The Jockey Club announced late last week that the projected foal crop for 2022 is 18,700, and most of the racing press reported this without commentary. That number of foals is the lowest figure in more than 60 years. The trendlines appear to be giving us both clear indications of what is happening and generally why it's happening too. Breeders are hearing what the marketplace is telling them and are responding in accordance.
For a generation, the commercial market has been pummeling breeders whose stock ranks below the median in auction sales. Typically, the prices for those foals and yearlings do not even cover the cost of on-farm production, without even considering ancillary expenses or the cost of money tied up in non-productive assets.
As a result, the number of foals that breeders are willing to produce has hit a noteworthy low point.
The last time the North American foal crop of Thoroughbreds came this low was 66 years ago in 1965 when the foal crop was 18,846, and only five years before that, in 1960, the foal crop was 12,901. So in the span of half a decade, the foal crop increased by nearly 50 percent, but the decades of the 1960s and 1970s featured exponential growth in Thoroughbred racing, and especially in breeding, with the expansion of breeding programs outside of Kentucky, Florida, and California.
Now, those regional programs are nearly dead. Many breeders are pensioning stallions, selling off mares, and not breeding for those specialty markets.
In contrast to the present trend, the foal-production boom peaked in 1986 with a foal crop of 51,296, just in time for the tax act that changed the rules for breeders and sent the market into a panic and decline. By 1995, the selloff had bottomed out with a foal crop of 34,983, more than 16,300 foals fewer than only nine years earlier.
Since then, the foal crops remained remarkably stable around the 35,000 level until 2010, when the foal crop dropped below 30,000 for the first time since the 1970s. Crop numbers have been drawing down, slowly but steadily to the present level, and one of the great factors for this direction is the continuing negative pressure from buyers.
Despite the tone of the foregoing information, there is a good market for Thoroughbreds, but it is a good market, consistent and profitable, only for premium foals and yearlings. Nobody wants an average one. Or what is perceived to be an average yearling, because every year there are graded stakes winners from every book and every session of the September sale. Perception of average-ness is not the same as being average (or below average).
At the same time that breeders are stuck with half or thereabouts of their annual foal crop in the “below-average” section of sales, the same breeders are consistently being prodded to spend more for stud fees and other services, then to accept less at the sales, because what other choice would they have.
The situation is sufficiently trying to make one wonder “what if”: what if breeders made different decisions; what if breeders formed cooperatives (or a single cooperative) to improve their economic and political impact; what if a group or several groups collectively hired trainers to train the horses that were not “sales types?” These and other choices are out there, apparently waiting for someone or a group of someones to latch onto them and bring them into operation.
By these and other avenues, there are ways out of the financial quandary breeders find themselves in, but it may not be the path that brought them here. We have, for more than 20 years, been breeding stallions to as many mares as breeders will present and as many as the horse can (hopefully) handle.
This approach, in hindsight, might be considered an overreaction to the concept of a free market, as in too much of a good thing can drown you.
Stallion syndicates, hard number syndicates that restrict access to premium stallions and control the supply of yearlings as a result, are one option. This is considerably different from the current free-for-all that seems to be sending more breeders to the poor house each year.
Instead, a syndicate with a contractual cap on seasons and members would be a return to the style of syndicates from the 1950s and '60s and '70s, when everyone made money in horses. And somehow the horses were even better and raced more and seemed more like fun, than what we have now.
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