Kentucky is known as the horse capital of the world, it might be argued, because it is home to “the greatest two minutes in sports,” the Kentucky Derby. It might also be argued that Kentucky is on the map when it comes to horses because the Bluegrass is where champions such as Man O’ War and Secretariat were bred and born.
Being home to the Kentucky Derby and birthplace of famous four-legged athletes no doubt has laid the foundation for the state’s worldwide horse fame, but as the equine industry has grown in the commonwealth it is much more than the steeds in the field that have cemented Kentucky’s role as horse capital of the world.
It is a rich infrastructure of tops-in-their-field businesses supporting the horse farms and racing industry that makes Kentucky, specifically the Bluegrass region, known worldwide. Beyond the bragging rights, there are big bucks involved – multiple billions of dollars a year spilling into virtually every aspect of the state economy.
An equine cluster
The focal point of the equine industry may be the beautiful Thoroughbreds, Saddlebreds, Quarter Horses and many other equine breeds found in Kentucky’s fields and barns. Yet horses are only the beginning when looking at the total impact of the state’s equine industry.
“There is no question that the horse industry in the state spins off other businesses. You have equine feed, hay, tack shops, transportation, and that is just a few of the many businesses that support the industry,” said Kentucky Gov. Steve Beshear.
Dr. Lori Garkovich, of the University of Kentucky College of Agriculture, has been studying the far-reaching impact of Kentucky’s equine industry. Her research shows that industry has developed into an equine economic cluster as it evolved.
“A cluster occurs when there is a geographic concentration of firms and institutions whose activities are interconnected and interdependent within a sector,” Garkovich explained. “That is what has happened in the equine industry in Kentucky, especially in Lexington and the surrounding area.”
Garkovich’s research justifies the existence of an equine economic cluster in the Bluegrass. It’s a concept many have long recognized as they watched the industry over the years.
“What we have seen over time is that as the number of horses and farms grew, so did the infrastructure in the industry to support the growth,” explained Nicole Pieratt, owner of Sallee Horse Vans Inc. based in Lexington. “At Sallee, we provide transportation for horses to tracks and farms across the country and into Canada, but Kentucky is the hub of our industry.”
The equine infrastructure
As the commonwealth’s unique equine infrastructure has grown, so has its recognition beyond the state’s borders. Today, Kentucky is home to equine world leaders ranging from specialty feeds and equipment suppliers to distinctive providers of veterinary, legal, financial, insurance and other services.
“We are very unique within the feed industry, as we are an ultra-premium manufacturer of horse feeds,” said Lee Hall, vice president of Hallway Feeds, based in Lexington. “We are making products that are fueling and feeding what is arguably the best Thoroughbred breeding stock in the world and very many of the best racing horses in the world. Would this be possible if we were located anywhere else in the world? I don’t think so.”
What makes the infrastructure around Kentucky’s equine industry unique and known worldwide, Hall went on to explain, is its quality. The horse owners demand quality products and care for their animals and farms, and businesses that provide the quality that is demanded have flourished.
Dr. Andy Clark, CEO of Hagyard Equine Medical Institute in Lexington, echoed Hall’s statements. Horse owners want the highest quality care for their animals, he said, and equine veterinarians in the state have responded to their needs.
“There is nowhere else in the world where you can find the level of equine veterinary care you will find in Lexington and the surrounding area,” said Dr. Clark. “There are two equine MRI machines within seven miles of each other and dozens of digital X-ray machines, but this level of quality care should be here since we are the center of the horse business.”
That quality level has propelled some of those businesses that began by providing services locally to now reach far beyond Kentucky and the United States to the international equine industry.
“So many of the horse farm owners in this area have stables in other areas. Wherever the stable is located, we can make sure they have the same quality hay there as we provide here in Kentucky,” said Tom Creech, owner of Creech Services in Lexington. “It doesn’t matter if it is in Versailles, California or Ireland, the customer wants the quality and service, and we take care of that.”
This quality infrastructure has created niche business opportunities in the equine industry. In Kentucky, equine accountants, equine insurance agents, equine artisans and equine real estate agents have thriving businesses providing services to horse farms and horse owners.
“Equine insurance is a very narrow niche market – and amazingly enough becomes even more specialized within the individual breeds and uses of the horse,” said Alan Hutchison, an agent with BB&T Insurance in Lexington. “In fact, many people within the standard insurance industry barely know we exist. While our clientele are international in scope, there is a heavy concentration of equine insurance based in Kentucky because of the high quality of horse industry infrastructure.”
The equine cluster also attracts trade and professional associations to the area. Kentucky is home to national breed registry offices and other types of equine-related organizations such as the American Association of Equine Practitioners.
At the heart of Kentucky’s equine industry are the workers who labor day in and day out on the farms, at the track and beyond providing the services that we all appreciate but often take for granted. Landscapers, mowers, practice riders, stall muckers, groomsmen and thousands of other workers keep the land and animals in shape so people can enjoy a drive through horse country or a day at the track.
“I know people who do nothing more than just build fences for farms. Then there is the whole other group who just paint fences and barns,” said Jim Mahan, a Fayette County farmer. “Then you have the landscaping business; there are businesses that employ hundreds of people just working to keep the farms looking good who wouldn’t have these opportunities without the equine industry in this area.”
Equine economic cluster impact
“It is important to recognize that the equine industry has a tremendous impact far beyond those who own horses,” said Gov. Beshear, who is also a farmer and horse owner. “The economic and cultural impact reaches into a lot of different businesses and lives across Kentucky.”
The equine industry is the leading source of agriculture cash receipts for Kentucky. According to the just-released 2007 Kentucky Agriculture Statistics, the sale of horses and stud fees reached $1.13 billion. This was 25 percent of the Kentucky’s total receipts for agriculture. Yet, this amount is just the tip of the economic impact the equine industry has on the state.
According to the American Horse Council Web site, a national economic study done by Deloitte Consulting LLP for the American Horse Council Foundation in 2005 found the Kentucky horse industry directly provides 51,900 full-time equivalent jobs in the state. Spending by suppliers and employees (in Kentucky and other states) generates additional jobs here for a total Kentucky employment impact of 96,000.
The 2005 study determined that the commonwealth’s horse industry then produced goods and services valued at $2.3 billion annually, and that the national industry has a $3.5 billion impact on the Kentucky economy when the multiplier effect of spending by industry suppliers and employees is taken into account.
The $3.5 billion figure does not even account for off-site spending by event spectators, which creates further economic impact on the state.
In her research, UK’s Garkovich stresses the important role that major horse-related events have in bringing hundreds of thousands of visitors to the state. During events such as the Kentucky Derby, Keeneland and Churchill racing, Keeneland’s and Fasig-Tipton’s horse sales, the Rolex Kentucky Three-Day Event, the Junior League Horse Show (the world’s largest outdoor gaited horse show), the Circuit Hunter/Jumper Shows and the World Championship Saddlebred Show, tourists and locals take advantage of the high concentration of equine-related businesses, area hotels, restaurants and other tourism venues in the state.
“The equine industry is an industry that gives totally to our economy,” said Hall. “The fact of the matter is that we are a business, just one of the many, that does millions of dollars of business here in Lexington. We provide jobs and pay taxes. This is money that would not be coming into our community, our state if it were not for the horse industry.”
The commonwealth equine industry also is directly responsible for attracting the Alltech FEI World Equestrian Games 2010 to the Kentucky Horse Park. It’s estimated that the 16-day event will draw 500,000 spectators from 60 nations, producing an economic impact exceeding $150 million.
Sustaining the equine cluster
Kentucky has built an amazing infrastructure for the equine industry that has led to the economic equine cluster that exists today, but without continued growth and support this, like any industry, cannot be sustained.
Garkovich points out that there are many factors that can lead to the decline of an economic cluster, one of which is when the public sector fails to nurture and sustain a cluster’s viability.
“The equine industry is Kentucky’s signature industry. The far-reaching economic impact of the industry is almost immeasurable,” Hall said. “What is frustrating for me, being a player in the industry, is that there are so many people who are benefiting from this industry here in Lexington and across the state and don’t even realize it.”
Like so many of the rich resources in Kentucky, the equine industry is one many in the state take for granted. People love seeing the horses in the field, but they do not understand the vital importance this industry has on Kentucky’s economy.
“One of the things I was most startled by when I came to Kentucky was how little respect the horse industry receives from the rest of the community, especially for its size and importance to the business community,” said Clark. “The further you get away from Kentucky, the more respected our industry is; we are the center of the horse world. I only wish people in the state would see that and begin to understand the role the equine industry plays in our community.”
Though Kentuckians might not always recognize the important role of the equine industry in the state, people around the world value the quality of the equine infrastructure that has developed to create the economic equine cluster in the commonwealth.
The eyes of the equestrian world are on Lexington and Kentucky with the 2010 Alltech FEI games. Hopefully Kentuckians will choose to embrace the No. 1 agriculture sector in the state, educate themselves on the importance of this thriving industry, and nurture the opportunities that are coming to sustain the unique economic equine cluster in Kentucky.