The Economy: Struggles for Some, Opportunities for Others

May 2009

 

Fewer Hack Stables
Hack stables can come and go with the wind. Although many "proper horse people" take a disdainful view of hack stables (stables which rent horses by the hour for trail rides, or which provide guided trail rides), the brutal reality is that hack stables are the horse industry's most critical "point of entry" for new horse people. Any industry, in order to thrive, must continually create new clients, new business. Although it is every trainer's fantasy to have a wealthy client who has never ridden before land in their lap, so that that trainer can shape that rider's career (and financially benefit) from up/ down through Grand Prix, it is not how the vast majority of people come into the horse world. Be it Madonna or the horse owner next door, most people, if not born into horses, come into horses through renting a horse for a trail ride and/ or taking a lesson.

So, the prevalence of hack stables can be seen as an "obscure, lagging economic indicator" for the future health of the industry.

In this issue of The Equiery is our guide to stables offering rentals or guided trail rides. We also provide this directory as a free, stand alone brochure to tourism centers throughout Maryland, and the directory is featured on equiery.com and www.saddleupmaryland.com.

Since we last published this directory, five hack stables have gone out of business, but several have started, so the overall attrition rate is only two. Not bad. This year will tell us if non-horse folks will still spend their discretionary income on a trail ride.

Depressed Prices Keeping Operating Costs Down For Stable Owners

Farmers are feeling the economic chill of depressed commodity prices. According to the Carroll County Times, corn has dropped from $7 per bushel to $4 per bushel, and with prices for fuel and fertilizer still relatively high, farmers are bracing for a tough year.

However, horse people to some extent, are benefiting as feed prices likewise drop. And with the bumper crop of 2008 hay, stable owners didn't take the same kind of hit to their bottom line for hay that they took in 2007 because of the drought.

Likewise, the currently depressed sales prices for off-the-track Thoroughbreds are once again making the breed attractive to local lesson stables and trainers looking for affordable, athletic horses for show hunters, eventing and foxhunting. While locally bred, sound, off-thetrack Thoroughbreds once dominated local stables, in the late 90s and early 2000s, prices made the sound ones unaffordable for most, and the ones that were affordable were sadly not sound or quiet enough. Thus, many barn owners turned to affordable cross breds. But this may again be changing, and some local trainers are retooling their programs and looking for more Thoroughbreds.

Of course, we want farmers and breeders to do well, so that they can earn a living and maintain their farms, but for every economic downside for one business, there is an economic upside for another business.

Southern States Reports a Great 08

Sales Top $2 Billion!

Nationwide sales for fiscal year ending June 30, 2008 pushed Southern States into the $2 billion dollar club. Remember: Southern States is more than just horse feed. In addition to its retail segments, with close to 30 stores in Maryland alone, Southern States handles direct commodities, exporting internationally. According to Southern States' Rich Schnider, "Commodity markets were strong in feed, fertilizer and petroleum, which boosted the top and bottom line. But as they say "what goes up must come down" is the story for this operating year. So we expect this year to end with a normal bottom line."

How does this affect your feed prices? Well, according to Schnider, "We have experienced some buying down to more economical feeds, but Legends and Triple Crown continue as strong feed lines."


Farm Credit Feelin' Fine

Because Farm Credit is not your ordinary mortgage company (you know, like the ones you have been reading about over the past six months, which sell you a mortgage and then bundle up your mortgage with a bunch of others and sell it to someone else), it has been able to steer clear of the economic tsunamis affecting banks. In April, Farm Credit released its annual financial report, along with those wonderful little kickback checks to mortgage holders (known as "patronage refunds"). Farm Credit's net numbers continue to grow, and this year the institution returned $13,400,000 in refunds to members (if you have a mortgage through Farm Credit, you are a "member").

Although equine related loans rank fifth on Farm Credit's commodity portfolio, these loans continue to grow steadily. In 2006, equine business loans accounted for 8% of Farm Credit's business, with $154+ million in loans. In 2008, equine business accounted for 9%, with over $188 million in loans. (For comparison sake, Farm Credit made $454+ million in loans in the poultry industry, its number one commodity group, followed by grain and dairy; nurseries/greenhouses, timber/forestry, fruits & vegetables come in under equine.) Due to their risk management and method of qualifying borrowers, Farm Credit is not experiencing the kind of eye-popping default rates of traditional banks or mortgage companies.

For Farm Credit's annual report, visit equiery.com.

Equine Business Bookings Up At PGEC
According to the The Inquirer-Gazette, the Prince George's Equestrian Center booked seven more horse shows in 2008 than in 2007 for the period of September through January (for a total of 18 shows for Sept. 08 - Jan. 09). However, attendance was down at those horse events for that same period with fewer than 10,000 as compared to 15,300 for the same period last year.

The equestrian community is still waiting, however, for those long promised (and funded) improvements. According to PGEC watchdog Dorothy Troutman, covering the outdoor arena was promised 12 years ago, with funding secured two years ago, but we still wait.

Oceans Downs Reaches Agreement

Ocean Downs racetrack (Worcester Co. on the Eastern Shore) has reached a long awaited agreement with the Maryland Harness Horsemen's Association, the Cloverleaf Standardbred Owner's Association, valid only if the track owner, William Rickman, is awarded a slots license (see elsewhere in this issue of The Equiery for the Rickman family's contribution to recreational horse sports). The deal includes:
- 40 nights of live racing;
- $900,000 for purses from the track;
- closing of the backstretch in December.

If awarded slots, Rickman promises a complete renovation of the clubhouse. Stay tuned!

 

 

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