ECONOMICS OF THE AMERICAN JOCKEY CLUB 140-MARE LIMIT by ROBERT L. LOSEY, PH.D.

On May 7, 2020, the Jockey Club issued a rule limiting stallions under its jurisdiction born after 2019 to breeding a maximum of 140 mares annually in North America.  The limits placed on mares bred for stallions born 2020 and later put them at a financial disadvantage relative to stallions born before 2020 and will lead to at least four significant changes in the economics of stallion markets.

  • Very popular stallion prospects born in the United States after 2019 will be worth less in North America.
  • Very popular new stallions will be increasingly likely to be exported or shuttled.
  • Potential stallion prospects born before 2020 and young stallions now at stud are now worth more.
  • Upper-end stallion seasons prices will trend higher starting in mid-decade.  Mid-level stallion seasons will trend upward to a lesser extent.

Before and After Stallions

While stallions born before 2020 will face no limits on mares bred, U.S. stallions born after 2019 will be limited to 140 mares throughout their careers.  An extremely popular stallion born in 2020 that is retired to stud in mid-decade may have bred 252 mares (as Triple Crown champion Justify did in 2019) in the absence of the 140-mare limit, but will find that 112 mares he might have previously bred will be displaced to other stallions.  That future version of Justify will logically command a higher stud fee in light of the Jockey club limit on mares bred, but the lower number of mares bred will cause a decline in his breeding revenues. 

The 112 mares redirected to other stallions from future stallions like Justify born after 2019 will increase demand for other stallions.  The increased demand will be absorbed by multiple replacement stallions, and will initially result in very modest, perhaps even no perceptible increases in posted prices for replacement stallions.  But each passing year will find more new stallions subject to the 140-limit being retired, and the rising demand for alternative stallions generated by the increasing number of displaced mares will cause prices of stallion seasons to rise, most especially for elite stallions.  By 2040, stallion season prices at the upper levels will be higher than they otherwise would have been by 20% or so, with mid-level season prices rising relative to where prices would have been absent a limit on mares bred.

More Exported and Shuttle Stallions

Popular new stallions subject to the 140 limit that appeal to European and Japanese markets will be more likely to be in play for export.  Being able to breed 200 or more mares overseas rather than 140 in the U.S. during the early years at stud may significantly increase the now rare phenomenon of popular new U.S. stallions being exported at the start of their breeding careers; and a less stressful Northern Hemisphere breeding environment for new stallions subject to the 140-limit, coupled with increased financial pressures, may increase the likelihood of new U.S.-based stallions being shuttled.

Price Adjustments for Stallions and for Racing Prospects

Had the September 2019 Jockey Club proposal on breeding limits been implemented without change for 2021, most stallion season prices for commercial stallions would have experienced substantial immediate increases.  But because the May 2020 Jockey Club rule phases in mare limits gradually, price changes arising from the phase-in of the 140-mare limit will occur gradually over the next 15 years or so, though with one significant “break point.”

Fertile stallions born before 2020 that face no limits on mares bred will be worth significantly more than similar quality stallions born in 2020 or later. Other things equal though, a stallion born in 2019 will be worth a bit more than a stallion born in 2018.  In the early part of this decade, we should expect to see newly retired stallions born before 2020 be worth more each successive year.  This is because these younger stallions will not be subject to the 140-mare limit that can potentially decrease revenues.  Stallions born after 2019 will find that their values will be substantially diminished because of the 140-mare limit.

An extensive discussion of this topic can be accessed at https://ir.library.louisville.edu/faculty/445/

Robert L. Losey can be contacted at rllosey@gmail.com

FACTS AND THOUGHTS ABOUT THE 2020 KENTUCKY DERBY

A few weeks after Tiz the Law’s impressive victory in the 2020 Travers, the daily Saratoga racing show on Fox Sports showed a video of a post-Travers workout by the colt.  On-air personality and former jockey Richard Migliore commented that he thought Tiz the Law was not as energetic and sharp as previously, though he said he would wait for future workouts before confirming his view.  This expert opinion indicated to me that the 1 ¼ mile Travers may have taken more out of the colt than it looked like during the race…and that another 1 ¼ mile race in less than a month in the Kentucky Derby might be problematic.  When Tiz the Law could not get past Authentic in the Churchill Downs’ stretch, Migliore’s astute observation came to mind.

With no Triple Crown in the offing, the connections of Tiz the Law might consider skipping the Preakness on October 3rd and give the colt a breather to freshen him for the Breeders’ Cup Classic on November 7th at Keeneland.  Then there are several lucrative races to choose among in early 2021 in Florida, Saudi Arabia, and Dubai.

Both of Tiz the Law’s career losses came at Churchill Downs, with the initial loss attributed to a muddy track and jockey error.  Maybe he just doesn’t take to the surface.  Or likely the fact that Authentic ran the seventh fastest Kentucky Derby ever (2:00.61) was why Tiz the Law ran second.

Like many jockeys before him, Mike Smith chose the wrong mount.  He left Authentic for A. P. Honor, apparently on the thinking that the latter was better suited to the Derby distance.

Bob Baffert’s win with Authentic ties him with Ben A. Jones of Calumet Farm as the winningest trainer in Kentucky Derby history, with six victories each.  At age 67, Baffert could very well set the record.  Remarkably, he has won three of the last six Kentucky Derby races and a pair of Triple Crowns.

Pari-mutuel handle for the Kentucky Oaks/ Kentucky Derby cards declined almost 50% from 2019.  It will be informative to see to what extent this decrease, coupled with the loss of revenue from 150,000 or so on-track spectators, weighs on Churchill Downs’ stock on Tuesday and in ensuing days.

The Kentucky governor’s conspicuous absence from Churchill Downs on Derby day may be a first, at least in modern history.  The tradition is for the governor to present the trophy to the winning owner, but 2020 has been anything but a year for tradition.

Kentucky Oaks winner Shedaresthedevil is co-owned by Qatar Racing Ltd. (a subsidiary of Qatar Investment & Project Development Holding Company or QIPCO), which is controlled by four brothers who are members of the ruling family of Qatar.  Launched in 2012, Qatar Racing has become a major player across the globe, racing in Australia, Britain, France Germany, Ireland, New Zealand, and the United States.

Copyright © 2020 Horse Racing Business

DO MODERN-ERA KENTUCKY DERBY WINNERS MEASURE UP HISTORICALLY?

In recent years, much has been written and said about the alleged declining durability of North American racehorses and how Thoroughbreds have increasingly been bred for speed at the expense of stamina.  As one indicator of the American Thoroughbred’s ability to carry speed over 1 ¼ miles, I looked at data from the Kentucky Derby to see how the winners’ times have trended since the Derby distance was changed in 1896 from 1 ½ miles to 1 ¼ miles.  Following is a summary of my calculations condensed mostly into ten-year components.

Average winning time for:

2010-2019.  2:03.92
2001-2009.  2:01.99
1990-2000.  2:02.27
1980-1989.  2:02.46
1970-1979.  2:01.78
1960-1969.  2:01.68
1950-1959.  2:02.54
1940-1949.  2:04.90
1930-1939.  2:04.54
1920-1929.  2:06.70
1910-1919.  2:06.36
1900-1909.  2:09.58
1896-1899.  2:07.81

(From 2001 to the present the Derby was clocked in tenths of seconds. From 1906 through 2000 it was clocked in one-fifth seconds. From 1896 through 1905 the race was clocked in one-fourth seconds.)

As speed figures demonstrate, such factors as track condition and weather affect performance on any given day.  With this in mind, it is still revealing to look at the twists and turns of Kentucky Derby winning times since 1896.  From 1896 through the 1930s, winning times markedly improved…and leveled off in the 1940s. Subsequently, average winning times decreased in the 1950s through the decade of the 1960s and stabilized in the 1970s.  Since then, average winning times have increased slightly. 

It could be that the American Thoroughbred reached its genetic speed ceiling for a 1 ¼ classic race fifty to sixty years ago and the breed has regressed somewhat since…or at least not improved. While no hard conclusions can be drawn with a data set from one classic race, it is plausible that North American foal crops of recent decades are not as suited genetically for the 10-furlong distance as their predecessors from the ’60s, and ’70s.  Another hypothesis is that trainers in the modern era are not as skilled as their forerunners in preparing racehorses for classic distances. These explanations are, of course, not mutually exclusive and both likely contain an element of truth. 

Copyright © 2020 Horse Racing Business