By John Boyce
Returns at the yearling sales in 2019 may have been particularly buoyant, but that doesn't mean the future economic landscape is particularly easy for commercial breeders in Britain and Ireland. The yearling sales have been on an upward trajectory for many years.
Right across Europe, commercial sellers have seen excellent growth in the market. The overall average of £60,096 is 6.6% ahead of last year's figure–and that was also the highest ever recorded. The median price has reached £22,000 for the first time in history and significant gains were witnessed at all levels of the market.
The average price for elite yearlings–the top 10% which numbers about 525 this year–rose to a record £224,165, well ahead of the £207,669 recorded in 2018. And just to put this number in perspective, it is a third higher than the £168,217 posted as recently as 2015.
Moreover, the same pattern can be seen throughout all sectors of the market as each and every decile (10% segment) showed a significant improvement on the year before. There were also a record number of £500k-plus yearlings in 2019 than ever before. It just goes to show what can be achieved when all of the powerful ownership groups participate fully at all the major sales as they did in 2019.
But even if it is the case that there is extra money around as the headlines suggest, it doesn't all go to the commercial breeder's bottom line. Investment costs have a habit of eating up any extra money in the market. It's not that stallion studs–in their efforts to try to make commercial sense of their own business models–are charging more per stallion. They are, after all, as conscious as anybody that commercial breeders need to make money to facilitate future growth.
No, it is the sheer quantity of highly priced stallions that now dominate the landscape. By my reckoning there will be at least 42 stallions priced at either £20,000-plus or €20,000-plus in the market for next spring's coverings. That's a record and it contrasts markedly with only 25 as recently as six years ago or the 21 eight years ago. In 2019, as many as 5,398 mares were bred to 39 higher-priced stallions, compared to 2,510 in 2011–that's an increase of over 100% which is partly explained by a climb out of recession. On the face of it, more mares being bred to better stallions ought to be good for the breed, all other things considered.
But there are consequences. Trading conditions become more difficult because the growth in the number of expensively produced yearlings is now running at a faster pace than the gains in overall spending at the sales.
At this year's big five yearling sales–Tatts Book 1 and 2, Goffs Orby, Arqana and Doncaster–64% of yearlings made enough to cover their advertised conception fee, plus £20,000. This was the lowest return for six years and down from 67% last year and 71% in 2017.
What's more, this year's yearlings were produced from the 2017 stallion rosters, when there was 4,808 mares were bred to 20k-plus British and Irish sires. Since then that number has increased to 5,034 in 2018 and 5,398 this spring. It's a number likely to rise further in 2020 with a record number of 20k-plus sires available. So, we can look forward to another three years of even more expensively produced yearlings coming to sale. In these circumstances, we can only expect a fall in overall profitability.
And that is a better-case scenario when your yearling makes it into one of the big five sales. Spare a thought for those European commercial breeders with yearlings that don't. This sector of the market has also come under pressure–in 2019 the percentage of yearlings sold outside the big five sales making enough to cover advertised conception fees, plus £20,000 was a mere 12.9%, down from 15.8% a year earlier. Of course, you can argue that is the nature of markets and it has always been thus.
In times of trouble, commercial breeders often seek refuge among first-season sires. But there can be an oversupply of new recruits and not even they can protect you.
Back in 2007 and 2008, an average of 25 new stallions retired to stud. But the market couldn't sustain such numbers and crashed. For the next four years an average of only 14 per year were retired. Now the pressure is building again and there has been five straight years with 20-plus new sires, peaking at 28 in 2017, the conception year incidentally for this year's yearlings.
It's entirely possible and indeed likely that another fairly major readjustment to the stallion market is just around the corner, unless of course the yearling market climbs markedly in the next three years.
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