Now and then

Jocelyn de Moubray assesses 25 years of bloodstock business

He reviews price movements for international buyers in dollar terms, the growing influence of sire power, which has seen stallion owners become the real winners, and the ever-reducing distance of European stakes races

TWENTY-FIVE YEARS is a long time in any business, and particularly so for the world of bloodstock sales where the names on catalogue pages are always changing.

The most sought after stallions at the yearling sales of 1998 have long since disappeared and, if like Sadler’s Wells they are still in pedigrees, it is these days likely to be in the third generation. Some things, however, seem to stay the same.

In 1998, the top two yearling sales at Tattersalls were the Houghton and then the October Sale and at the two combined sales 1,006 yearlings were sold for 55 million guineas at an average price of 55,000gns and the two biggest buyers were the Coolmore partnership and Godolphin.

Move forward 25 years and 1,017 yearlings were sold at this year’s Tattersalls October Book 1 and Book 2 sales for just over 149 million guineas and an average price of 146,876gns.The biggest buyers were the Coolmore partnership and Godolphin. Do these figures mean there has been a significant rise in prices over this period and the value of bloodstock?

Have the prices really gone up?

Once you have factored in inflation – very slight until 2008 and rising since – and the decline of sterling, the value of the yearlings sold at the Tattersalls’ top yearling sales has changed very little, at least for international buyers.

Few of the major buyers in either 1998 or 2023 receive income in sterling and it makes sense to put bloodstock prices into US dollars, which is still the major international reserve currency.

Over this 25-year period sterling’s value has declined by 25 per cent against the dollar and 16 per cent against the euro, it has not recovered from the post-Brexit fall in 2016.

During the same time span cumulative inflation in Britain has been 18 per cent.

So, in today’s US dollar value, turnover at the two Tattersalls sales of 1998 was $180 million. With the same number sold we are looking at about $190 million this year, or an advance of five per cent over a 25-year period.

In dollar terms there was a significant rise in the value of yearlings sold at Newmarket between 1998 and 2007 when the combined turnover at October Book 1 and Book 2 reached $300 million, but since then inflation, the financial crisis of 2008, the covid year of 2020 and the decline of sterling, 40 per cent against the dollar between 2007 and 2023, has seen real values fall. The top of the market has dropped by more than 15 per cent on three different occasions in 2008, 2020 and again in 2023. At the same time for those buyers whose income is in sterling, prices at the top of the yearling market have indeed risen significantly.

Once you have put the 1998 figures into 2023 sterling, the rise in the turnover and average price at Tattersalls’ two major yearling sales progressed by 165 per cent or an average of seven per cent a year, which has to be one of the reasons there are so few domestic buyers in Britain at the top of the yearling market.

Such a progression in prices in real terms suggests that this has been a golden period for commercial breeders, however, the real winners from these trends lie elsewhere as becomes clear when you factor in changes in the stallion market.

I looked at two different ways to measure how the stallion market has changed between the yearling sales in 1998 and those of 2022.

In 1998, the stallions with the most yearlings on offer at auction were Barathea, Sadler’s Wells, Caerleon, Cadeaux Genereux, Grand Lodge, Indian Ridge, Common Grounds and Night Shift.

Of these only two, Sadler’s Wells at €215,000 and Caerleon at €130,000, stood at the equivalent of more than €100,000 in current euro prices.

Between them these eight sires, all with 27 or more yearlings catalogued, had a total of 302 yearlings in the catalogue, 13 per cent of the total of 2,300 yearlings offered in Britain and Ireland in 1998.

The average covering fee of these sires in current euros was €60,000 and they had an average of 38 yearlings each.

The outlier and sire who pointed the way to the future was Yeomanstown Stud’s Common Grounds, who had 63 yearlings from his second crop entered in sales.

Fast forward to the 2022 yearling sales and the sires with the most yearlings catalogued were Galileo, Sea The Stars, Dark Angel, Kodiac, Lope De Vega, Zoffany, Showcasing, Iffraaj, Muhaarar and Fast Company. They had a total of 878 yearlings or 22 per cent of the total of 4,000 yearlings offered.

The ten sires averaged 90 yearlings and had an average price in current euros of €100,000.

By this measure real prices of popular sires rose by 67 per cent over the period, while the number of yearlings offered by them rose by 140 per cent. It suggests that the income for stallion owners has increased by something like 200 per cent in real terms, or an average annual increase of eight per cent in real terms.

The stallions with the most representatives sold at the 1998 Tattersalls Houghton Sale were Rainbow Quest, Green Desert, Polish Precedent, Fairy King, Machiavellian, Sadler’s Wells, Caerleon, Barathea, Cadeaux Genereux, Indian Ridge and Night Shift, all of whom had at least seven yearlings sold.

Aside from Sadler’s Wells and Caerleon the most expensive of these were Rainbow Quest and Machiavellian, who stood at the equivalent of €70,000 in current terms.

The average covering fee of these sires was €75,000 in current terms.

In 2022, the sires with the most yearlings sold at October 1, all of whom had 17 or more sold, were Blue Point, Too Darn Hot, Dubawi, Frankel, Siyouni, Kingman, Lope De Vega, No Nay Never, Sea The Stars and Night of Thunder.

Of these seven, Dubawi, Frankel, Siyouni, Kingman, Lope De Vega, No Nay Never and Sea The Stars stood at six-figure fees and the average price in current euros was €130,000.

And so, by the measure of the most successful sires in the select sale, covering fees rose by 73 per cent in real terms and the number of products on offer increased significantly, too.

Whichever way you assess it, the last 25 years has been a golden period for the owners of the most popular stallions.

Not only have average covering fees gone up by about 70 per cent in real terms, but the number of live foals produced by each of these stallions has also increased by about 150 per cent.

There have been crises following outside events such as the financial crisis and the covid pandemic, but very few alternative investments outside the bloodstock world could begin to match this return.

Twenty-five years ago the bloodstock market was deep into its Sadler’s Wells era and 1998 was another year that saw the Coolmore sire top the Houghton Sale leading sires’ list by aggregate with sales totalling over $7 million In 1999, the sire’s gross at the sale was over $11 million and by 2000 that figure had reached $15 million. The priciest horse sold at the Houghton Sale in 1998 was by Nureyev and out of the Riverman mare Go Solo, while Columbus by Sadler’s Wells and out of Northern Script, sold by Camas Park Stud and bought by Demi O’Byrne, was Sadler’s Wells’s most expensive horse of that year.

The big winners in the bloodstock business over the last 25 years have been stallion owners – not only have fees increased by around 70 per cent in real terms but the number of live foals produced has

How many other commodities have seen their price rise by 70 per cent in real terms and the volume of business more than double over the last 25 years?

There are commercial breeders who have prospered over this period, which has seen the value of yearlings rise by seven per cent a year in real terms while stallion fees have risen by three per cent, the real winners have been the stallion owners, as well, of course, as the sales companies.

For stallion owners the major problem is securing future sire prospects, while for commercial breeders the risks and capital outlay required to compete at the top level have climbed significantly.

The most popular stallions are more expensive, and because each is likely to have at least 90 products in the yearling sales, securing a nomination to a popular sire is no guarantee of a return on the investment.

How the numbers have grown

In numbers alone the bloodstock business has grown over the last 25 years with the peak coming in 2008 before the financial crisis.

In 1997 there were 6,026 foals born in Britain and Ireland destined to race on the Flat. Of these 1,568 (26 per cent) were offered for sale as foals, 2,356 (39 per cent) as yearlings and 331 (5.5 per cent) as two-year-olds.

These figures do give an idea, but, of course, some were offered more than once and some of those offered at British and Irish sales were born in France, the US or elsewhere.

In 2019, 8,771 Flat-destined foals were born in Britain and Ireland of which 1,566 were offered for sale as foals (18 per cent), 3,972 as yearlings (45 per cent) and 688 (7.8 per cent) as two-year-olds.

Over this period the number offered for sale rose by about 50 per cent, and while a smaller proportion were offered as foals, the percentage of foals offered for sale as yearlings or two-year-olds increased.

The Flat foal crop rose by 16 per cent in Britain and by 76 per cent in Ireland, while the number of races rose by 46 per cent in Britain and by 75 per cent in Ireland.

An increasing Pattern but in decreasing distance

This dramatic increase in the number of races run in Ireland and Britain also included an expansion of the number of Group races.

In Ireland there were 36 group races in 2000, five per cent of the total number of races; in 2021 this has grown to a total of 73 group races, 5.9 per cent of the total.

In Britain, the proportion of all races which are group races has remained unchanged at 2.5 per cent, but this, of course, means that in 2021 there were 160 group races up from 110 in 2000.

It has never been fully explained – in whose interest has this expansion of group races supposed to be for?

These races are used to select the best horses and, to some degree, determine the value of untried horses, as well as of breeding stock. The number of group races is important as an expansion gives more opportunities for horses to gain the status of black-type in sales catalogues, which is supposed to be a standard of quality.

The balance between different types of races, for two and three-year-olds or older horses, as well as the distance they are run over, will also have an effect on values and demand at yearling and breeding stock sales.

There is no obvious reason why more races should mean more group races, after all there is no international benchmark of the relation between the two.

In Britain, 2.5 per cent of all races are group races, in Ireland it is 5.9 per cent and in Japan there are only 129 group races, which represents 0.8 per cent of all races.

For British group races to be as competitive and of a similar quality to those in Japan the number would have to be divided by three – if there were only 55 group races a year you can be sure they would attract large competitive fields!

The Prix du Jockey-Club of 2005 was the first shortened version of the Classic and was won by Shamardal. Many European middle-distance stakes races have been lost from the calendar completely. The proportion of Group 1 races run in Britain over 1m2f or more has dropped from 59 per cent to 45 per cent

In Ireland the balance between the different age groups and distances has remained broadly the same as the number of group races has grown.

The most obvious change has been the fall in the number of group races for three-yearolds alone over 1m2f or further.

No doubt in in an attempt to maintain competitive fields, many have been opened up to older horses. It means that the proportion of group races for three-year-olds alone over 1m2f or further has gone from 30 per cent to only nine per cent.

In Britain, there have been more fundamental changes in Group races.

Of the races for three-year-olds and upwards over 1m2f or further, the proportion has gone from 50 per cent (42 of the 84 group races for three-year-olds and upwards) to 59 of the 124 in 2021, which is 46 per cent.

For Group 1 races, those which are likely to give the winners a chance at stud, the changes have been greater.

The proportion of Group 1 races over 1m2f or further has dropped from 59 per cent in 2000 to 45 per cent in 2021, while that of races over less than a mile has increased from 14 per cent in 2000 to 23 per cent in 2021.

The decline in the proportion of group races run over 1m2f or further has been reflected in the market for untried horses, and in the type of stallions likely to attract strong support when they first retire to stud.

Market correction?

Few predicted that the market would be down at this year’s Tattersalls October Book 1 and 2 sales and so the question has to be asked whether this is a one-off or whether it is likely to mark the beginning of a larger correction?

This has happened before, even if few of those trading today were active in the 1980s, when the market lost around 40 per cent of its value in three years after reaching a peak in 1984.

This was a correction due to internal factors rather than the fall in equine values following the financial crisis of 2008 or the covid pandemic of 2020.

In general terms, any market will fall if there are more people who wish to sell at the current price than those who wish to buy.

Those who are concerned about future trends have to assess whether or not the bloodstock market has reached this point.