1986 Proved to Be Year of the Devalued Horse

The most important racing story of 1986 didn’t happen on the track. It unfolded in sales rings around the country and, most recently, at an auction in a Lexington, Ky., hotel, where the prices of thoroughbreds crashed. The choice of words is no exaggeration. This was 1929 in the horse business.

The prices for yearlings had dropped sharply at all of the summer and fall sales. The prices of mares fell at the important sale at Keeneland in November. But the crucial part of breeding economics is one seldom seen in public-auction figures: stud fees.

The cost of breeding a mare to a stallion touches everybody in the thoroughbred business. It is the major expense for people who breed horses. It also has been a major consideration for people who own top racehorses, because the money stallions can earn at stud often will dwarf what they can win in competition. However, stud fees usually are set in private deals; published figures often are bogus, so it has been hard for outsiders to judge what is happening in this key segment of the market.

Shortly before Christmas, however, the innovative Matchmaker Sales Co. held an auction of 1987 breeding seasons (i.e., the right to breed a mare to a stallion), with bidding conducted by phone and the results posted on a big board in the ballroom of a Lexington hotel. The results could scarcely have been more dramatic. They showed that the era is over when a horse could win a big race such as the Kentucky Derby and automatically be worth $10 million or $20 million.

Consider, for example, the case of Devil’s Bag. The brilliant 2-year-old champion of 1983 had been syndicated for $36 million before he went to stud -- 40 shareholders paid $900,000 each for the right to breed one mare a year to him. With the thoroughbred market soaring at the time, this seemed to be a reasonable price, because Devil’s Bag’s stud fee was set at $200,000 when he started his career as a stallion.

Because his progeny won’t be of racing age until 1988, it is far too soon to guess what kind of a stallion Devil’s Bag will be, but his value has plummeted, nevertheless. In view of the declining market, Claiborne Farm cut his “official” stud fee to $120,000, but at the Matchmaker Sale a mating to Devil’s Bag changed hands for $93,000. By this yardstick, his value has dropped by more than 50 percent since he was syndicated.

Many of the other prices at the sale were far more stunning. A mating to Spectacular Bid sold for $27,500. The well-established sire Tom Rolfe brought $9,600. Lear Fan, a top European runner who went to stud for a $40,000 fee, had mating sessions sell for $10,600. A mating to Key To Content, whose 1986 stud fee had been $20,000, changed hands for $200.

This widespread decline has hurt just about everybody in the business, yet many people think it represents a return to reality rather than a crash.

“My hypothesis,” said Bill Oppenheim, editor of the industry newsletter Racing Update, “is that the game is returning to its 1980 levels before Wall Street discovered the horse business and drove prices ridiculously high.