ANALYZING THE FOAL-CROP TREND

In the past decade, U. S. pari-mutuel wagering, when adjusted for inflation, declined by 41.6%, while aggregate purses decreased by 16.3% and average purses increased by nearly 4%.  Concurrently, the U. S. registered foal crop fell from 34,800 to 21,275, or by 38.9%.

The trajectory of pari-mutuel handle (which is to some extent dependent on what is occurring in the national economy) and the trend in the size of the foal crop are almost perfectly correlated.   Likewise, the correlation between the movements in aggregate purses and the foal crop is extremely high.

While correlation is not a definitive measure of cause and effect, it is reasonable to construe that breeders have generally been quick to react to unfavorable developments in pari-mutuel wagering and aggregate purses by breeding fewer mares.

After the financial crisis of 2008, yearling auction prices decreased in 2009 and 2010 but rebounded in a big way in 2011.  Since 2008, average prices are up (even in inflation-adjusted terms) 8.6% and medin prices are up 70%.  Yet the foal crop remains low.  If breeders were making decisions based on auction prices why weren’t more mares bred since 2011?  Something else is at work in declining foal crops, and the numbers indicate it may be ebbing pari-mutuel handle (in nominal and real dollars) and aggregate purses (in real dollars).

In comparison, there is no correlation between the upward movement in average purses and the downward trend in foal crops.  One reason is that average purses have been maintained and increased by spreading aggregate purses over far fewer races; in 2013, U. S. racetracks held 43,139 races compared to 53,595 in 2004.  Another cause is that purses have been supported by slots revenues.

The scale of the U. S. breeding industry should continue to shadow what is occurring with pari-mutuel wagering and aggregate purses, and the latter derives from both betting handle and slots subsidies.  Thus the magnitude of the U. S. horse racing industry ultimately hinges on actions by racetracks to rejuvenate pari-mutuel handle and with state governments to continue with slots contributions to purses.

Diminished foal crops will require racetracks to offer cards with fewer races in order to present the fuller fields that bettors prefer.  This less-is-more approach is apt to foster additional wagering.  Smaller foal crops have other redeeming qualities, such as fewer retired racehorses to place in caring homes.

Copyright © 2014 Blood-Horse Publications.  Used with permission.

Speak Your Mind

*