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For Stallion Cap Protectionism Lesson, Read Kentucky’s Tobacco Leaves

Lexington native Frank Penn raised both Thoroughbreds and tobacco for the better part of 50 years at Pennbrook Farm, his 300-acre spread out on Mt. Horeb Pike. Based on that experience, he has some words of caution for the bloodstock industry as it enters a new era of protectionism with The Jockey Club’s recent rule change limiting to 140 the number of mares a stallion can cover, starting with foals of 2020.

In short, Penn said, the Thoroughbred industry should read Kentucky’s now-withered tobacco leaves to glean a lesson in how deviating away from a free marketplace can harm the very trade that restrictive policies are designed to protect.

Penn, a director emeritus of the Kentucky Thoroughbred Association/Kentucky Thoroughbred Owners & Breeders, Inc., said there are “similar but different” parallels between the United States tobacco production in the 1970s and America’s bloodstock business today. Both industries have (or had) an anchor base of about seven or eight major states, and each at some point turned to forms of over-arching protectionism in attempts to solidify their futures.

“The different part is that at the time, we were trying to limit the production of Burley tobacco, which is what we raised in Kentucky,” Penn told TDN via phone on Feb. 24, one day after three Kentucky stud farms sued The Jockey Club in federal court, alleging that the phased-in cap on matings acts as an “anti-competitive restraint” that threatens to disrupt the free-market nature of the bloodstock business.

“Before the filtered cigarette, Burley was extremely important because it provided the flavor and the aroma in a cigarette,” Penn said. “And we–meaning the tobacco industry–tried our best to limit production to keep the price up. But what happened was we just moved the market overseas. They couldn’t get the Burley in Kentucky to the price point that they wanted. And so with worldwide marketing, [cigarette manufacturers] were able to get the producers in Brazil and Zimbabwe to raise the kind of tobacco they wanted, and therefore Kentucky gave away their market.”

Penn continued: “If you’d have asked me a year ago what I thought about [the stallion cap rule], I’d have said I supported it. The reason I would have supported was if we were going to the Keeneland sale, there were 60 or 70 yearlings by the same sire, [so] if you didn’t have one of the top 10 of those 70, you were kind of in trouble [because] they flooded the market. So from a market standpoint, I would have said [a cap] is a good thing.

“But the more I’ve thought about it and watched our horse industry over the past year, I’ve pretty much come around 180 degrees, to the point where I think once you start [capping matings] all you do is give your competition [an advantage]. It puts us at an unfair competition market, and I believe that all this is going to do is give away the top part of our stallions. They’re going to go overseas, just like the tobacco industry did.”

Penn summed up: “In other words, the competition, the price to acquire the stallions, it’s like pushing a balloon. You push in one side, and it pushes out on the other. And I believe there’s some correlation between the tobacco industry and what we’re trying to control in [the bloodstock] industry.

Asked if he thought there were other options to address The Jockey Club’s concerns about diversity within the gene pool, Penn drilled down the argument to something he said seems to be lacking across many industries these days–common sense.

“When you talk about the genetic pool, we’ve gone from 52,000 foals at the height of our Thoroughbred production now down to less than 20,000,” Penn said. “At 52,000, there wasn’t much way that you were going to take 200 mares to a stallion and [affect] the gene pool. I don’t know where that number is [that represents the point at which large batches of same-sire matings do affect the genetic pool]. But at some point, based on common sense, that becomes a valid argument.

“I don’t want to be cynical. But I don’t believe common sense is as common as it used to be,” Penn said. “My observation in life has become that we don’t apply common sense to a lot of things any more. And common sense will tell you that a free market–win, lose or draw–is usually the best solution.”

Penn, 75, said these days he neither raises Thoroughbreds nor tobacco on his farm, which was established in 1968 and over the years housed numerous graded stakes winners, including the 1989 and ’90 distaff champion Bayakoa.

“Pennbrook is retired as a boarding operation but we still farm the land,” Penn said. “My mares have been moved over to my brother John’s farm, Pennland, over in Bourbon County. I am leasing the barn and 50 acres that I fixed up to people who like to jump over things on horseback–show horse people.

“I’m learning a whole new game while still involved with Thoroughbreds on a small scale,” Penn said.” But I’m not boarding horses anymore. I was fortunate to work with some really good horses for some really good clients. I love raising horses and love the sport. I will always be involved with Thoroughbreds to some extent.”

And the scope of the farming operation now that tobacco has been phased out?

“We’re pretty bold,” Penn said with a laugh. “We tried to do the cattle thing, and I remembered 50 years after I first quit cattle why I quit it, so that didn’t last long. And then we tried hemp, but we tried it on too big a scale. We found out that anything you use by the medicine dropper but raise by the acre, you get oversupply problems. So we learned that lesson, and now we’re raising a little sod and some hay. That’s about it.”

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