Breeding drain or racing gain: How many yearlings are making a profit?

Cover image courtesy of The Image Is Everything

Australia’s foal crop has dropped nearly 40% over the past two decades - yet the percentage of foals offered at yearling sales has barely changed. As explored in The Thoroughbred Report’s article “The shrinking foal crop,” this consistency suggests the contraction isn’t isolated to small breeders, but is more systemic.

Commercial operations, breed-to-race participants, and hobbyists alike are feeling the squeeze, and the very foundation of the breeding industry is beginning to shift.

This commerical sale year has been widely regarded as challenging by most in the industry, but how has that reflected in the yearling numbers?

There were 12,550 foals born in 2023 who were eligible to sell as yearlings in 2025, and of those 5214 yearlings were catalogued across Australia’s 10 physical yearling sales. 588 were withdrawn, leaving 4626 horses who walked through the ring on sale day, and 3678 yearlings sold.

With more than 7336 foals born in 2023 not being catalogued for sale as yearlings in 2025, measuring profitability across the whole crop is anything but simple. What can be estimated, however, is the commercial viability of the horses that do make it to auction.

By factoring in the advertised service fee from 2022, adding the 10% sales commission, and an estimated production cost of $69,000 - based on detailed input from a range of breeders interviewed by The Thoroughbred Report - we can assess the individual profit or loss per horse. Note that all service fee figures are sans-GST as all yearling sale prices are without GST.

From this baseline which gives an individual profit figure per yearling, it’s possible to determine the average and median returns across the entire sales season for horses that went through the ring.

Of course, this is a simplified view of a highly complex landscape.

We are assessing service fee and productions costs at full freight when it's often not the case. Many breeders don’t pay the advertised service fee due to discounts, breeding rights, or foal shares.

A number of yearlings were pinhooked as weanlings, adding another layer of complexity. Some were imported in utero with their dams, making their production cost assumptions more challenging.

And as we know, a sale in the ring doesn’t always mean full ownership has changed hands - many breeders retain a share and remain involved throughout the horse’s racing career.

Also it's also important to note that production costs will be lower in different parts of Australia, and some vendors will have shorter yearling preparations for less commercial sales.

However, taking costs at their advertised value we can determine that in 2025, 3678 sold yearlings made a collective profit of $44 million, with an average profit of just under $12,000 per horse. The median outcome was a loss of $39,000, while 33% of those sold made a profit.

If we add the 948 yearlings who passed in, meaning they have generated no income at time of sale, they collectively add $110 million in costs at an average total value of $116,000 per passed in horse.

So, across all the yearlings who went through the ring - passed in or sold - in 2025, there was an total loss of $66 million, or an average loss of $14,400 per horse.

As this split shows, the horses who sold are not completely covering the costs of those who were put through a yearling preparation, taken to market, and taken home again. In a healthy industry, the yearlings who make a profit should ideally cover the losses on those who don’t sell, thus enabling a breeder to keep going without needing to prop up the business with external income.

These figures don’t take into account the cost to produce the yearlings catalogued for sale but withdrawn, or those who were bred for sale but never catalogued.

Table: Profitability of the 2023 foal crop at the 2025 yearling sales after costs

Quartile analysis of profitability in the market

For greater understanding, it’s important to break the market down by quartiles to understand where its strengths lie. This analysis segments the market based on service fee, with the top 25% of stallion fees representing the commercial top quartile.

By using the advertised service fee against each horse, quartile one is stallions standing above $65,000 plus GST, the middle of the market is quartile two with stallions who stood for between $30,000 and $65,000, while quartile three covers stallions who stood between $15,500 and $27,500.

Quartile four is stallions who stood at $15,000 or less in 2022, the conception year of the 2025 yearlings.

Table: Quartile analysis of the 2025 yearling sales

As expected, the data confirms that higher service fees are linked to better financial outcomes, with 54% of yearlings bred off a service fee above $65,000 (plus GST) returning more than they cost to produce. While that percent drops in lower fee brackets, very profitable yearlings can be found across all tiers of the market.

Respected breeder Olly Tait, proprietor of Twin Hills Stud, noted that the yearling sales market is stratified by value, but the stakes are highest at the top.

“The risk of breeding a horse for Easter or Magic Millions correlates to the potential upside, because the risk when you consider the value of the mare and the value of the service fee is far greater (than elsewhere).”

“Someone who breeds a very good looking colt out of a great mare by a stallion that's hot and he's got good x-rays, they deserve to get well paid because it's really hard to do it,” said Tait.

“It's very difficult, just as it's difficult to race a good horse. It's challenging at every step.

“And everybody aspires to breed as good horses as they can and obviously be as high up on the ladder as they possibly can.”

Another factor that adds complexity to the market is the practice of breeders retaining shares in yearlings, which can lead to perceptions that the sale price may not reflect the full market value. When asked about this, Arrowfield Stud’s John Messara responded: “Most of our yearlings are owned by several people, and the market is the best way to determine the value of a horse.”

“The market is the market. If one owner wants to sell and the others want to stay, then the horse has to go through the ring to find the price. Sometimes we will stay in a horse who is a stallion prospect, because stallions are very hard to buy, and keeping a share helps the trainer sell the rest of the shares too.

“It’s infrequent. In our case, we are taking horses to market to sell them. At the end of the day, we have 125 staff to pay, so we need to collect cash to keep the whole farm going.”

The middle of the market

The middle of the market in our quartile analysis shows that 38% of yearlings in quartile two made a profit, and overall the group made an average profit of $8,000 after estimated costs off an average service fee of $43,500. In the third quartile, being the yearlings whose service fee was between $27,500 and $15,500 plus GST, 26% of those sold made a profit.

Messara agreed that more needs to be done to assist the middle of the market.

“The top end is strong as it’s populated by local and international buyers who are coming here to buy the best horses. The part we need to build up is the middle of the market, to allow people to breed for profit. The middle is only profitable for a marginal number of people,” Messara said.

While motivations differ between breeders and owners, Tait said most commercial breeders are ultimately seeking a return.

“If you are breeding to sell your yearling, then you are breeding to try and make a profit. I don't think people who race horses have the same driver: how can you value having a winner at Flemington during Melbourne Cup week? The value of that is far greater than the prizemoney that is paid out by the VRC.”

“But for people who are breeding horses to sell, people are trying to make a profit”

A profit is still possible off a low fee

In the lowest quartile, where the service fees for those yearlings are $15,000 plus GST or less, the data shows that it is still possible to make a profit here - but if you're paying full retail prices on both service fees and production costs, it's only 15% likely. So this bracket is best for breeding rights arrangements, and those breeding on their own farm.

“Every business runs differently and has different overheads,” said David Whishaw of Armidale Stud when asked about the production costs in Tasmania, which are likely notably lower than the Hunter Valley or Victoria.

“We are blessed to have high rainfall, fertile country here, and our cost of land is lower too. There’s probably less capital tied up in the mares too. I’d like to think our attention to detail is as good as anywhere else.

“Small family run businesses run a lot leaner, and are able to offer products to the market for a lower cost of production. What the cost discussion highlights is that the costs have increased astronomically over the last five years.

“It’s harder and harder for those who don’t own their own farms. We are risking losing the lifeblood of the industry, those people who own a few mares and make the romantic stories.

“The cost pressures and the polarisation of the yearling market will force people out.

“Small breeders live and breathe the industry. We are all dreamers who think we can breed the next life-changing horse, and we love the sport.

“It’s disappearing at an alarming rate, and highlights the squeeze in the game. Most of us just want it to wipe its own face, so we can keep living the dream of breeding that great horse. If we are close to breaking even, none of us look too closely.”

Current performers help ease the pain

Kirsty Willis of Rheinwood Pastoral pointed out that cost structures vary widely between breeders. Farm owners may reduce expenses by doing much of the work themselves and foregoing a wage, but unlike larger operations that stand stallions, they must also pay full service fees - adding significant upfront cost.

“We've had a good year with Private Harry, Sonofkirk, Libertad, and Upper Limit. It obviously helps to have some good racehorses running for us,” said Willis.

“On family-run farms it’s a 24/7 lifestyle and you don't get a break. You do it because you love it and you want to keep breeding horses. There's no bigger thrill than the last few months with Private Harry. If you could bottle that feeling of a Group 1 winner and sell it, you'd be a multi-millionaire because there's no better feeling in the world.”

Private Harry (Harry Angel {Ire}) was sold by Rheinwood Pastoral to Kurrinda Bloodstock and Doyle Racing for $115,000 at the Inglis Classic Yearling Sale. He is unbeaten in five starts including the G1 Galaxy Handicap and a half-share in him was purchased by Yulong during the season.

“It’s hard being a small breeder when we factor in the actual cost of the service fee. Some of the big farms can sell a horse for a couple of grand because they haven’t actually paid the fee when they own the stallion.

“On a small farm, every loss feels big when you don’t have big numbers. One horse not being profitable can have a big impact on the farm. And then you are trying to upgrade your broodmares and being conscious of your stallion decisions and not over-mate your mares while also trying to breed athletes.

“It’s also getting harder and harder to even get your horses into the right sales. You have to have a bloody nice horse. I'm incredibly thrilled that our horses are running really well on the track and I'm proud of how our graduates are doing. All the changes that we made over the last six years to try and focus on breeding the best racehorse, and not just a sales horse, is paying off.

“I have taken pride in seeing that a lot of the times when we've sold yearlings, the same trainers will come back and purchase the next foal. They buy more horses from us because they're happy with how that particular horse was raised and cared for. The horses we sell are winning and they’re getting pay cheques for their owners.”

As margins tighten, economies of scale are increasingly becoming the most viable way to absorb rising costs and stay competitive. Larger farms benefit from standing their own stallions, shared staffing across operations, and greater negotiating power - advantages that smaller breeders simply can’t match.

“Any industry needs the smaller foundation businesses," said Willis.

“I think that there's worrying signs out there as the bigger farms get bigger, and the bigger stables get bigger. The smaller farms are huge employers of people and contribute to local communities too.

“The amount that racing contributes to the country areas matters, you need to have country trainers and provincial trainers, you can't just have the big dogs in the city.

“And small breeders can be hugely successful, look at Bell River and Tyreel, both do a great job.”

The difficulty in getting a yearling to market

The theme running through all these conversations is that it is difficult to get a horse to the sales - reflected in the statistic that only 29% of the foal crop are sold as yearlings.

There are risks at every stage from getting the mare in foal, delivering a live foal, raising one that grows out correctly and shows athleticism, passing scope and x-rays, and finally, presenting a yearling that appeals to buyers both on paper and in the flesh.

“Every horse is valued on a combination of sire and dam and their physical attributes, and then there are some more intangibles like where it's come from as well. If it's perceived to come from a farm which has given the horse a good start in life that can affect value as well,” said Tait.

“If you've got a good looking horse, it'll sell well. People will forgive the sire and the dam (if the horse is good looking) whereas people are less likely to forgive a horse for not being a good looking horse even if it is by a good sire and has a good dam.

“Horses have got to be within acceptable limits in whatever they do. They can't be too small. Can't be too big. They have to walk well enough and they’ve got to have a nice head, all the physical attributes.”

Profit against enjoyment

The racing and breeding industries are unique in that they combine sport, hobbies, and profit. While some breeders and racing owners are here for the thrill of the win, it is expensive to participate, and the falling foal crop figures alone show that the capacity to continue losing money is pushing people out of the industry.

“We're a business and we're trying to make profit overall. The more individuals that make a profit (each), improves the industry's overall profitability,” said Tait.

“Not all the horses we produce are going to be profitable, but that's the same whatever level of the market you're at. You're going to have some that make money and you're going to have some that lose money.

“And then with those (which don’t get to the yearling sale), sometimes we are going to try and sell them later, by putting the horse into training and sell privately, or try and recoup some of the cost with prize money.

“It's challenging breeding horses. The commercial side is challenging - but every business is challenging otherwise everyone is doing that business.”

The bigger cost for breeders comes with the horses who don’t sell - almost two thirds of those bred.

“We are racing the horses that don’t go to sale, or went to sale and didn’t sell,” said Messara. “We have shares in enough racehorses to add up to 70 whole horses in work.”

“There’s a general misunderstanding of the importance of breeders in this game. We have the investment, and then we have the training costs of the ones we can’t sell. There are a million obstacles along the way.”

A historical study done by Aushorse found that breeders have a share in 61% of horses in training and this tracks with the current foal crop figures where 70% are not sold as yearlings.

“Luckily we love it so much,” said Messara with a chuckle in his voice.

“You get a very big dose of satisfaction when you find a nice horse and win a Group 1. There’s the process of collecting knowledge, and then making a judgement call on a horse. It’s pitting your capacity to select (a horse) against the rest of the world.”

In 2025, it was possible to make a profit at all levels of the market - if you had the right horse: correct on type, clean on x-rays, by the right sire, from the right family. A selective breeder can still succeed. But the margin for error is thin.

And even though only one third of yearlings sold returned a profit, our calculations didn't account for the capital value of the broodmare.

The figures don’t lie: it’s getting harder to break even, let alone get ahead. And when the pipeline of new foals keeps shrinking, the message is clear: This industry cannot afford to keep losing its breeders.

Read the full Breeding drain or racing gain series here:

If you would like to contribute to this series - especially as we turn to discussing solutions, send your thoughts or ideas to vicky@ttrausnz.com.au.