10/02/2015 10:37AM

Breeding sector well positioned for recovery


You can’t say American Pharoah had anything to do with it, but the North American foal crop has ticked up for the first time in 10 years. This is good news for racetracks, though any effect, albeit small right now, will not truly be felt until 2017 at the earliest.

Without racing stock – in large numbers – the scope of our sport is diminished both nationally and regionally, and the decline in foal crops over recent years has brought an accompanying steep drop in the number of races, race days, and field sizes.

But those things aren’t necessarily all bad. Growth is not always a good thing if quantity outstrips quality, leaving the ontrack product weaker because the foal population became too large and breeding stock at the bottom was poor. One can argue that happened when the 1986 foal crop topped out at 51,296 and races were run year-round at tracks large and small without regard to quality. Imagine what the NBA would look like if in five years’ time it went from 30 to 60 teams. Most likely, fans would complain about a decline in quality of play as less-talented players came into the league to fill rosters.

In 1989, when races run in North America peaked at 82,705, there were some 55,000 claiming races. By comparison, in 2014, only 44,640 total races were carded, with half as many claiming events – 28,141. So, more is not necessarily better, and an ongoing parade of claiming races makes for ordinary, unexciting fare.

The long, slow decline in the number of mares bred that began in the late 1980s accelerated after the Great Recession of 2008, and the foal crop of today numbers about what it did in the 1960s. While annual crops hovered in the 30,000s from 1991 until 2008, they dropped precipitously from 35,270 in the latter season to 23,500 in 2012, a dramatic decline of 33.4 percent in just four years.

While the game is currently smaller in terms of operating racetracks, race days, and races, it is not all gloom and doom. In fact, the decline in foals has brought with it opportunity as total purses paid in North America is near an all-time high. Simple math has dictated a better earnings climate for racehorses, as the number of runners has declined substantially while purses have remained relatively stable.

The number of annual starters declined by 36.5 percent between 1991 and 2014, from 86,937 to 55,198, while races declined 43.9 percent over that same period, from 79,303 to 44,640. Total North American purses reached the $1 billion mark in 2000 and have remained above that level ever since. Total purses in 2014 of $1.11 billion boosted potential average earnings per runner to a record level. These trends in breeding and racing have created a better economic climate for owners and ultimately should spur increased interest in breeding stock.

We may already be seeing some effects of that.

The Jockey Club reported in mid-September that preliminary figures for the 2015 foal crop, based on its Report of Mares Bred the previous season, suggest that numbers may be up nearly 2 percent compared with 2014. The 2014 estimated foal crop of 22,000 is the lowest North American output since the 21,876 foals dropped in 1967.

Today’s economics suggest that the pendulum is beginning to swing the other way, and as a result, breeding activity will increase due to better opportunities on the track.

Equally important, the Great Recession forced many marginal mares out of production because few wanted to hold onto a long-term losing proposition in the face of a severe economic downturn. For a commercial breeder, it takes two years from the time a mare is bred until the resultant foal gets to a yearling sale, and for those who race their stock, it takes three years (at least) from conception to racetrack. Fewer in 2008 were willing to accept that risky proposition, and breeders began leaving the business in large numbers.

This culling of inferior broodmares can only help the breeding side going forward. Mares who remained in production generally had stronger pedigrees, superior conformation, and were more viable long term as producers who could ultimately improve the overall gene pool. Their female foals, in turn, will more likely remain in production due to their commercially viable pedigrees, regardless of how they fared on the track. The increase in population of higher-quality mares over time will serve to increase annual foal crops.

All this is merely conjecture until it actually occurs, of course, but the commercial marketplace has been strong and steady of late, with average prices for yearlings and juveniles in training increasing annually over the past four years. Keeneland’s recently concluded September yearling sale, the market bellwether due to its depth, recorded an average price of $102,549, third-highest in its history. The $50,000 median matched its all-time high.

Confidence is clearly on the rise, and the industry will soon turn its attention to the impending breeding-stock sales. The guess here is that owning broodmares will be back in vogue and these sales will be very strong.

That the sport has its first Triple Crown winner in 37 years can’t hurt, but he accomplished his feat long after the 2014 breeding season was over. But if people want to call it an American Pharoah effect going forward, that’s okay.