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Horse & Other Equine Production in the USNovember 2014 1

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Saddling up: Increased disposable incomes will


boost spending on race and recreational horses

IBISWorld Industry Report 11292

Horse & Other Equine


Production in the US
November 2014

Antal Neville

2 About this Industry

17 International Trade

33 Key Statistics

Industry Definition

19 Business Locations

33 Industry Data

Main Activities

Similar Industries

22 Competitive Landscape

Additional Resources

22 Market Share Concentration

33 Annual Change

22 Key Success Factors

4 Industry at a Glance

33 Key Ratios

34 Jargon & Glossary

22 Cost Structure Benchmarks


24 Basis of Competition

5 Industry Performance

25 Barriers to Entry

Executive Summary

25 Industry Globalization

Key External Drivers

Current Performance

Industry Outlook

11 Industry Life Cycle

27 Major Companies
28 Operating Conditions
28 Capital Intensity

13 Products & Markets

29 Technology & Systems

13 Supply Chain

30 Revenue Volatility

13 Products & Services

30 Regulation & Policy

14 Demand Determinants

31 Industry Assistance

16 Major Markets

www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

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About this Industry


Industry Definition

Establishments in this industry breed


and raise horses, mules, donkeys and
other equines (mammals belonging to the
Equidae family) for transportation,

Main Activities

The primary activities of this industry are

racing events, rodeo competitions and


other recreational sports. These
establishments are commonly referred to
as ranches, farms or studs.

Producing and raising burros


Producing and raising donkeys
Producing and raising horses
Producing and raising mules
Producing and raising ponies

The major products and services in this industry are


Mules, burros and donkeys
Racehorses
Show horses
Thoroughbred breeding mares
Thoroughbred breeding stallions
Thoroughbred foals
Other horses and equines

Similar Industries

11199 Hay & Crop Farming in the US


Equines subsist on a diet of hay, oats and other crops, much of which are produced by the Hay and Crop
Farming industry.
11521 Livestock Production Support Services in the US
Establishments primarily engaged in equine boarding are classified in this industry.
42452 Cattle & Hog Wholesaling in the US
Equine producers buy and sell their livestock through specialist wholesalers in this industry.
71121b Racing & Individual Sports in the US
Equine owners enter horses in racing or other spectator sporting events.

Horse & Other Equine Production in the USNovember 2014 3

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About this Industry

Additional Resources

For additional information on this industry


www.agcensus.usda.gov/index.php
Agricultural Census
www.horsecouncil.org
American Horse Council
www.bloodhorse.com
Blood-Horse
www.census.gov
US Census Bureau

IBISWorld

writes over 700 US


industry reports, which are updated
up to four times a year. To see all
reports, go towww.ibisworld.com

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Horse & Other Equine Production in the US November 2014

Industry at a Glance
Horse & Other Equine Production in 2014

Key Statistics
Snapshot

Revenue

Annual Growth 09-14

Annual Growth 14-19

Profit

Exports

Businesses

$1.5bn

-4.1%

1.8%
$117.2m $362.8m 168,776
Demand from racing and individual sports

Revenue vs. employment growth

% change

There are no
Major Players in
this industry

12

% change

Market Share

12
18

Year 06

08

10

Revenue

12

14

16

18

Year

20

08

10

12

14

16

18

20

Employment
SOURCE: WWW.IBISWORLD.COM

p. 27

Products and services segmentation (2014)

Key External Drivers

5.8%

Demand from racing


and individual sports

7.5%

Per capita disposable


income

0.8%

Thoroughbred foals

Thoroughbred
breeding stallions

1.9%

Racehorses

Mules, burros and donkeys

Consumer
Confidence Index

11.3%

52.9%

Thoroughbred breeding mares

Trade-weighted index

Other horses and equines

Price of feed

19.8%

Show horses

p. 5

SOURCE:
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SOURCE:
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Industry Structure

Life Cycle Stage


Revenue Volatility

Mature
Medium

Regulation Level

Medium

Technology Change

Medium
Medium

Capital Intensity

High

Barriers to Entry

Industry Assistance

Low

Industry Globalization

Concentration Level

Low

Competition Level

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 33

High
Medium

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Industry Performance

Executive Summary | Key External Drivers | Current Performance


Industry Outlook | Life Cycle Stage
Executive
Summary

Revenue for the Horse and Other Equine


Production industry was on an upward
trend until the recession severely
weakened demand for horses.
Downstream demand for the industrys
horses is mainly dependent on household
disposable income, activity in the horse
racing industry and the popularity of
horses for recreation. Due to the onset of
the recession in 2009, demand fell,
causing revenue to plummet that year
and in several subsequent years. The
industry is not expected to recover to
prerecessionary levels; revenue is

anticipated to fall at an annualized rate of


4.1% to $1.5 billion in the five years to
2014. The decline is mainly attributed to
the drop in big-ticket purchases during
the recession, but the industry has also
been negatively affected by less
participation overall in horse-racing
activities. Renewed demand is expected
to lead to 1.9% revenue growth in 2014.
The recession also negatively impacted
profit margins. As fewer people had the
disposable income for purchases of new
horses, breeders had to drop their prices
to accommodate the buying market.

Many did not make up the costs that


went into producing these horses, and
the industry recorded comparably low
margins throughout the past five years.
Profit margins have inched back up, but
are still below precessionary levels. As a
number of breeding facilities failed to
make ends meet, many left the industry,
spreading out the inventory of horses and
other equines to specialized breeding
facilities as well as to generic boarding
facilities. Therefore, participation in the
industry has grown in the past five years,
increasing an annualized 1.7% to 174,799
establishments in the five years to 2014.
The industry is forecast to grow slowly
but consistently in the next five years due
to further recovery in consumers
disposable income, which will prompt
increased demand for these discretionary
purchases. Similarly, consumers with
more spending money will attend or take
part in horse racing related activities, such
as gambling. These factors will enable
racing facilities to generate more revenue
and, therefore, offer larger amounts of
prize money to incentivize racers to
participate. Racers will then demand more
Thoroughbreds, which are known for their
high quality performance. Additionally,
increased exports will facilitate revenue
growth. As a result, revenue is forecast to
rise at an average annual rate of 1.8% to
$1.6 billion in the five years to 2019.

Demand from racing and


individual sports
Horse racing and related sporting events
demand horses as the main feature for
recreation and entertainment purposes.
An increase in horse racing will raise
demand for horses bred to participate in
such activities, lifting revenue. Revenue
for racing and individual sports is
expected to increase during 2015,
presenting a potential opportunity for
the industry.

Per capita disposable income


Demand for horses is sensitive to
household disposable income as horses
are an expensive discretionary purchase,
and annual maintenance, such as food,
boarding, training and veterinary
services can cost into the thousands.
Consumers with higher disposable
income are generally more able to afford
recreational horses. Per capita
disposable income is expected to
increase slowly in 2015.

Profit

margins have inched back up, but are


still below precessionary levels

Key External Drivers

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Industry Performance

Consumer Confidence Index


Because horse races can be an expensive
and risky investment, Thoroughbred
demand is particularly sensitive to
consumer sentiment. A higher consumer
sentiment makes people more willing to
make these investments, in addition to
participating in related activities, such as
gambling. The consumer confidence
index is expected to increase during 2015.
Trade-weighted index
Exchange rates affect the price
competitiveness of this industrys
exports. An appreciation of the American
dollar makes US horses relatively more

expensive to the global market, making


them less attractive to purchase, in turn,
negatively affecting export earnings. The
trade-weighted index is expected to
increase in 2015, representing a potential
threat to the industry.
Price of feed
A rise in the domestic prices of feed for
horses increases operating costs for horse
ranches. If firms elect to pass these costs on
to downstream buyers in the form of higher
prices, demand can fall. Generally, a higher
price of inputs like feed causes operators to
reduce the number of horses kept. The
price of feed is expected to fall during 2015.
Per capita disposable income

Demand from racing and individual sports


4

% change

% change

Key External Drivers


continued

2
4
6

Year

0
1

08

10

12

14

16

18

20

Year

08

10

12

14

16

18

20

SOURCE: WWW.IBISWORLD.COM

Horse & Other Equine Production in the USNovember 2014 7

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Industry Performance

Current
Performance

Although the Horse and Other Equine


Production industry was growing, any
progress was stamped out during and
following the recession. Downstream
demand is largely determined by
disposable income, activity in the horse
racing industry, popularity of horses for
recreation and export activity. When
disposable income plummeted during the
recession, consumers became less willing

Thoroughbred racing
and breeding

Demand for racehorses and stud services,


or horse breeding services, is influenced
by the prize money available to race
participants in the United States and
abroad. In turn, the amount of prize
money depends on earnings from
admissions tickets and revenue from
spectators gambling activity. Over the
past decade, downstream demand from
horse racing has been on the decline,
partly due to the recession. With less
disposable income, Americans were less
willing to participate in risky gambling on
horse races, so racing facilities earned
less money from gamblers, which trickled
down as smaller prize money offers. This
trend led the total Thoroughbred foal
crop, or number of pedigreed baby
Thoroughbreds born, to fall in each of the
past five years. According to The Jockey
Club, a racing association, the foal crop
declined 2.2% from 22,500 in 2012 to
22,000 in 2013. This figure is down from
a high of close to 40,000 in 2005.
Consequently, revenue from breeding
racing Thoroughbreds has decreased.
In addition to the economic
environment, horse racing has been
under pressure due to competition from
other forms of gambling, such as casinos
and sports betting. Furthermore,
according to racing news source The
Paulick Report, the racing industry is
under scrutiny as a result of infighting
about the division of wagering revenue,

to purchase these animals, which


represent a considerable expense for both
the casual rider and competing
professional. Thus, demand fell, causing
revenue to plunge in 2009 and continue
to drop through 2012. Though growth
has resumed slightly, the industry has yet
to recover. Revenue is expected to fall
4.1% per year on average to $1.5 billion in
the five years to 2014.

Competition

from other
forms of gaming affects
demand for race horse
production
public concern about the treatment of
retired racehorses and an NTRA that is
limited in its marketing and strategy
development for the industry.
However, consumers have not
completely lost interest in horse racing.
In fact, viewership of televised events has
increased. For example, the Belmont
Stakes drew in 20.6 million viewers in
2014 when the Triple Crown was at stake,
up from 7.0 million viewers in 2013. The
tune-in was the second-largest on record
for the Stakes, trailing only the 2004 race
when another Triple Crown was at stake.
The Rolex Equestrian Championship is
another annual horse racing event that is
gaining slightly higher viewership. As
viewership and interest spreads and
disposable income increases, the decline
in betting has slowed. In addition, the
increasing popularity of racinos,
combination race tracks and casinos, in
the past decade has helped generate more
interest for the sport in the past several
years. As a result, despite the five-year
overall decline, revenue is expected to
grow 1.9% in 2014.

Horse & Other Equine Production in the USNovember 2014 8

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Industry Performance

Profit and industry


participation

International trade

Profit margins for the industry are


traditionally high, particularly for
Thoroughbred racehorses, which are
bred specifically for high quality
performance. But extremely low demand
for these animals led operators to slash
their prices for these animals starting in
2009. In addition, the volatile cost of
hay rose dramatically in 2008 and 2012,
parallel to corn prices. In addition to
being a major input for cow, hog and
chicken feed, corns major role as an
input for biofuel production has placed
upward pressure on its price. Since hay
is also a feed crop, its price often
fluctuates with the price of corn. In
order to counteract these high costs and
soften profit declines, firms reduced
their man hours. Industry wages have

fallen an annualized 1.2% to $273.3


million in the five years to 2014.
Reduced profit forced many higherend breeding facilities to shut their doors
and exit the industry. Nevertheless, the
total inventory of horses has risen, and
they are less concentrated in specialized
facilities. The number of
establishments has consequently risen
1.7% per year on average to 174,799 in
the five years to 2014.

Although horses and other equines are


difficult to transport, international trade
remains an important industry activity.
Exports make up an estimated 24.5% of
revenue in 2014. America is a leading
horse-breeding nation that produces
well-pedigreed race horses and show
horses. Buyers looking for highperforming horses often shop on a global
market, including in the United States.
The majority of sales value of exported
horses comes from buyers in countries
where equine sports are popular,
including the United Kingdom and
Japan. However, as fewer Thoroughbreds
and other high-price horses were bred in

the United States in the past few years,


the value of exports also dropped,
declining an annualized 6.7% to $362.8
million in the past five years.
Despite the United States leadership
in horse breeding, other countries also
specialize in industry activities. Breeders
in Europe produce lines of horses that are
prized in disciplines outside of racing,
including dressage and jumping. As the
popularity of these showing events has
remained strong, demand for suitable
horses, such as Warmbloods, has
increased. In the past five years, the value
of imports has risen 7.0% per year on
average to $324.2 million in 2014.

A

decline in profit has


contracted the number
of horse farms and ranch
locations

Horse & Other Equine Production in the USNovember 2014 9

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Industry Performance

In the next five years, the Horse and Other


Equine Production industry is forecast to
grow consistently while still remaining
under prerecessionary levels. Continued
recovery in factors affecting downstream
demand for the industrys animals and
services will benefit revenue. For example,
higher disposable income, in addition to
greater participation and stronger interest
in equestrian sports, will play a key role in
stimulating demand. Although imports
will pose a threat to the domestic market,
the industry will benefit from export
growth. In light of these positive factors,
revenue is forecast to increase at an
average annual rate of 1.8% to $1.6 billion
over the five years to 2019.

Revenue vs. exports


36
24

% change

Industry
Outlook

12
0
12
24

Year 06
Revenue

08

10

12

14

16

18

20

Exports
SOURCE: WWW.IBISWORLD.COM

Turnaround in horse
racing

In the five years to 2019, continued


economic recovery will allow disposable
income to rise at a forecast 2.5% per year
on average. Since horses and other equines
are considered expensive luxury goods,
higher disposable income will encourage
consumers to buy these animals for
equestrian and recreational purposes.
Larger amounts of spending money will
also encourage consumers to pay for
activities, such as riding lessons and scenic
tours conducted on horseback, which will
cause these downstream enterprises to
purchase more horses from horse breeders.
By the same token, consumers with
higher disposable incomes are typically
more willing to gamble on horse races,
creating more interest and driving up

attendance for these types of events.


Facilities that combine racetracks and
casinos, known as racinos, are expected
to increase. Some will even upgrade from
having only video lottery terminals (i.e.
slot machines) to having card tables with
live dealers. As racing facilities gain more
revenue from admission tickets and
spectators gambling activity, they will be
able to offer larger prize money packages.
These larger prize purses will give race
teams more incentive to compete.
Furthermore, to better their chances,
racers will demand more of the expensive
Thoroughbred horses that were bred for
high quality racing performance,
boosting industry revenue with sales of
Thoroughbred race horses.

Profit expansion

Increasing demand for horses will allow


operators to raise their prices from
recessionary lows. Also, Thoroughbreds
demand a price premium for their
perceived superior bloodline and are
forecast to experience greater demand
from the racing industry, boosting profit
margins. In addition, hay prices are

anticipated to be less volatile in the next


five years. Consequently, the industrys
profit margin is expected to expand in the
next five years. Consolidation that
occurred in the past five years will also
support profit expansion in the future
period due to the increased efficiencies of
larger operations.

Horse & Other Equine Production in the USNovember 2014 10

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Industry Performance

Profit expansion
continued

As horse breeding becomes a more


profitable industry, breeders that once
left during the recession will reenter, as
these operators already have the
specialized experience and knowledge
necessary for running a breeding facility.
Growing profitability will also attract new
entrants who have the appropriate
resources to enter the industry.
Therefore, the number of establishments
is anticipated to rise at an average annual

Trade conditions

Despite growing demand in foreign


markets, exports will continue to fall as the
US dollar appreciates, making US-bred
horses more expensive on the international
market. Nevertheless, the use of shuttle
stallions (i.e. studs that are shipped to
different parts of the world depending on
breeding seasons) is projected to increase
internationally, partially tempering
declining demand for exports. As a result of
these factors, exports are expected to fall
2.4% per year on average to $322.0 million
in the next five years.
However, the industry will face
competition from imports due to an
appreciating dollar. When the dollar

rate of 1.4% to 187,291 in the five years to


2019. Similarly, the more farms in
operation will require more workers. The
number of employees is forecast to
increase 0.4% per year on average to
895,736 in the same five-year period. The
trend of horse farm movement to states
with protected farmland is also expected
to continue well into the future and
further support establishment and
employee growth.

The

risk of equine diseases


indicates the importance of
biosecurity in the industry
appreciates, foreign products are
relatively less expensive to the domestic
market, making them more attractive to
purchase. Imports of specialty breeds not
traditionally bred in the United States,
including European Warmblood breeds,
will continue to drive much of this
demand, Imports are projected to rise an
annualized rate of 7.0% to $454.7 million
in the five years to 2019.

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Industry Performance
Products and services enjoy
wholehearted market acceptance

Life Cycle Stage

Product development is limited

% Growth in share of economy

IVA is expected to grow at a slower rate


than GDP during the 10 years to 2019

20

Maturity

Quality Growth

Company
consolidation;
level of economic
importance stable

High growth in economic


importance; weaker companies
close down; developed
technology and markets

15

Key Features of a Mature Industry


Revenue grows at same pace as economy
Company numbers stabilize; M&A stage
Established technology & processes
Total market acceptance of product & brand
Rationalization of low margin products & brands

10

Quantity Growth

Many new companies;


minor growth in economic
importance; substantial
technology change

Cattle & Hog Wholesaling


Hay & Crop Farming
Tractors & Agricultural Machinery Manufacturing
Farm, Lawn
Horse & Other Equine Production
& Garden
Equipment
Livestock Production Support Services
Wholesaling

Decline

-5

Shrinking economic
importance

-10
-10

-5

10

15

20

% Growth in number of establishments


SOURCE: WWW.IBISWORLD.COM

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Industry Performance

Industry Life Cycle


This

industry
is M
 ature

The Horse and Other Equine Production


industry is expected to grow at a similar
rate to the overall economy in the 10
years to 2019. Although demand for
these animals fell considerably in years
during and following the recession due
to low disposable income, the industry is
forecast to recover over the next five
years. In addition, profit is anticipated
to expand in the next five years. As a
result, in the 10 years to 2019,
IBISWorld projects the industrys
contribution to the economy, as
measured by the industry value added
(IVA), to increase at an annualized rate
of 1.1%. Over the same period, GDP is
forecast to rise at an average annual rate
of 2.5%. As such, the industry is in the
mature stage of its life cycle.
Although considered a luxury, there is
a consistency of demand from particular

segments of society for racehorses, show


horses and horses for recreational use.
This consistent base of demand makes
industry growth fairly reliable.
Furthermore, horse racing and other
professional equestrian sports, including
show jumping and dressage, are widely
recognized and practiced internationally,
from novice levels up to the Olympics.
The structure of this industrys
products and services, though, leads to
little product innovation, which is
common to many mature industries.
Product innovation for the Horse and
Other Equine Production industry
typically refers to the variations within
horses bloodlines. Thoroughbreds are
already considered the optimal choice for
racing, while operators are limited to
mixing bloodlines for improving the
quality of animals bred.

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Products & Markets

Supply Chain | Products & Services | Demand Determinants


Major Markets | International Trade | Business Locations

Supply Chain

KEY BUYING INDUSTRIES


11

Agriculture, Forestry, Fishing and Hunting in the US


Farming, ranching and forestry industries use horses for transportation across rugged terrain
and long distances.

42452

Cattle & Hog Wholesaling in the US


Livestock wholesalers may use live horses.

71121b

Racing & Individual Sports in the US


Horse racing groups are major purchasers of Thoroughbred horses.

KEY SELLING INDUSTRIES

Products & Services

11

Agriculture, Forestry, Fishing and Hunting in the US


Horse farmers purchase stock from other ranches for breeding purposes.

11521

Livestock Production Support Services in the US


Horse ranches often use support services for maintenance.

33311

Tractors & Agricultural Machinery Manufacturing in the US


Agricultural equipment is used for a variety of purposes in horse ranching.

42382

Farm, Lawn & Garden Equipment Wholesaling in the US


Horse ranches purchase equipment and machinery at the wholesale level.

42451

Corn, Wheat & Soybean Wholesaling in the US


Farmers may purchase equine feed from grain wholesalers.

42491

Farm Supplies Wholesaling in the US


Feed is purchased from farm supply wholesalers.

54194

Veterinary Services in the US


Ranches and stables use veterinary services.

Industry revenue is earned through sales


of equine animals and services, but the
single largest revenue earner for this
industry is through the sale of horses for
racing purposes. Meanwhile, the majority
of horses, mules, donkeys and burros
produced are for non-racing purposes.
Participants within this industry also
earn revenue through the sale of stud
services, as well as by providing boarding
and training for equines. Stud services
have high prices, especially within the
Thoroughbred racing horse markets. The
segments outlined in this discussion are
based on volumes and intend to reflect
animal uses compared with total animal
numbers. Overall, each product segment
has seen lower volumes in the past five
years in line with depressed downstream
demand due to reduced disposable
incomes during the recession.

Thoroughbred production and racehorses


This segment includes all of the horses
involved in the racing industry, from
breeding stock to racing stock. Included
in this segment are Thoroughbred
breeding mares, Thoroughbred breeding
stallions, Thoroughbred foals and
racehorses. Well-pedigreed
Thoroughbred horses are mostly raised
for racing purposes. Although the total
Thoroughbred segment accounts for only
about a smaller share of volumes, the
segments contribution to revenue is the
highest. Some horses can command price
tags in the millions depending on the
performance of previous horses in their
bloodline, while prices well into the tens
of thousands are more common. Horses
raised by stud farms are bred to possess
certain characteristics and therefore
command a high price. Male

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Products & Markets

Products & Services


continued

Products and services segmentation (2014)

0.8%

7.5%

Thoroughbred
breeding stallions

Mules, burros and donkeys

1.9%

Racehorses

5.8%

11.3%

Thoroughbred breeding mares

Thoroughbred foals

52.9%

Other horses and equines

19.8%

Show horses

Total $1.5bn
Thoroughbreds have the highest breeding
value, particularly those with a proven
winning track record, since they are able
to mate up to 200 mares per year.

Recreational and other


horses and equines
Other horses account for about half of all
horses sold in the United States. Horses
in this segment are often used for

recreational riding or at equestrian


schools. Some of them are even used for
transportation or other practical
purposes on ranches and farms. Some
horses in this segment simply live on
pastures on large properties. Due to the
informal aspect of much of these uses,
horses in this segment are usually not
bred for any particular use and switch
roles or functions any number of times in
their life depending on who their
particular owner is.
The last segment in the industry is
other equines including mules, burros
and donkeys. These animals are
traditionally bred for use as beasts of
burden. However, their use as labor
animals is now obsolete on most farms or
ranches. Now these equines are used for
a variety of functions, including being
kept as pets, used for rides for small
children or kept among horses where
they often have a calming effect on herds.

Per capita disposable incomes play a


pivotal role in determining
participation in horse-related
recreational activities. Horse
ownership can be expensive because
owners incur maintenance costs

associated with stabling, feed,


supplies, training and veterinary
services. An increase in per capita
disposable income will make horse
ownership more affordable and also
increase participation in racing events.

Show horses
While show horses also command much
higher prices than their utility-based
counterparts, racehorses often outshine
their value. Still, horses bred for these
purposes command high price tags in the
tens or hundreds of thousands of dollars
and account for a larger percentage of
revenue than recreational horses or
horses used for utility. Some of these
horses compete in dressage, jumping and
rodeo events.

Demand
Determinants

SOURCE: WWW.IBISWORLD.COM

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Products & Markets

Demand
Determinants
continued

Racehorse demand
Demand for racehorses is primarily
driven by activity in the downstream
horse racing industry. An increase in
horse racing will increase demand for
racing Thoroughbreds. The prosperity of
US racehorse production depends on the
level of wagering at racetracks.
Meanwhile, the amount of prize money
and incentive payments received by
racehorse owners also determines the
funds available for purchasing
Thoroughbreds from studs.
The popularity and participation levels
of alternative animal racing and other
sports can also indirectly influence the
demand for horses. Like many Western
nations, the US has developed an
extensive greyhound racing circuit that
provides an alternative to traditional
horse racing. An increase in greyhound
racing can translate into reduced activity
in horse racing, thus lowering demand
for racehorses.
Export demand
Exports account for about one-fourth of
all industry revenue and are driven
mainly by the sale of horses for racing
purposes, including Thoroughbred
breeding. The value of the dollar relative
to the currencies of the United States
biggest trading partners, as indicated by
the trade-weighted index (TWI), forms a
part of export demand. As the TWI rises,
the value of the dollar increases relative
to the currency of foreign nations. On the
other hand, as the TWI falls, US horses
become more affordable to foreign
buyers. However, because highperformance racehorses are a high-value
commodity, buyers are often undeterred
by added expenses related to exchange
rates and are more motivated by the
pedigree of a horse. As such, in addition

to exchange rates, the reputation of


US-bred racehorses compared with
horses from other countries helps
determine export demand.
In addition, a number of horses have
been purchased by Mexican and
Canadian meat processors since a 2007
ban in horse slaughter in the United
States. A 2011 Government
Accountability Office report estimated
that about 140,000 horses were exported
for slaughter in 2010, about as many as
were slaughtered domestically prior to
the ban. While these numbers are high,
horses for slaughter are sold for very
little, thus the monetary impact of
exports for slaughter is small.
Breeding demand
The demand for horses for breeding and
stocking purposes can depend on existing
inventories, which in turn may be affected
by disease outbreaks. Reductions in the
national equine population can create a
push for farmers to restock herds.
Throughout the year, available supplies of
horses are partly determined by the
biological breeding cycle. Horses are
seasonal breeders that typically produce
small numbers of offspring each year.
Other equine demand
Demand for other equine relies on
demand from downstream users
including riding schools, ranchers
performing stock work, the police force
and carriage services. Participation in
equine-related recreational activities,
such as trail riding, are major factors
driving demand for horses. Meanwhile,
equestrian events such as dressage and
show jumping create another source of
demand. Demand for horses in the
equestrian circuit depends on the size of
these events.

Horse & Other Equine Production in the USNovember 2014 16

WWW.IBISWORLD.COM

Products & Markets

Major Markets

Major market segmentation (2014)

16.7%

Domestic racing

24.5%
Exports

17.1%
Showing

23.1%
Other

Total $1.5bn

18.6%

Recreation

Horses bred for equestrian sports


generate the highest total sales value of
any use. However, because these sports
exist on an international level, highperformance horses are often bought and
sold across borders. Almost one-fifth of
industry revenue is generated from
exports. Similarly, about one-fifth of the
value of domestic demand is imported.
These figures suggest that buyers of
high-performance horses do their
shopping globally, looking for a prime
specimen regardless of country of origin.
As such, the breakdown of major markets
in the US Horse and Other Equine
Production industry is skewed away from
high-value equines, which are accounted
for in trade.
Recreation
Horses sold for recreation account for the
largest share of domestic sales. The
majority of horses in the United States
are used recreationally, including for
lessons for children and beginners, trail
riding and arena riding. Owning and
riding horses is a popular pastime,
especially in wealthy and rural
communities that have the land available
for horseback riding. In communities
where recreational horseback riding is
common, it is also well established. As

SOURCE: WWW.IBISWORLD.COM

such, this segment has remained steady


over the past five years and is expected to
remain steady in the future.
Showing
Like many other sports, horseback riding
exists in a number of forums both
professional and amateur where a
horse-and-rider team competes for
placement. Showing disciplines include
Western-style events such as barrel
racing, cutting, roping and pole bending,
as well as European-style events such as
classical dressage, showjumping and
cross-country jumping. Horses sold to
this market can be used in amateur
performance, where there is some
crossover with the Recreation market
segment, or can compete in much more
professional contexts like national rodeos
or Olympic events like dressage and
jumping. A number of higher-end horses
in professional showing, especially
European-style events, are bought and
sold on the global market.
Racing
Horses sold for racing purposes in the
domestic market generate about the same
amount of revenue as the showing
segment. However, these horses
command the highest selling price. Even

Horse & Other Equine Production in the USNovember 2014 17

WWW.IBISWORLD.COM

Products & Markets

Major Markets
continued

International Trade
Level & Trend
 xports in the
E

industry are H
 igh
and D
 ecreasing
Imports

in the
industry are
Mediumand
Increasing

though this market accounts for about


the same share of revenue as showing,
there are far fewer active racehorses than
show horses. Further, Thoroughbreds are
the most commonly raced horse, though
other breeds, such as Quarter horses and
Arabian horses, are raced in smaller
events. Horse racing is highly competitive
and only the fastest horses get a chance
to compete professionally. These highperformance horses often come with a
high price tag; since many perform on a
global level, the market for racehorses is
international. Many of the top
Thoroughbred breeders, including
Shadwell farm and Darley, are owned by
foreign parties. Horse racing has declined
in popularity in recent years; as a result,
this market segment has shrunk slightly.

After a 2007 ban in slaughtering US


horses for meat production, a new export
market cropped up in Canada and Mexico to
slaughter and processes horses. According
to a 2011 Government Accountability Office
report, about 140,000 horses per year are
exported to these countries for slaughter,
about the same amount that had been
slaughtered domestically in prior years.
Though these numbers are high, the
monetary value of horses exported for
slaughter is small because these horses often
fetch a low price. The ban has since been
lifted, though meat processors and
government officials have been slow to
reinstate the slaughter of horses for meat. If
this practice picks up again domestically, or
if regulators ban the export of horses for
slaughter, this export market will dry up.

Exports
Although exports account for a significant
share of revenue, their value has dropped
slightly in the past five years. Highperformance horses for racing, which
make up the lions share of the value of
exports, are in low demand due to the
sports waning popularity. High-end
show horses are still in high demand,
though breeders in other countries,
particularly in Europe, have attracted
more of the global market in recent years.

Other
Other markets for horses include farm
and ranch work, carriage horses, polo
horses, rodeos and police work. Horses
bought for these and other miscellaneous
uses account for a significant share of
industry revenue. Nevertheless, there is
some crossover between this market
segment and the showing or recreational
segments. Polo horses, for example, can
be used for recreational sport as well as
professional sport.

Exports
Mexico and Canada are consistently strong
sources of demand for US exports. The
shared borders between the United States,
Mexico and Canada facilitate easier
transportation. Also, reduced trade barriers
from these countries participation in the
North American Free Trade Agreement
(NAFTA) further facilitates trade. Exports to
these two countries primarily consist of
greater volume of less expensive horses. The
United States shares an agriculture and
ranching history with both its neighbors; as
such, many horse dealers close to a border

operate on both sides of it. Furthermore,


since a 2007 ban on slaughtering horses for
meat, horses have been exported to these
two countries for slaughter. Though the ban
has since been lifted, US meat processors
and regulators have been slow to reinstate
the practice. Exports of horses for slaughter
form a small part of the value of exports,
though a significant share of volume.
Exports have fallen at an annualized rate of
6.7% to total an estimated $362.8 million in
the five years to 2014.
The United Kingdom, Ireland and
Japan represent several other large

Horse & Other Equine Production in the USNovember 2014 18

WWW.IBISWORLD.COM

Products & Markets

markets for US exports. These countries


have a tradition of racing and buyers there
are often in the market for US-bred
horses. Japan hosts major horse races
including The Japan Cup, The
TokyoYushun, and the February Stakes.
The United Kingdom is also home to some
of the worlds most famous courses
including Newmarket, Ascot and
Cheltenham. The country hosts races
including the Epsom Derby, Grand
National and Cheltenham Gold Cup.
Imports
Imports have risen at an annualized rate
of 7.0% to $324.2 million over the past
five years. During this time, breeders in
countries with a tradition of refined
horsemanship and select breeding,
especially in Europe, have been producing
horses in high demand. A number of US
dressage and jumping competitors in the
US buy horses from countries where these
sports have a strong tradition. The top
import markets for the industry are

Industry trade balance


600
400
200

$ million

International Trade
continued

0
200
400
600

Year 06
Exports

08

10

12

Imports

14

16

18

20

Balance
SOURCE: WWW.IBISWORLD.COM

Germany, the Netherlands, Ireland,


Canada and Belgium. The value of imports
has increased as demand for these highend pedigreed horses rises around the
world. In the next five years, as the US
dollar is expected to appreciate, US
equestrians will have a buying advantage.
As a result, the value of imports is
expected to increase in the next five years.

Exports To...

Imports From...

11%

Ireland

10%

Canada

12%
Japan

42%

11%

37%

Ireland

Germany

All others

20%

Netherlands

16%

Mexico

22%

All others

19%

United Kingdom

Year: 2014

Total $362.8m

SIZE OF CHARTS DOES NOT REPRESENT ACTUAL DATA

Total $324.2m
SOURCE: USITC

Horse & Other Equine Production in the USNovember 2014 19

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Products & Markets


Business Locations 2014

West
New
England

AK
0.0

Great
Lakes
WA

ND

MT

1.7

Rocky
Mountains
ID

OR
1.9

West NV
0.6

1.8

SD
1.8

WY

1.7

MN

1.2

2.6

Plains

CO

1.6

KY

2.0

OK
4.4

NC
1.9

TN

AZ

NM

2.4

1.3

Southwest
TX
11.7

HI
0.1

Additional States (as marked on map)


1 VT

2 NH

3 MA

4 RI

5 CT

6 NJ

7 DE

8 MD

0.3
0.5

0.2

0.7

0.5

0.2

SC

Southeast

1.8

MS

AL
1.9

1.5

GA
2.0

1.7

LA
1.7

FL
3.3

Establishments (%)

0.1

0.8

AR

0.7

2.9

3.8

WV VA
2.4

3.9

3.3

CA

West

3.1

MO

KS

3.0

OH

2.6

1.7

3.3

IN

IL

1.7

UT

PA

2.4

1.7

0.3

1 2
3
NY
2.4
5 4

MI

2.8

IA

NE

1.9

WI

ME

MidAtlantic

9 DC
0.0

Less than 3%
3% to less than 10%
10% to less than 20%
20% or more
SOURCE: WWW.IBISWORLD.COM

Horse & Other Equine Production in the USNovember 2014 20

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Products & Markets

Southeast
The greatest equine inventories and sales
occur in the Southeast region. The
regions large proportion of horse sales is
explained by its heavy involvement in
racing and historical factors. Kentucky
alone, home of the Kentucky Derby,
accounts for about 6.0% of all horse and
pony revenue due to the states
dominance in the horse racing industry.
Kentucky is also referred to as the
Bluegrass State due to the quality of its
pastures, which are optimal for raising
horses. According to the Kentucky Horse
Park, the state produces roughly 30.0%
of Thoroughbred foals born in the
country each year and, during breeding
season, it is home to roughly 20,000
Thoroughbred mares and 368

Distribution of establishments vs. population


30

20

10

Southwest

Southeast

Rocky Mountains

Plains

New England

Mid-Atlantic

Great Lakes

0
West

Historically, specialist horse studs have


been established on urban fringes or
close to towns. The horse industry was
affected by the rising value of
metropolitan land and the encroaching
developers. However, in recent years,
horse farms have been assisted by
movements to protect farmland in some
states. Horse farms provide open spaces
that complement the land-use objectives
of many suburban jurisdictions. For
example, the Agricultural Reserve in
Montgomery County, Maryland, has
93,000 acres of protected farmland. In
this region, horse farms have more than
doubled over the past 25 years while
other farm numbers have declined.
Surveys carried out by the US
Department of Agriculture show that
factors influencing location decisions for
horse and other equine producers include
precipitation levels, feed costs, the density
of production and the number of
established ranches and stables in the state.
In light of these assumptions, the seasonal
characteristics and open spaces found in
the Southeast and Southwest regions are
expected to continue generating high
percentages of overall US horse sales.

Business Locations

Establishments
Population
SOURCE: WWW.IBISWORLD.COM

Thoroughbred stallions. Kentucky also


accounts for about half of the live foals
reported every year, according to the
Jockey Club. Aside from horseracing the
Southeast has a tradition of horse
breeding in the US and has developed
specialized breeds including the
Tennessee Walking Horse, the Kentucky
Mountain Saddle Horse and the Quarter
Horse (originally bred in Virginia).
Southwest
The Southwest region is expected to
account for the second-largest
concentration of sales by volume. Texas
has the single-largest share for any state
of horse sales by volume at an estimated,
while Oklahoma makes another strong
showing on a national scale. High
concentrations of agricultural activities in
these states, including beef production,
and their vast open spaces make them
ideal as horse markets. Furthermore, the
industry and tradition of cattle ranches in
these states have continued to drive
equine events, such as rodeos. Many
horses bred in these states are raised for
these purposes.

Horse & Other Equine Production in the USNovember 2014 21

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Products & Markets

Business Locations
continued

Plains
The Plains region is expected to account for
the third-highest sales volume. Specifically
for this region, Missouri, Minnesota and
Iowa exhibit the highest regional
concentrations of equine sales volumes.

Missouris shared border with Kentucky


makes it convenient for interstate
Thoroughbred sales, while dense
concentrations of agricultural activity in
Iowa and Minnesota help increase
equestrian demand in those states.

WWW.IBISWORLD.COM

Horse & Other Equine Production in the US November 2014

22

Competitive Landscape

Market Share Concentration | Key Success Factors | Cost Structure Benchmarks


Basis of Competition | Barriers to Entry | Industry Globalization
Market Share
Concentration
Level
Concentration

in
this industry is L ow

Key Success Factors


IBISWorld

identifies
250 Key Success
Factors for a
business. The most
important for this
industry are:

Cost Structure
Benchmarks

Equines are frequently raised by hobby


farmers or part-time producers, creating
a highly fragmented industry. As such,
the Horse and Other Equine Production
industry has a low level of concentration.
Although the specialist racehorse
segment is more concentrated than
others, even commercial producers
account for a small proportion of the
industrys revenue.
Horse farm structures are very different
from other agricultural operations. Other
agricultural operations, such as meat and
grain production, are volume-focused due
to their connections with downstream
food industries and markets. Over the
years, those operations have concentrated
on increasing the productivity of their

plants and animals so as to increase their


output while minimizing inputs. In
comparison, this industry is focused more
on improving the quality of the animals
bred and not necessarily increasing their
productive capacities.
The difference between quality-based
and quantity-based production has
grown horse farm numbers and kept
owner concentration low. In addition,
small horse farms remain viable and
competitive due to the low
infrastructure requirements of less
commercialized farms. Therefore, other
livestock operations have more to gain
in the way of economies of scale than
horse farms; those industries usually
have higher concentrations.

Locating close to key suppliers


Locating close to grain and hay sellers
helps ensure a continuous supply of
horse feed.

breeding businesses. This subsequently


impacts equine production and quality.

Production of premium horses


Farmers that produce premium horses
(e.g. high-quality breeding stock) will
secure higher prices in livestock markets.

Market research and understanding


Ranches need to identify, anticipate and
respond to demands for particular horse
breeds as well as the type of activity they
will participate in (e.g. racing, recreation).

Appropriate physical growing conditions


Location and regional weather conditions
impact equine welfare in ranch-style

Locating close to key markets


Locating close to key equine markets
reduces transport costs and provides
buyers easy access.

Profit
Profitability can vary widely between
different production segments. For
example, stud horses, or horses kept for
breeding, tend to be highly profitable
because their bloodline is crucial in
determining price. Racehorses also
generate a high profit margin based on
the high quality of their performance.
However, some businesses record losses
on their horse and other equine
production, but remain in business by

subsidizing from other income sources


including operating equestrian schools,
boarding facilities or ranches. Overall,
the industry took a loss in 2008 as buyers
held off on horse and pony purchases at
the onset of the recession. Profit is also
affected by input costs, such as the price
of feed, which has been highly volatile in
line with the price of corn over the past
five years. Feed costs jumped especially
high in 2008 and 2012, cutting into
operators profit margins. As a result,

WWW.IBISWORLD.COM

Horse & Other Equine Production in the US November 2014

23

Competitive Landscape

profit was volatile, but ultimately rose


slightly as a share of revenue in the past
five years, estimated at 7.9% of revenue
in 2014.
Purchases
Purchases are the largest cost segment at
more than half of revenue. Specifically,
feed purchases make up one of the biggest
components. Hay is the most common
feed purchased for horses. A horse out of
pasture can eat as much as five tons of hay
in a year. Though properties with enough
acreage can let horses graze to make up
part or all of their diet. However, the cost
of feed increased rapidly over the past five
years in line with corn prices, because hay
and corn are both used as animal feed
throughout the agricultural sector, which
partially ties their prices together. Corn
has become more expensive, as it is also a
major commodity for ethanol production.
Ethanol is seen as the solution to lessen

Americas dependency on foreign oil,


which is placing upward pressure on the
price of corn. Some farmers are locking in
feed prices with supplier contracts,
safeguarding against sudden price hikes in
feed, but purchase costs have still grown
as a share of revenue in the past five years.
Other purchases include hay and bedding
costs, horses, stud fees, boarding and
training, shoeing and equipment.
Wages
Wages are a major cost component for
horse and other equine producers,
accounting for about one-fifth of revenue.
Hired workers are typically employed to
carry out labor-intensive duties, such as
feeding, cleaning stables and horses,
providing simple medical care, and other
farm maintenance responsibilities.
However, these duties depend on how
large the facility is. As such, smaller
breeding facilities may have no employees,

Sector vs. Industry Costs


Average Costs of
all Industries in
sector (2014)

Industry Costs
(2014)

8.4

7.9

11.5

18.4

59.8

51.2

100

80

Percentage of revenue

Cost Structure
Benchmarks
continued

60

Profit
Wages
Purchases
Depreciation
Marketing
Rent & Utilities
Other

40

20

3.0

4.3
9.3
3.9

1.0

9.2
8.0
4.3
SOURCE: WWW.IBISWORLD.COM

WWW.IBISWORLD.COM

Horse & Other Equine Production in the US November 2014

24

Competitive Landscape

Cost Structure
Benchmarks
continued

while large-scale Thoroughbred stud


farms may have a number of full-time,
skilled or professional staff that require a
sizeable payroll.
Other costs
Rent and utilities also make up a
significant expense for horse and equine
breeders. Horses need to be exercised
regularly to maintain their health, so
considerable space is required for horse
facilities to include pastures and arenas
in addition to stables. In addition to the
expense of leasing facilities, utilities costs
for these establishments adds up,
especially for water. Industry
establishments require water for horses
to drink, to bathe them with and hose
down dusty arenas.
Depreciation costs include the upkeep
and maintenance of facilities like

Basis of Competition
Level & Trend
 ompetition
C

in
this industry is
Mediumand the
trend is I ncreasing

Internal competition
Price and quality are the two factors on
which most equine producers compete.
Competition between equine ranches is
primarily based on price because horses
and other equines are price-sensitive
commodities. Moreover, basic equine
stock is relatively homogeneous. Thus,
the main basis for distinguishing between
suppliers is price.
In contrast, specialist equine
producers compete on a platform of
quality where horse bloodlines are
extremely important. Buyers of
Thoroughbreds meant for racing, for
instance, are less sensitive to price
changes than customers in other breed
segments. The premium prices for
Thoroughbreds reflect the high
production costs associated with animal
husbandry as well as the specific traits of
the horse produced. Thoroughbred

mending fences and repairing pipes but


also the loss in value of the equines
themselves. The value of highperformance Thoroughbreds, especially
racehorses, depends on their ability to
perform. Horses that end up unable to
race lose virtually all their monetary
value. Similarly, sires and mares must be
retired once they are past breeding age,
with costly pedigreed horses required to
replace them.
Other costs include insurance,
transportation costs, veterinary fees and
medicine costs, which are necessary for
maintaining high quality animals. Horse
and other equine farms also use
marketing to distinguish themselves from
other farms. Common marketing tactics
include designing websites and logos,
taking photos of the horses and posting
classified advertisements.

stallions have the highest breeding value


because they can mate with as many as
200 mares a year.
External competition
The industry faces competition from
foreign producers in the domestic
marketplace. Factors that influence
competitiveness of US horses and other
equine include: exchange rates, trade
barriers, quality, price and overseas
supply conditions.
Other countries are also known for
their specialty in the horse production
industry. Many Western European
countries, for example, have long
traditions of horsemanship and breeding
practices that have been refined over
centuries. Thus, many Americans looking
for specific breeds of horses, including
Spanish Lipizzaners or German
Warmbloods, may look abroad.

WWW.IBISWORLD.COM

Horse & Other Equine Production in the US November 2014

25

Competitive Landscape

Barriers to Entry
Level & Trend
 arriers to Entry
B

in this industry are


Mediumand S
 teady

Industry
Globalization
Level & Trend
 lobalization
G

in
this industry is
Highand the trend
is I ncreasing

Entry into the Horse and Other Equine


Production industry is fairly unrestricted,
but requires a large capital investment.
The 2012 Agricultural Census (latest data
available) revealed that the average horse
and other equine farm occupied land and
buildings worth $404,393 and employed
plant and machinery valued at $42,075.
Those figures represent increases of
14.1% and 2.1%, respectively, over 2007
figures. In addition to land and buildings,
farms must be able to pay for feed,
veterinary services, cleaning services and
other items necessary for maintaining a
healthy animal. If potential operators
cannot afford these investments, they will
not be able to enter the industry.
However, with perhaps the exception of
Thoroughbred breeding, new entrants are
able to procure most necessary inputs and
equipment at a reasonable cost, as all
inputs are readily available. Also, producers
can usually shift between agricultural
activities with ease and there are often a
number of equine ranches for sale.
Entry into specialist equine breeding is
more difficult. New entrants need to invest
heavily in breeding stock and access to
high-quality Thoroughbred stallions can
also present financial and logistical

The Horse and Other Equine Production


industry has a high level of globalization.
Globalization varies depending on the
operators industry segment. Farms that
mainly produce horses for recreational
use have a low level of globalization, as
the majority of farms are domestically
owned and operate within particular
regions. However, breeding highperformance horses for racing, dressage
or showjumping operates on a global
scale. The majority of horse trading is
attributable to this segment due to the
demand for high-quality bloodlines.
Globalization is driven by the desire to
build a global reputation for racehorses.

Barriers to Entry checklist


Competition
Concentration
Life Cycle Stage
Capital Intensity
Technology Change
Regulation & Policy
Industry Assistance

Level
Medium
Low
Mature
High
Medium
Medium
Low
SOURCE: WWW.IBISWORLD.COM

hurdles. Other operating costs associated


with the establishment of a stud farm
mean that new entrants need a substantial
cash flow. Studs need to outlay money on
animal husbandry, stabling, supplies,
feeds and veterinary services.
Reputation and proven success is also
important, particularly in this specialist
breeding segment. Often, it takes time for
a stud to receive a return on these
expenses, especially while it is still
building a reputation as a winner at the
track. Therefore new entrants may find it
difficult to compete successfully until
they have built a good reputation within
the industry. Although a proven
reputation is not a barrier to entry, it may
hamper the success of new entrants.

Thoroughbred breeders seek to take


advantage of the global supply of bloodlines
to perfect a racehorses genetic makeup.
The use of shuttle stallions across the world
has increased. This process involves
transporting stallions between countries to
take advantage of the various breeding
seasons. Shuttle stallions have increased
trade between the major horse breeding
countries and widened the available
bloodlines. The globalization of this
industry segment is set to increase over the
outlook period as high-end equestrian
competition becomes more competitive.
In addition to the large volumes of
trade, many of the operators within this

WWW.IBISWORLD.COM

Horse & Other Equine Production in the US November 2014

26

Competitive Landscape

Exports offer growth


opportunities for firms.
However there are legal,
economic and political risks
associated with dealing in
foreign countries.
Import competition can
bring a greater risk for
companies as foreign
producers satisfy domestic
demand that local firms
would otherwise supply.

Trade Globalization
200

Going Global: Horse & Other Equine Production


2004-2014
Global

Export

150
100
50
0 Local
0

over 50 stallions across the globe. These


operations include breeding in the United
States, Australia, Japan, the United Arab
Emirates and the United Kingdom.

Horse & Other


Equine Production Import
40

80

120

Imports/Domestic Demand

160

200 Export

Exports/Revenue

International trade is a
major determinant of
an industrys level of
globalization.

industry run horse breeding and training


operations in different countries. For
example, industry player Darley America
operates within seven countries and has

Exports/Revenue

Industry
Globalization
continued

Global

150
100
50

2004

0 Local
0

2014
Import
40

80

120

160

Imports/Domestic Demand
SOURCE: WWW.IBISWORLD.COM

Horse & Other Equine Production in the USNovember 2014 27

WWW.IBISWORLD.COM

Major Companies

There are no Major Players in this industry | Other Companies

Other Companies

The Horse and Other Equine Production


industry is highly fragmented and consists
of small, family owned farms and breeding
studs, along with a few larger
industrialized farms. The type and size of
the farms vary depending on the segment
in which they operate. For example, the
racehorse-breeding segment is more
commercially focused than other
segments of the industry so these farms
are larger and generate more revenue than
farms for other equines. Farms operating
in this segment are also more profitable
because this type of establishment
generates high returns on the basis of
superior quality in performance.
Some farms breed horses for
recreational purposes. These farms are
smaller and less concentrated than
racehorse breeders. Movements to
protect farmland have positively
influenced the number of these farms.
Horse farms are particularly located near
urban populations because their land-use
objectives are often consistent with
suburban jurisdictions. Due to the private
nature of these farms, financial
information is not publicly available.

Shadwell Farm LLC

Estimated market share: 1.6%


Established in 1985, Shadwell Farm
covers 3,200 acres in Lexington, KY. It
currently has a capacity to house 160
mares, which are capable of producing
125 future racehorses in a year. Nashwan
Stud, the stud farm of Shadwell Farm, is
home to five Thoroughbred stallions.
Shadwell Farm is part of the larger,
international Shadwell Racing operation,
which owns an additional seven stud

farms, seven in England and one in


Ireland. IBISWorld estimates the
companys revenue will reach $23.1
million in 2014.

Darley America

Estimated market share: Less than 1.0%


Darley America is part of a global horsebreeding and racing company that has a
presence in Australia, Japan, China,
Ireland, the United Kingdom and the
United States. Within the United States,
the company is based on Jonabell Farm,
which has been located in Lexington, KY,
since its founding in 1954; Darley
America acquired Jonabell Farm in 2001.
Darley America also owns Godolphin, a
horse-breeding and training farm
specifically for racehorses. In 2014,
IBISWorld estimates that Darley
Americas stud farm operations will earn
about $10.4 million in revenue.

Westphalia Ranch

Estimated market share: Less than 1.0%


Headquartered outside of
Fredericksburg, VA, Westphalia Ranch
breeds American Quarter Horses, a breed
crossed from Thoroughbreds, Arabs,
Barbs and Light Drafts that dates back to
the 1600s. Westphalia prides itself on the
purity of its Quarter Horse breeds,
distancing them from variations with too
much Thoroughbred line bred in. On its
115-acre facility, the ranch houses 18
pastures and six large mare-and-foal
stalls. In all, the ranch has about two
stallions that it breeds out for a fee and
about 15 mares. IBISWorld estimates
that its revenue will total about $1.1
million in 2014.

Horse & Other Equine Production in the USNovember 2014 28

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Operating Conditions

Capital Intensity | Technology & Systems | Revenue Volatility


Regulation & Policy | Industry Assistance
Capital Intensity
Level
The level

of capital
intensity is H
 igh

The Horse and Other Equine Production


industry has a moderate to high level of
capital intensity. However, the level of
capital employed in horse and other
equine farming varies between different
segments of the industry.
For facilities that do not breed highperformance racing or show horses, the
capital intensity level is low. These
establishments pay for the upkeep of
their facilities, which succumb to regular
wear and tear, and for other equipment
including trucks and trailers for
transportation to and from facilities.
Overall, these costs are minor.
Facilities that breed high-performance
horses, especially racehorses, the level of
capital intensity can be high. These
breeders often use artificial insemination

Capital intensity

Capital units per labor unit


1.0
0.8
0.6
0.4
0.2
0.0

Economy

Agriculture,
Horse & Other
Forestry, Fishing
Equine
and Hunting
Production

Dotted line shows a high level of capital intensity


SOURCE: WWW.IBISWORLD.COM

(AI), which has a number of benefits


including preventing injury while
breeding and preventing stallion overuse.

Tools of the Trade: Growth Strategies for Success


Investment Economy

Recreation, Personal Services,


Health and Education. Firms
benefit from personal wealth so
stable macroeconomic conditions
are imperative. Brand awareness
and niche labor skills are key to
product differentiation.

Information, Communications,
Mining, Finance and Real
Estate. To increase revenue
firms need superior debt
management, a stable
macroeconomic environment
and a sound investment plan.

Tractors & Agricultural


Machinery Manufacturing

Traditional Service Economy


Wholesale and Retail. Reliant
on labor rather than capital to
sell goods. Functions cannot
be outsourced therefore firms
must use new technology
or improve staff training to
increase revenue growth.

Livestock Production
Support Services

Hay & Crop Farming


Cattle & Hog Wholesaling
Farm, Lawn & Garden
Equipment Wholesaling

Horse & Other


Equine Production

Change in Share of the Economy

Capital Intensive

Labor Intensive

New Age Economy

Old Economy
Agriculture and Manufacturing.
Traded goods can be produced
using cheap labor abroad.
To expand firms must merge
or acquire others to exploit
economies of scale, or specialize
in niche, high-value products.
SOURCE: WWW.IBISWORLD.COM

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Operating Conditions

Capital Intensity
continued

High-prized racing Thoroughbred


stallions can be required to sire up to 200
foals per year. Using AI allows the semen
to be collected as few as three times a
week instead of once or twice per day.
However, AI equipment is expensive.
Stud farms that take on this equipment
need to breed at least 20 mares per year
to justify the cost, according to The
Horse, an industry publication. The high
costs therefore restrict this equipment to
only large-scale breeders.
In addition to AI equipment, the
horses themselves are counted as
depreciable assets. Horses are typically
sexually mature from the ages of two or

three years old until they are about 15 or


20 years old. Well-pedigreed horses are
expensive, especially if they are racing
champions, and their maturing past
breeding age represents a considerable
cost for breeders.
Compared to other livestock
industries, horse and other equine
production tends to be characterized by
high labor costs. These costs are highest
in racehorse breeding where grooming,
training and veterinary care are major
features of production. Labor costs
include wages but also purchases of
veterinary, shoeing and other services
from outside providers.

Technology
& Systems

The Horse and Other Equine Production


industrys adoption of increasingly
sophisticated production methods coincide
with microchip technology and
computerized monitoring systems. A radio
transponder or microchip inserted on a
horses neck between the ears and withers
can be used to store details on birth and
branding, veterinary treatments, weaning
dates and ownership information. In
conjunction, software such as HorseTrak
can record and monitor horse health,
performance and activities. These tracking
systems are helping equine farmers
increase identification efficiency and
ensure quality. Increasing numbers of
breeding stables are also operating
websites with pictures and descriptions
about horses for sale; some even have
applications on new devices, such as the
tablet computers, as a means for promoting
their production, sales and services.
Increased knowledge about animal
nutrition has also played a significant

role in the industrys expansion. Modern


equine are fed nutritionally balanced feed
that encourages rapid growth. To assist
in this process, US farmers supplement
feed with a range of minerals, antibiotics
and vitamins that help maintain heath.
Genetic engineering offers the potential
for the more efficient use of feeds in the
future. In the future, genetic engineering
may also be used to select horses that are
genetically resistant to livestock diseases.
Work is currently underway in this area
so that farmers will be able to take blood
samples from horses to test their
susceptibility to degenerative diseases.
Artificial insemination (IA) equipment
has also become increasingly popular in
the past several decades. This equipment
prevents a number of risks involved in
horse breeding including injury and
stallion overuse. This technology is fairly
standard, but innovations continue to
make equipment more affordable and
processes more efficient.

Level
The level

of
Technology Change
is M
 edium

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Operating Conditions

Level
The level

of
Volatility is M
 edium

Revenue volatility for the Horse and


Other Equine Production industry is a
largely a function of disposable income
and capital expenditure. Horses
represent a sizeable cost at any level,
whether for the recreational rider or the
racehorse owner. As such, when
disposable income and capital
expenditure levels are low, fewer horses
are purchased and at lower prices. For
example, in 2009 when the economy
A higher level of revenue
volatility implies greater
industry risk. Volatility can
negatively affect long-term
strategic decisions, such as
the time frame for capital
investment.
When a firm makes poor
investment decisions it
may face underutilized
capacity if demand
suddenly falls, or capacity
constraints if it rises
quickly.

was in recession, consumers had low


disposable income and were less willing
to buy big-ticket items, such as horses.
As demand fell, operators lowered
prices to entice consumers into buying
these animals. As a result, revenue
plummeted in 2009 and continued to
trend downward for several years.
Although industry revenue has
subsequently risen, the industry has not
reached full recovery.

Volatility vs Growth
1000

Revenue volatility* (%)

Revenue Volatility

Hazardous

Rollercoaster

100
10

Horse & Other


Equine Production

1
0.1

Stagnant
30

10

Blue Chip
10

30

50

70

Five year annualized revenue growth (%)


* Axis is in logarithmic scale
SOURCE: WWW.IBISWORLD.COM

Regulation & Policy


Level & Trend
 he level of
T

Regulation is
Mediumand the
trend is S
 teady

Serious breaches or failure to comply


with regulations, laws and other rules
governing equine farming can subject
industry players to civil remedies and
administrative penalties. It can also
result in considerable negative publicity
that can damage the reputation and
public image of producers. Given this,
non-compliance can potentially have a
material effect on the earnings and
competitive position of firms
operating in this industry. It is worth
noting that industry sources believe
that laws and regulations relating to
agricultural production are becoming
more stringent, resulting in
increasing compliance costs for US
equine producers.

State regulations
Equine producers must comply with state
regulations that aim to control the impact
of agriculture on the local environment.
Regulations commonly relate to the size
of operations, waste disposal, odor
control, animal health and water quality.
For startup farms, county zoning policies
also impact on location decisions.
Increasing public concern about the
treatment of animals is placing pressure
on regulatory authorities to tighten
controls on horse ownership. Non-profit
organizations, such as the Animal
Protection Institute (API), have played a
key role in bringing the welfare of horses
to the attention of the American public.
Although the organization has no

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Operating Conditions

Regulation & Policy


continued

regulatory authority, it influences animal


protection laws through its lobbying
efforts targeting the courts and congress.

Relevant legislation
A 2007 ban on slaughtering horses for
meat was lifted in 2011. Also in 2011, the

American Horse Slaughter Prevention


Act was re-introduced. The bill intended
to once and for all end the slaughter of
horses for food production. Though horse
slaughter is again legal, authorities have
been slow to reauthorize meat processing
plants for horse slaughter.
The Equine Equity Act of 2008 also
provides regulations for the industry.
The act shortened the capital gains
holding period for horses from 24
months to 12 months, places all
racehorses in the three-year category for
depreciation, makes horses for breeding
eligible for federal emergency loans and
institutes permanent disaster-relief
funds in areas declared to be disaster
areas by the USDA for horse owners
with horses for production agriculture.
The Wild Horse and Burros Legislation
is an amendment to this legislation to
prohibit the commercial sale and
slaughter of wild horses.
The Animal Enterprise Terrorism Act
expanded the monetary and criminal
penalties for economic losses caused due
to acts of violence and damage toward
farm animals and broadened the scope of
the property and enterprises protected by
the law.

There are several government programs


designed to assist equine producers.
Direct assistance includes: the Livestock
Relief Program and the Environmental
Quality Incentives Program (EQIP).
These programs provide financial and
technical assistance to producers. Under
the Livestock Relief Program, equine
producers can apply for financial relief in
the event of economic or natural
disasters. This form of assistance is
provided through emergency programs
and is designed to protect farmers
against the effects of low prices and
extreme weather like droughts and
floods. Under the EQIP, farmers can

obtain access to funding, advice and


education services for addressing
resource issues. The program is designed
to help farmers use their land in the most
environmentally friendly and cost
effective manner. More than 50.0% of
funding allocated to the project has been
earmarked for livestock producers
(including horse ranches).
Equine farmers also benefit indirectly
from government assistance through
export promotion and conservation
programs. Generally, American horse
and other equine producers do not
benefit from domestic market protection.
Presently, imports of horses and ponies

Federal regulations
In 2014, a new Farm Bill was passed (The
Agricultural Act of 2014). Key provisions
include reinstating federal emergency
disaster relief programs that had expired
in 2011. These programs include the
Livestock Indemnity Program (LIP), the
Livestock Forage Program (LFP) and the
Emergency Livestock Assistance Program
(ELAP). Following a natural disaster,
equine farmers will be able to apply for
loans and may be able to receive funds.
The industry benefits from increased
funds to support conservation programs
by livestock producers (Environmental
Quality Incentives Program and
Conservation Security Program) and
increased funds for export development
through the Market Access Program,
which is designed to promote US
agricultural or livestock products to
foreign export markets.

Industry Assistance
Level & Trend
 he level of
T

Industry Assistance
is L owand the
trend is S
 teady

Horse & Other Equine Production in the USNovember 2014 32

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Operating Conditions

Industry Assistance
continued

are not subject to tariffs. Imports of asses


are subjects to a 6.8% tariff and mules
are subject to a 4.5% tariff. However,
more than 15 countries are exempt to
these tariffs based on special trade
relations, including Mexico and Canada,
the likely origin of these lower-priced
beasts of burden. Despite the lack of
protective import tariffs, quarantine rules
designed to minimize the threat of
animal disease outbreaks can restrict
entry of imported horses.
More generally, this industry is
assisted by private sector organizations

and industry associations. In the private


sector, US horse producers receive
assistance from the lobbying efforts of
peak industry associations. Membership
organizations include bodies like the
American Quarter Horse Association and
the American Horse Council. This
membership-funded association also
provides a range of services to paid
members including education programs,
access to industry research findings and
discounted pricing from supporting
businesses. There are also state-level
industry bodies.

Horse & Other Equine Production in the USNovember 2014 33

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Key Statistics
Industry Data
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Sector Rank
Economy Rank

Industry
Revenue Value Added Establish($m)
($m)
ments
2,011.0
579.2
171,967
2,160.7
605.0
166,843
2,348.6
655.3
168,694
2,000.8
314.1
165,375
1,824.5
507.2
160,476
1,708.8
507.5
169,117
1,570.6
422.5
170,301
1,389.1
482.0
172,043
1,455.9
528.5
170,553
1,483.4
527.0
174,799
1,492.6
534.2
176,630
1,519.9
545.3
180,323
1,561.3
555.5
183,513
1,617.5
568.9
185,020
1,624.7
568.3
187,291
28/37
27/37
6/36
1078/1319 1060/1319
57/1318

Enterprises Employment
157,533
733,183
165,643
762,509
167,080
796,597
158,184
787,135
152,252
770,444
162,352
800,609
161,193
813,422
165,620
856,313
166,156
874,297
168,776
877,633
169,302
881,248
172,018
881,989
172,902
885,373
175,095
890,244
175,902
895,736
6/36
3/37
54/1318
49/1319

Exports
($m)
549.7
573.8
471.6
484.4
512.9
436.8
366.4
475.0
378.8
362.8
351.2
345.3
346.2
329.4
322.0
19/27
262/405

Imports
($m)
337.7
335.1
413.0
331.9
231.0
235.3
311.5
309.9
323.6
324.2
351.3
384.8
405.7
429.9
454.7
17/28
294/406

Wages
($m)
374.0
384.6
415.7
332.1
290.1
334.9
298.4
277.8
279.6
273.3
279.0
285.4
288.5
292.3
290.5
23/37
1067/1319

Domestic
Demand
1,799.0
1,922.0
2,290.0
1,848.3
1,542.6
1,507.3
1,515.7
1,224.0
1,400.7
1,444.8
1,492.7
1,559.4
1,620.8
1,718.0
1,757.4
22/27
317/405

Per Capita Disposable Income


($)
34,428
35,461
35,870
36,082
35,600
35,705
36,294
36,759
36,771
37,352
38,305
39,186
40,294
41,366
42,312
N/A
N/A

Enterprises Employment
(%)
(%)
5.1
4.0
0.9
4.5
-5.3
-1.2
-3.8
-2.1
6.6
3.9
-0.7
1.6
2.7
5.3
0.3
2.1
1.6
0.4
0.3
0.4
1.6
0.1
0.5
0.4
1.3
0.6
0.5
0.6
12/36
20/37
540/1318
937/1319

Exports
(%)
4.4
-17.8
2.7
5.9
-14.8
-16.1
29.6
-20.3
-4.2
-3.2
-1.7
0.3
-4.9
-2.2
23/27
339/405

Imports
(%)
-0.8
23.2
-19.6
-30.4
1.9
32.4
-0.5
4.4
0.2
8.4
9.5
5.4
6.0
5.8
17/28
286/406

Wages
(%)
2.8
8.1
-20.1
-12.6
15.4
-10.9
-6.9
0.6
-2.3
2.1
2.3
1.1
1.3
-0.6
32/37
1189/1319

Domestic
Demand
(%)
6.8
19.1
-19.3
-16.5
-2.3
0.6
-19.2
14.4
3.1
3.3
4.5
3.9
6.0
2.3
11/27
171/405

Per Capita Disposable Income


(%)
3.0
1.2
0.6
-1.3
0.3
1.6
1.3
0.0
1.6
2.6
2.3
2.8
2.7
2.3
N/A
N/A

Annual Change
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Sector Rank
Economy Rank

Industry
EstablishRevenue Value Added
ments
(%)
(%)
(%)
7.4
4.5
-3.0
8.7
8.3
1.1
-14.8
-52.1
-2.0
-8.8
61.5
-3.0
-6.3
0.1
5.4
-8.1
-16.7
0.7
-11.6
14.1
1.0
4.8
9.6
-0.9
1.9
-0.3
2.5
0.6
1.4
1.0
1.8
2.1
2.1
2.7
1.9
1.8
3.6
2.4
0.8
0.4
-0.1
1.2
19/37
27/37
11/36
780/1319 1049/1319 410/1318

Key Ratios
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Sector Rank
Economy Rank

IVA/Revenue
(%)
28.80
28.00
27.90
15.70
27.80
29.70
26.90
34.70
36.30
35.53
35.79
35.88
35.58
35.17
34.98
19/37
590/1319

Imports/
Demand
(%)
18.77
17.43
18.03
17.96
14.97
15.61
20.55
25.32
23.10
22.44
23.53
24.68
25.03
25.02
25.87
10/27
192/405

Figures are inflation-adjusted 2014 dollars. Rank refers to 2014 data.

Exports/
Revenue
(%)
27.33
26.56
20.08
24.21
28.11
25.56
23.33
34.19
26.02
24.46
23.53
22.72
22.17
20.36
19.82
9/27
130/405

Revenue per
Employee
($000)
2.74
2.83
2.95
2.54
2.37
2.13
1.93
1.62
1.67
1.69
1.69
1.72
1.76
1.82
1.81
37/37
1318/1319

Wages/Revenue
(%)
18.60
17.80
17.70
16.60
15.90
19.60
19.00
20.00
19.20
18.42
18.69
18.78
18.48
18.07
17.88
15/37
660/1319

Employees
per Est.
4.26
4.57
4.72
4.76
4.80
4.73
4.78
4.98
5.13
5.02
4.99
4.89
4.82
4.81
4.78
8/36
966/1318

Average Wage
($)
510.10
504.39
521.84
421.91
376.54
418.31
366.85
324.41
319.80
311.41
316.60
323.59
325.85
328.34
324.31
37/37
1319/1319

Share of the
Economy
(%)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
27/37
1060/1319

SOURCE: WWW.IBISWORLD.COM

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Jargon & Glossary

Industry Jargon

ENVIRONMENTAL QUALITY INCENTIVES PROGRAM


A federal government program where farmers can
obtain access to funding, advice and education services
for addressing resource issues.
EQUINEAn animal of the Equidae family, or horse
family.

HORSETRAKA proprietary software technology that


monitors and records a horses health.
STUDAn establishment or farm where horses are kept
for breeding or a group of broodmares and stallions kept
for breeding.

FOALA baby horse or equine

IBISWorld Glossary

BARRIERS TO ENTRYHigh barriers to entry mean that


new companies struggle to enter an industry, while low
barriers mean it is easy for new companies to enter an
industry.
CAPITAL INTENSITYCompares the amount of money
spent on capital (plant, machinery and equipment) with
that spent on labor. IBISWorld uses the ratio of
depreciation to wages as a proxy for capital intensity.
High capital intensity is more than $0.333 of capital to
$1 of labor; medium is $0.125 to $0.333 of capital to $1
of labor; low is less than $0.125 of capital for every $1 of
labor.
CONSTANT PRICESThe dollar figures in the Key
Statistics table, including forecasts, are adjusted for
inflation using the current year (i.e. year published) as
the base year. This removes the impact of changes in
the purchasing power of the dollar, leaving only the
real growth or decline in industry metrics. The inflation
adjustments in IBISWorlds reports are made using the
US Bureau of Economic Analysis implicit GDP price
deflator.
DOMESTIC DEMANDSpending on industry goods and
services within the United States, regardless of their
country of origin. It is derived by adding imports to
industry revenue, and then subtracting exports.
EMPLOYMENTThe number of permanent, part-time,
temporary and seasonal employees, working proprietors,
partners, managers and executives within the industry.
ENTERPRISEA division that is separately managed and
keeps management accounts. Each enterprise consists
of one or more establishments that are under common
ownership or control.
ESTABLISHMENTThe smallest type of accounting unit
within an enterprise, an establishment is a single
physical location where business is conducted or where
services or industrial operations are performed. Multiple
establishments under common control make up an
enterprise.
EXPORTSTotal value of industry goods and services sold
by US companies to customers abroad.
IMPORTSTotal value of industry goods and services
brought in from foreign countries to be sold in the
United States.

INDUSTRY CONCENTRATIONAn indicator of the


dominance of the top four players in an industry.
Concentration is considered high if the top players
account for more than 70% of industry revenue.
Medium is 40% to 70% of industry revenue. Low is less
than 40%.
INDUSTRY REVENUEThe total sales of industry goods
and services (exclusive of excise and sales tax); subsidies
on production; all other operating income from outside
the firm (such as commission income, repair and service
income, and rent, leasing and hiring income); and
capital work done by rental or lease. Receipts from
interest royalties, dividends and the sale of fixed
tangible assets are excluded.
INDUSTRY VALUE ADDED (IVA)The market value of
goods and services produced by the industry minus the
cost of goods and services used in production. IVA is
also described as the industrys contribution to GDP, or
profit plus wages and depreciation.
INTERNATIONAL TRADEThe level of international
trade is determined by ratios of exports to revenue and
imports to domestic demand. For exports/revenue: low is
less than 5%, medium is 5% to 20%, and high is more
than 20%. Imports/domestic demand: low is less than
5%, medium is 5% to 35%, and high is more than
35%.
LIFE CYCLEAll industries go through periods of growth,
maturity and decline. IBISWorld determines an
industrys life cycle by considering its growth rate
(measured by IVA) compared with GDP; the growth rate
of the number of establishments; the amount of change
the industrys products are undergoing; the rate of
technological change; and the level of customer
acceptance of industry products and services.
NONEMPLOYING ESTABLISHMENTBusinesses with
no paid employment or payroll, also known as
nonemployers. These are mostly set up by self-employed
individuals.
PROFITIBISWorld uses earnings before interest and tax
(EBIT) as an indicator of a companys profitability. It is
calculated as revenue minus expenses, excluding
interest and tax.

Horse & Other Equine Production in the USNovember 2014 35

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Jargon & Glossary

IBISWorld Glossary
continued

VOLATILITYThe level of volatility is determined by


averaging the absolute change in revenue in each of the
past five years. Volatility levels: very high is more than
20%; high volatility is 10% to 20%; moderate
volatility is 3% to 10%; and low volatility is less than
3%.

WAGESThe gross total wages and salaries of all


employees in the industry. The cost of benefits is also
included in this figure.

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