Sometimes, the seller has the chutzpah to ask the mare owner for stud fees! Occasionally, the seller even claims that the foal is their property and that the mare owner should care for the foal until weaning (at the mare owner's expense, of course) and then turn it over to the seller.
Does the mare owner have any recourse against the seller? If the seller knew or had reason to know that the mare was pregnant and failed to disclose that fact to the buyer, the seller has a claim that the seller materially misrepresented the mare (or even committed fraud). The buyer can seek rescission, which means that the contract is void and the parties are each returned to their original pre-sale position (seller gets mare and foal, reimburses buyer for buyer's expenses). Alternatively, the buyer can seek damages (i.e., the additional expenses they have incurred in connection with the pregnancy and foaling). In the rare instance where the seller had no reason to know that the mare was pregnant and neither did the buyer, either party may seek rescission based upon a doctrine known as "mutual mistake."
Who owns the foal? In most cases, unless the original purchase contract for the mare is rescinded, the buyer will own the foal.
Does the buyer have to pay stud fees to anyone? Typically, no. In most cases, the buyer has no contract with the stallion owner (whether it is the seller or a third party) to breed the mare and pay stud fees. However, unless the seller fulfilled his or her obligations under the breeding contract (e.g., paying the stud fees and informing the stallion owner that the mare is in foal), the stallion owner is not legally obligated to file a breeding report with the appropriate breed registry for the breeding. Without a breeding report on file at the breed association that includes the mare, the foal will generally not be eligible for registration. What that means is that it may be in the mare owner's best interest to negotiate with the stallion owner to get the foal registered, as registered foals are typically worth far more than grade foals.
Labels: horse breeding, horse sales
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