Crop Chop - By Dan Liebman

Blood-Horse Staff — Tue, 18 Aug 2009 18:19:00 GMT

The question was not whether fewer mares were bred this year, but exactly how many? With a struggling economy, stallion owners were talking about a reduction in mares for all but the hottest stallions. Now, The Jockey Club has answered the question: roughly 12% fewer.

Though the complete Report of Mares Bred will not be released for a few months, officials of The Jockey Club announced Aug. 14 that it is projecting the 2010 North American foal crop at 30,000, the lowest level in more than 30 years. It also dropped the earlier estimate of the 2009 crop from 35,400 to 34,000.

Ever since the rapid growth in the commercial market caused the foal crop to top 50,000 in 1985-87—the top being 51,296 in 1986—it has been steadily declining, dropping
under 40,000 in 1992 and now down to 30,000, a number not seen since the 30,036 of 1977.

For further historical reference, the size of the foal crop first topped 5,000 in 1935; 10,000 in 1956; and 20,000 in 1966. But a rise or drop from one year to the next of 12% has never happened before.
There are many ramifications from a smaller foal crop, some positive and some negative.

What happens to the nearly 3,500 mares that were not bred this year? Will their owners return them to the breeding shed in a year or two, or do we now have more “unwanted” horses, a problem becoming more visible after years of overbreeding?
When the full report is issued, we will see which stallions had trouble attracting mares this year. Some will surely be sold, while others will be pensioned from active duty.
The need for fewer stallions may cause some horses not to be even tried at stud, a possible negative. Some of those same horses may remain in training longer, a possible positive.
A reduction in stud fees lightens the load on breeders but means less income for breeding farms. Those that paid hefty prices for stallion prospects in recent years will have a longer period
to “get out” on their investment.
Fewer foals means fewer sale horses and fewer racehorses. Less supply could translate to more demand in auction rings, but fewer racehorses could bring hard times on some trainers.

It is not farfetched that a drop of this magnitude could ripple down to mean fewer farms, stallions, mares, owners, breeders, trainers, and racetracks. Whether that is a positive or negative depends on your point of view.

WAIT 'TIL NEXT MONTH

Even in a down market, a blip of positive news is possible, as evidenced by the upswing in business at the Aug. 10-11 Fasig-Tipton Saratoga yearling sale. The auction was up in gross, average,
and median.

However, though any good news right now is sorely needed—psychologically as much as anything—to make too big a deal of the Saratoga sale results, with just 160 horses sold, would be foolish.

After Fasig-Tipton was purchased last year by an associate of Sheikh Mohammed, sale company officials said one of the goals was to make the Saratoga auction the elite place to sell summer yearlings, much as it was in the first half of the 20th century and the Keeneland July sale was thereafter. They worked hard to increase the catalog and presented quality individuals that impressed prospective buyers.

For the first time in 20 years, sale company officials persuaded Sheikh Mohammed to attend the sale personally, and though his agents have purchased horses there every year, his sheer presence
made an important statement.

The Maktoum family and associates spent $18,345,000, nearly 35% of the gross. That certainly is not unprecedented; the Maktoums spent more than $76 million at the 2006 Keeneland September
sale, more than $63 million at that venue in 2005, and as far back as 1984, bought horses for $51 million at Keeneland July (more than 50% of the gross).

We will get a truer read on the overall market next month at Keeneland.

Paint By Numbers - by Dan Liebman

Blood-Horse Staff — Tue, 26 Aug 2008 14:13:00 GMT

Based on Reports of Mares Bred, The Jockey Club recently announced its projection of the foal crop of 2009 as 35,400, which would represent a 3.3% decline from the estimated 36,600 foals of 2008.

Many believe the foal crop should be much smaller.

Consider this quote from pinhooker Eddie Woods, speaking at the Ocala Breeders’ Sales Co.’s yearling sale, which Aug. 18-21 suffered major declines in business: “Basically, we’re seeing the results of the overproduction of mediocre stock…there are too many mares (in production).”

The size of the Thoroughbred foal crop grew dramatically in the 1980s, when auction prices boomed and everyone wanted a piece of the action. There were 35,679 foals in the first year of the decade, but by 1985, the number had soared to 50,433, peaked at 51,296 in 1986, and was 50,917 in 1987. In just a few years, the crop size had jumped nearly 44%.

What followed was pure economics. With high supply and low demand, prices fell and many limited investors fled. The foal crop was back to 35,341 in 1994 and has remained around that number ever since.

During the decade of the ’80s, there were 463,827 registered foals, a number that fell 19% to 375,302 in the ’90s. Based on crop totals and estimates for the ’00s, the decade will see 371,633 foals registered, a drop from decade to decade of less than 1%.

What makes it tough for breeders to scale back is the emphasis on the commercial market and the solid average price for yearlings sold throughout North America. In 2007, there were 10,159 yearlings sold at public auction for an average of $55,306. At the world’s largest shopping venue, Keeneland September, the average has been more than $100,000 each of the past three years.

For its 2008 sale, Keeneland has cataloged a record 5,555 youngsters, about 14% of the entire estimated foal crop.

A year ago, 4,901 yearlings went through the Keeneland sale ring over the course of 15 days, with 3,799 listed as sold. But only 1,235 yearlings, 25%, were profitable, based on stud fee returns, according to Blood-Horse calculations.

This is not to say many breeders are not making a profit. If you send 10 through the ring and two or three sell for enough to carry the others, the bottom line can wind up being positive.

But now comes a year in which breeders have higher stud fees and pinhookers have larger investments in yearlings. Combine that with a struggling economy, and there is plenty of reason for concern.

Many breeders/consignors have expressed a belief that they expect the first week of the Keeneland sale, when most of the better pedigreed and conformed horses are cataloged, to remain healthy, while the rest of the sale could experience significant downturns. At the OBS sale, the number sold was down 20.5%, the gross dropped 34.6%, and the average was off 17.7%.

With mares currently carrying what will be the final crop of this decade, breeders should again assess the size of the crop as it relates to the economics of the game. The crops of 2000-09 will drop only about 1% because of larger books and fewer stallions. That fewer stallions are standing at stud may not be such a bad thing, but larger books have pushed catalogs to record sizes. One need only look at the list of freshman sires in the Keeneland sale and the number of offspring representing each to see this at work.

There were 4,513 active stallions in the United States in 1998, though obviously only a small number were considered truly commercial. By 2006, when this crop of yearlings was conceived, there were 3,682.

Fewer stallions and more broodmares. As Woods so succinctly said, the overproduction of mediocre stock does no one any good.

What's Going On Here : foal crop

Crop Chop - By Dan Liebman

Paint By Numbers - by Dan Liebman