Horses, bourbon topic of session at NASDA annual meeting

The National Association of State Departments of Agriculture annual meeting was held Sept. 20 to 22 in Louisville, Kentucky. In one session, President Ryan Quarrels led a panel with Les Fugate, vice president and director of state and local public affairs at Brown-Forman Company, and Chauncey Morris, executive director of the Kentucky Thoroughbred Association and Kentucky Thoroughbred Owners and Breeders Association.

Brown-Forman is the largest global spirits company headquartered in Louisville, and Fugate serves on the executive committee of the Distilled Spirits Council. Morris represents thoroughbred breeding and racing in Kentucky.

Quarrels said Kentucky is the biggest producer of thoroughbred foals in the world, responsible for 40% of the entire United States foal crop. Lexington has a large concentration of stallions, veterinary practices and breeding farms.

“We’re home to the largest yearling and breeding stock sales and premier race meets at both Keeneland and Churchill Downs, year round,” Quarrels said.

Prior to his position in Kentucky, Morris served as the CEO of the Australian counterpart, and he was successful in adding horses into the free trade agreement framework between Australia and the Peoples Republic of China. Once back in Kentucky, he started working on getting U.S. horses into China.

The thoroughbred and bourbon industries are not immune to the economic issues caused by the pandemic. Morris said across the five flat tracks in Kentucky, both directly and indirectly about 60,000 people are employed by the racing industry.

“Which is fairly significant because out of a state of 4 million people, we have a workforce of 2 million,” he said. “It’s a very large employer and beyond that, the scope of the industry, with all the value added components is estimated at $6 billion.”

Morris said there’s no racetrack that can hold 175,000 people like Churchill Downs can consistently, with the exception of one in Japan. Add in all the breeding farms and associated businesses across Kentucky and it becomes a powerhouse.

“You flip that to 60 miles down the road in central Kentucky where, literally, nearly half of all thoroughbred horses in the United States are at least covered or are bred and where they foal out here,” he said. “So it’s a very important part of the state.”

Fugate said bourbon is inherently part of Kentucky and the state’s heritage. Brown-Forman has the brand Woodford Reserve and are proud sponsors of the Kentucky Derby.

“Our industries are tied together quite often,” he said. “We are an $8.6 billion industry in the state with about 20,000 jobs,” he said. “But most of the companies have facilities all across the country so just for my company alone. We have a small brand in Tennessee called Jack Daniels.”

Brown-Forman brands are ranked as the No. 1 selling whiskey in the world, which Fugate said is impressive because of scotch.

“We appreciate our partners in the UK tremendously,” he said.

Brown-Forman has it’s own barrel company with facilities in Ohio, Indiana and Alabama—buying white oak across the eastern United States. They also have a wine company out of California.

“Kentucky is 95% of the world’s bourbon. Kentucky is the epicenter when it comes to those figures, so we have a pretty strong impact,” Fugate said. “And it’s growing.”

When it comes to the effects of the tariffs on the industries, the bourbon industry is seeing a big impact.

“It’s really painful,” he said. “We are caught up in the aluminum, steel tariffs. The retaliatory tariffs at the European Union. And now, due to the Brexit split the UK have related to aluminum and steel.”

These tariffs were often called the “Trump tariffs,” Fugate said, but the Biden administration has a very similar position on aluminum and steel tariffs.

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“I think the difference here is that you now see that the Biden administration has maybe a little bit stronger working relationship with some of the EU countries in particular, that there’s hope that maybe some of these tariffs will come off.”

Fugate said his company’s CEO has been publicly quoted that the impact has been $70 million a year.

“If you take just our company alone, and we make up 60% of the exports of American whiskey to the EU and the UK, we’re by far the greatest one hit,” he said. “But if you take in all of the tariffs related to Boeing Airbus and aluminum steel. Those two alone. We make up 10% of the tariff, so our company is taking a big, big hit as it comes to this in something that is unrelated to us. So we’re hopeful that that will be removed come November or December.”

Thoroughbred racing exists in 69 countries around the world, and Morris said Kentucky actively exports between 45 and 50 every single year. It wasn’t necessarily the tariffs causing problems for the racehorse industry, but other trade barriers—phytosanitary issues and so forth.

“When you’re producing as many horses, as you have here in Kentucky,” he said, “we must keep the herd as safe and sound as possible. So we have some fairly restrictive (travel) and health protocols, the vaccinations and so forth are a little bit stricter here.”

Fugate said supply chain problems have affected both industries too.

“Most of the large companies such as ours, we’re importing our scotches, some vodkas, a bunch of different products from across the country—shipping containers are impossible to get. And if you do get them, then you can’t find the port of call to be able to unload it.”

The combination of all that is really hitting now, he said.

Fugate encouraged attendees to reach out to the distilling community in your local area.

“There are distillers in every state. Kentucky, obviously, is the most well known, but they’re involved in every state,” he said. “You are selling higher end products, which is usually what gets exported. They are struggling.”

With the cutbacks, those distillers need your voice, he said.

“All of you have a connection somewhere that is of great value,” he said.

The other factor he would recognize is how many agricultural products go into distilling.

“Just our company alone we bought 9 million bushels of corn last year,” Fugate said. “There are ripple effects if our industry gets hurt.”

Morris closed by saying domestic sales of thoroughbreds in Kentucky are strong, as is racing.

“There’s been this disruption of trade. We know that all these things are cyclical,” he said. “It’s why row crop farmers have grain elevators.”

As Morris looks at the prism of the horse industry, he saw that by the turn of the last century, the U.S. became with richest country in the world without an imperial system because of free trade.

“Our industry is certainly a huge benefactor of that,” he said. “We find that we perform more business with equals.”

Being able to compete with the horse industries of the United Kingdom, Ireland and Japan is huge.

“Their racing and breeding industry is hugely profitable as is ours,” he said. “And that’s really the endpoint and the goal and finish line, if you will, that we’re all trying to get to.”

Kylene Scott can be reached at 620-227-1804 or [email protected].