Economic analysis of Quarter Horse and Thoroughbred yearling production in Texas

Abstract

The horse industry in Texas generates $1.5-2.0 billion dollars of total economic activity per year. Combined with related service industries, the horse industry is a major component of a multibillion dollar industry in the State. Prior economic studies on horse production in Texas are nonexistent, therefore, economic information necessary for evaluating the profitability of existing farms and feasibility of new operations is not readily available. This study is concerned with costs associated with producing Quarter Horse and Thoroughbred yearlings in Texas. Two sizes of production systems of each breed were analyzed: farms with five broodmares and farms with twenty broodmares. At the core of the analysis are the four budgets which provide estimated break-even prices for Quarter Horse and Thoroughbred yearlings from the different size farms. These budgets were developed by combining average values from responses received from selected producers and representative values for selected items. The costs are for 30 months-the time from breeding to selling. Results of the analysis reveal that 15 percent of Thoroughbred producers with five broodmares are covering all costs, while 85 percent are covering neither variable nor fixed costs. Sixty-six percent of Thoroughbred operations with twenty broodmares are covering variable costs, but not fixed costs. None of the Quarter Horse farms with five mares are covering both variable and fixed costs. On Quarter Horse farms with twenty broodmares, 40 percent are covering variable costs, yet none of those are covering fixed costs. One implication of this analysis is that the majority of Quarter Horse and Thoroughbred yearling production systems in Texas are not breaking even. However, all of the producers surveyed had additional sources of income, either in a related or non-related field. There are indications that producers are motivated partially by incentives other than monetary ones. The budgets were developed based on representative farms across Texas. However, budget-users should include prices and practices that are specific for their operation to result in a more accurate break-even price for their individual operations.