By Sid Fernando
The bloodstock industry in Kentucky is heavily weighted to the commercial marketplace, and when the first yearlings of a stallion sell well, sometimes even experienced commercial breeders can get momentarily caught up in the euphoria. A breeder called me after the Fasig-Tipton October Sale to say that he was going to breed to such a stallion next year. That's great, I told him, if he had a strong opinion on the horse, but I reminded him that he breeds to sell and he'd be breeding to a fourth-year sire, meaning that when he sold the resulting fourth-crop yearling, the stallion would have 4-year-olds racing. That sobered him up quickly after he digested the years, because he knew that if the sire wasn't successful by then, his yearling would get hammered in the ring.
Here's an actual example to illustrate the phenomenon: Will Take Charge's (Unbridled's Song) first-crop yearlings averaged $169,190 in 2017. He'd entered stud in 2015 for a $30,000 fee and when his first foals arrived in 2016 he again stood for $30,000. He was at the same fee in his third season at stud, when his first yearlings sold–and they were highly profitable for breeders versus the stud fee. In 2018, his second-crop yearlings averaged $140,149 with his first 2-year-olds at the track–his fourth year at stud, in which he also stood for $30,000. But in 2019, with his first runners now three, the stallion's third-crop yearlings averaged just $29,882–less than the stud fee. This year, with 4-year-olds at the track, Will Take Charge's fourth-crop yearlings, conceived on a $30,000 advertised fee, averaged $14,051, or less than half the stud fee.
This downward four-year progression of yearling averages is common, even for “successful” freshman sires. Will Take Charge was number five on the top 10 in 2018, but that promise wasn't realized in 2019 with both 3-year-olds and 2-year-olds racing, or this year with three crops at the track, at least based on yearling averages.
The years can get confusing enough for experienced folks after the highs of a successful sale, with terms like first year at stud, first-crop yearlings, third-season sires, first-crop 2-year-olds, etc., floating around, so you can imagine what it's like for less-experienced breeders, much less newbies. Meanwhile, stud farms, naturally, want to publicize the profitable sales of first-crop yearlings, and nowadays they tend to solicit breeders with this hype by offering discounted seasons for fourth-year sires to make them even more attractive.
However, in this hyper-commercial environment, there's compelling evidence to suggest that most stud fees should drop in a stallion's second year at stud, and here's why: of the top 10 freshman sires of the last three years, second-crop yearling averages of 24 of these 30 sires (80%) declined versus their first-crop averages. Click here to view charts.
These charts are a retrospective look at yearling averages (only summer and fall yearlings; short yearlings are not included) of the 10 most successful freshman sires of 2018, 2019, and 2020 (to Nov. 1) by progeny earnings, and what they illustrate clearly is that racetrack success with first-crop 2-year-olds isn't usually enough to lift prices of second-crop yearlings. Those stallions that didn't make the top 10 suffered even more in this regard, as you can imagine. This, of course, explains why savvy commercial breeders will eagerly patronize an attractive first-year horse and shun the same horse in his second year at stud, when the upside chance of success in the ring isn't worth the downside risk of failure on the track.
There are exceptions, of course. As noted, six of the 30 referenced stallions (20%) had upward movement in second-crop yearling averages versus first-crop averages. One of them was Not This Time (Giant's Causeway), who has a trio in the Breeders' Cup races this weekend, headed by Grade l winner Princess Noor. Not This Time's first-crop yearling average was $67,352 last year (see chart 3), but this year his second-crop yearlings averaged $113,822, mostly on the strength of the quality and physiques of his early runners, including Princess Noor, who'd sold for $1.35-million at OBS this spring as a 2-year-old in training and then won the Gl Del Mar Debutante impressively a week before the Keeneland September sale, which was timely.
However, the case of Nyquist (Uncle Mo), who heads the top 10 this year and whose yearlings averaged $236,318 in 2019, is more the norm. He has been represented by two Grade l winners this year–one, Vequist, won the Gl Spinaway on the same day as the Del Mar Debutante–but his second-crop yearlings nonetheless averaged $165,773, down 30% from his first crop despite the success of Vequist before the September sale.
Furthermore, 16 of 19 stallions (84%; one died) had lower average prices with their third-crop yearlings than their second-crop yearlings (stallions in charts 1 and 2 combined). To more easily visualize this, I've included a row in bold type at the bottom of each chart that shows the age of the stallion's first crop during the sales year of each subsequent crop of yearlings, because it's the success or failure of that first crop of runners that's so important to future viability as a stallion. This line might seem redundant, but without it as a handy reference I guarantee that you'd be doing the math in your head and frequently getting the numbers wrong, as the breeder who wanted to send a mare to a fourth-season sire did.
For our purposes, a fourth-season sire is equivalent to one with second-crop yearlings and first-crop runners, and that's not easy to wrap your head around until you think about it.
In chart 1, for example, Cairo Prince (Pioneerof the Nile) had first-crop yearlings sell in 2017 and third-crop yearlings sell in 2019, when his first crop was three. In his case, note that his second-crop yearling average in 2018, true to form, dropped to $110,100 from $150,786 (27%) when his first juveniles were at the track, and his third-crop average dropped further to $46,784 when he had 3-year-olds at the track. This year, with 4-year-olds racing, Cairo Prince's fourth-crop yearling average stabilized at $47,601. In 2021, Cairo Prince will be serving his seventh book of mares, having entered stud in 2015.
Success on the track ultimately determines where a stallion's yearling averages settle, and yearling averages for breeders in a commercial marketplace should have a healthy rather than toxic relationship to stud fee.
The charts clearly explain several things at the same time–breeder preferences for first-year sires, downward yearling averages as a matter of norm–but most significantly they show why this happens: buyers won't pay premiums for yearlings by sires who haven't lit up the track with their first 2-year-olds, and prices tend to decrease with each subsequent crop if major racetrack success isn't there.
In other words, in a commercial marketplace, it's the buyers that drive yearling prices based on performance after the first crop of yearlings sell.
In the absence of performance–as is the case with first-crop yearlings–buyers will pay premiums based on a yearling's sire's race record, his dam's pedigree, and his own physique. This is why attractive first-season sires usually get their best mares in the first of their four years at stud before their first 2-year-olds run, and it's a pattern that will mostly reward a sire's first-crop yearlings. Every crop of foals after the first crop will mostly get discounted in the sales ring by buyers.
If you understand this commercial paradigm, you'll understand that limiting a stallion to 140 mares isn't going to change the trajectory of yearling averages by crop. Buyers will still assess second-crop yearlings by first-crop 2-year-old performances, and so on. It will do a few things, though. For one, the most commercial first-year horses will see increases in stud fees. Second, more first-year stallions will be given chances at stud, but in the end they'll all suffer the same fates as stallions do now as long as the current commercial model exists.
And this model isn't favorable for an overwhelming number of horses after their first-crop yearlings sell, as these charts so aptly illustrate.
Sid Fernando is president and CEO of Werk Thoroughbred Consultants, Inc., originator of the Werk Nick Rating and eNicks.