Norman K. Luba
President, Kentucky Quarter Horse Association

The Quarter Horse is the world’s most popular breed, and the American Quarter Horse Association (AQHA) registers more than 150,000 foals annually. Because of their versatility, Quarter Horses owned in Kentucky are dispersed among many more counties and towns than any other breed. The Commonwealth, best known for its Thoroughbred industry, has more verified Quarter Horses (36,198 in 2004) than Thoroughbreds. The Quarter Horse industry is a vital element in Kentucky’s collective equine industry.1 This presentation will use as a primary example the Kentucky Quarter Horse Breeder’s Incentive Program developed in 2005, as well as review other incentive programs, racing and non-racing, that might be relevant to a better understanding of optimizing the potential success of such programs. Regardless of your breed preference, incentive programs can be an important tool in promotion of your breed. This presentation will identify key philosophies, considerations, limitations and realities of developing an incentive program that meets your objectives.

Norman K. Luba

Norman K. Luba is a past member of the faculties at Cornell University, the University of Maryland and the University of Louisville. His horse industry board/committee assignments include the Kentucky Horse Council, United States Equestrian Association's Breeders' Committee, American Quarter Horse Association's Public Policy Committee and President of the Kentucky Quarter Horse Association. Recognized for his horse management expertise, business skills and industry coalition building abilities, in 1995 he was named the executive director of the North American Equine Ranching Information Council.

The Approach: Incentivizing Demand
It should be a firm consensus that, regardless of breed or sport use, creating breeder incentives to supply more horses (for which there may not be a sufficient demand) will foster mediocrity and, of necessity, depress their market price. Therefore, incentive program developers should focus on creating incentives only that will enhance demand. Establishment of incentives to boost demand for horses, leaving their supply to respond in a natural market fashion, cannot fail to improve the prices proffered for them. This is a vastly more efficient method of encouraging production than stimulating supply artificially and directly rewarding producers of foals demanded by no one. In addition, increasing the demand has the not-insignificant advantage of increasing the bona fide profit opportunities for horsemen. Encouraging people to breed horses is an ethical goal only if there is a legitimate chance of economic return. Limiting incentives to the demand side is the only approach that assures this.

The primary goal of incentive programs should be increasing equine economic activity related to your breed, by enhancing profit opportunities for both new and existing owners and breeders. Programs developed should be designed by individuals experienced in showing and racing, in the development and administration of incentive programs, and in the record of similar initiatives in other jurisdictions. Helpful would be input from your parent breed association.

Horsemen who participate in sanctioned competitions, whether those are licensed pari-mutuel races or nationally recognized shows, tend to invest more money and time in their equine pursuits than their peers. Whether amateurs or professionals, these people tend to be more active in their associations and more politically active. They are, in short, the economic leaders of this industry, and this reality provides rationale for incentive fund emphasis on racing and showing.

Considerations:
Enhancement of Economic Development for Your Breed
• Create significantly higher demand for your breed, hence higher prices for the breeders. This will drive economic activity.

• Promote the breeding of quality horses that are capable of competing in open competition anywhere in the world. Because the requisite achievements, whether performance or racing, can be made in any state/province/country, the maximum incentive impact will be achieved. This approach correctly addresses the debate over “restricted” programs and captures the objectives of a true incentive program.

• Rather than require the policing of residency, the preferred approach is to require that the stallions stand in your province/state, and that mares are both inseminated and also foal in your province/state. This promotes additional, and significant, economic activity.

• Breeders will benefit as a result of the fact that in order to qualify for the incentive, horses will be designated as “your province/state-bred.” This designation will be available to residents. Breeders will have a competitive advantage in that horses they produce will be eligible for the incentive.

• Encourage more ownership of stallions by your province/state residents, as well as encourage non-residents of your province/state to consider standing more stallions in your province/state. This is encouraged and accomplished by paying a portion of available dollars to stallion owners if the stallion stands the entire breeding season in your province/state. This further drives economic activity associated with your breed’s endeavors.

• Sales prices would eventually reflect that buyers would adopt the conviction that, all things equal, your province/state horses are worth more. Provincial/state residents would benefit from the higher sale prices, thus invest in higher quality breeding stock. The cycle would repeat with the eventual result being even higher demand for your breed.

Conclusion
There are several methods that one can consider in an equitable distribution scenario for breed incentive programs. The basis for any program should be to create economic activity. The health of your horse industry economy is contingent on ensuring the long-term viability of the horse, racing or non-racing, and thus maintaining and promoting the continued interest in, and development of, your breed.

Footnotes
1 Quarter Horse Associations Join Kentucky Education Effort, the Blood-Horse, September 4, 2004