Yearling Market: 80% Snapshot

We're not completely done with the yearling market yet, but we mostly are. Arqana's four-day October Yearling Sale started Tuesday in Deauville, with Baden-Baden's BBAG October Sale, which is mixed but has a lot of yearlings, this Friday and Saturday, followed by Fasig-Tipton Kentucky's three-day October Yearling Sale next week, with 1,250 yearlings catalogued. But, through last weekend, there had been 7,471 yearlings sold at the North American (4,085) and European (3,386) yearling sales since they kicked off at Fasig-Tipton July. What we find amazing, when you look at the overall totals, since 2013 in North America and since 2014 in Europe, is that there has been almost no change at all.

If you look at the two tables on the second page of this week's double-issue Weekly Sales Ticker you'll see what we mean. In the last four years, to this point in the North American sales season, the number of horses sold has been between 4,085 – 4,198 each year, a variation of under 3%. The catalogues grew by 16% between 2013-2016, but the number sold actually declined very marginally (about 1%), which means the clearance rate from the catalogues has dropped steadily, from 70.8% in 2013 to just 60.1% this year. The gross was $364 million, $362 million, $363 million in three of the last four years; in 2015 the gross edged up to $380 million. Similarly, the average was $88k, $86k, $88k except in 2015, when it reached $92k. Essentially, it means to this point of the yearling sale season–now about 80% complete–over the past four years over 16,000 yearlings have sold in North America for nearly $1.5 billion, and averaged almost exactly $90,000. In that time the only major change in the market is that four years ago seven out of 10 yearlings catalogued in these sales was listed as sold; now it is six out of 10.

The market plateau arrived in Europe a year later, in 2014. In the three years since then over 10,000 yearlings have sold at the corresponding European yearling sales, an average of 3,393 a year, with the number sold varying less than 1% each year. The gross was €270 million in 2014; €264 million in 2015; and back to €270 million this year. The average has been €79k, €78k, €79k. I'm not sure if the market is stable, static, or stagnant, but whichever it is, the needle hasn't moved very far here just lately. One striking feature when we look at market 'tiers' is a massive increase in $500k+ yearlings in America, and €500k+ yearlings in Europe, which must mean a corresponding decrease in the 100k-500k range. It can only mean there is intense competition at the top, but correspondingly less further down the scale, which is actually not good news for breeders and even pinhookers as it intensifies even further the dependency of all producers on the 'home-run horse.' You don't get paid as much for 'getting on base'; it becomes more of a 'Home Run Derby.' Well, it is baseball playoff time.

Not unrelated to this is to look at the sire averages at the NA/EU sales so far, which you can find in our Sales Statistics (formerly Insta-tistics) section on our website; click here to see the top 25 sires by average (converted to USD, which is a bad break for European sires) through last weekend. It's very striking; even taking the 20% plunge in GBP into account, the top five sires in Europe (3) and North America (2) have all averaged over $600,000, with a yawning gap back to the next group, headed by Darley's Medaglia D'Oro (41 sold, average $355,266). Darley's top sire, Dubawi (Ire), has averaged $1,267,131, but you have to beat Sheikh Mohammed to buy one of his yearlings: John Ferguson signed for 10 of the 17 sold, plus one each for Shadwell, Rabbah, and Roger Varian (presumably for Dubawi's owner, Sheikh Mohammed Obaid) took it to 13 of the 17 definitely for Dubai-based owners.

Juddmonte's Frankel (GB), who has probably had a higher percentage of highly rated 2-year-olds from his first crop than, yes, any horse in history (without yet getting a Group 1 winner, but that won't take much longer); and Coolmore's Galileo (Ire), the number one sire on the planet, also averaged over $600,000 from Europe, while Gainesway's Tapit and Claiborne's War Front also averaged over $600,000, from America.

Let me put it another way: 91 yearlings by Dubawi, Frankel, Galileo, Tapit, and War Front have averaged $700,000; 7,380 yearlings by all other sires have averaged $77,000–though, we hasten to add, the next tier of 10 sires all averaged between $230k-$355k and includes, in descending order of average, Medaglia D'Oro ($355k), Dansili (GB) ($326k), Speightstown ($324k), Invincible Spirit (Ire) ($315k), Shamardal ($311k), Pioneerof The Nile ($255k), Scat Daddy ($247k), Curlin ($238k), Malibu Moon ($237k), and Uncle Mo ($230k).

There won't be too many more yearlings selling by the five truly elite commercial sires, but there will no doubt be more in the next couple of weeks by most of the popular younger sires. Going into this final round of sales, nine stallions with their first yearlings selling have averaged over $100,000. Four are European, four America, plus Declaration of War, who sired this crop at Coolmore Ireland, but then moved to Ashford in Kentucky. Leading NA/EU first-year yearling sire on average (click here) is Al Kazeem (GB) (Dubawi), who has had only six sell from his first crop, having proved sub-fertile in his first stint at The Royal Studs; those six averaged $203,482, which nominally makes him leading first-year yearling sire. Coolmore's Camelot (GB) (77, $148,195), Cheveley Park's (now Haras Du Quesnay's) Intello (Ger) (45, $143,834), Declaration of War (69, $127,994), and Darley Kildangan's Dawn Approach (Ire) (40, $126,998) are the other European sires with six-figure averages through last weekend. In America the four with six-figure averages are: Claiborne's Orb (51/$148,186); Ashford's Shanghai Bobby (57, $124,075); Calumet's Oxbow (this crop sired at Taylor Made; 24, $111,125); and Darley Jonabell's Animal Kingdom (44, $105,056).

The commercial difficulties of prospering in a competitive environment for sires not named Dubawi, Frankel, Galileo, Tapit, or War Front, and not being first-year sires who have never done anything wrong, is illustrated by looking at prices for two interesting groups of promising North American sires: those with their first 2-year-olds this year (F2014 sires); and those with their first 4-year-olds (F2012 sires). Of the top 10 on the North American Freshman Sire List by progeny earnings (click here), none averaged as much as $100,000: the top three are #1 Freshman Sire Union Rags (55/avg $95,534); #9 The Factor (51/$86,474); and #7 Bodemeister (49/$85,867). There is less than $150,000 in progeny earnings on the North American Freshman Sire List between #3 Dialed In and #10 Dominus, but it's striking that six of the top 10 have yearling averages so far between $40,000-$60,000: #2 Gemologist (51/$56,405); #3 Dialed In (27/$44,908); #4 Tapizar (33/$56,581); #5 Creative Cause (44/$53,488); #6 Maclean's Music (27/$44,618); and #8 Stay Thirsty (24/$46,479). Being a promising, top-10 Freshman Sire clearly doesn't translate into booming yearling prices.

North American third-crop sires, with their first 4-year-olds this year, are usually that much more proven (or not). The top 2016 North American third-crop sire (click here), Quality Road, is the #1 NA third-crop sire by yearling average (40/$116,702), but he is the only one with a six-figure average. Blame (35/$97,140), #6 on the 2016 list, and #9 Super Saver (48/$88,562) also sold well, but #2 Munnings (25/$41,086) and #3 Lookin At Lucky (24/$38,355) weren't exactly on fire. Mind you, these yearling prices have more to do with the quality of mares bred to these horses in their fourth crops (often the worst for young sires) than so much how their progeny are doing on the racetrack. There have therefore probably been some pretty serious bargains among the yearlings by these sires; but that's the market, and we have to wait some time before we find out whether cheaper yearlings by up-and-coming young sires are a bargain or not!