The market has gained considerable strength since 1992. Despite an increase in supply (39% of the foal crop of 2004 was offered at yearling sales, compared with 26% in 1992), the average price of a yearling sold in North America increased by 141% from 1992 ($22,791) to 2005 ($54,910). Money spent on yearlings went from $347.8 million in 1985, to $180.2 million in 1992, to an all-time high of $553.9 million in 2005. Auction dollars in the juvenile market also were at a highwater mark in 2005 when $190.9 million was spent at 2-year-olds in training sales, including $5.2 million on a son of Tale of the Cat that established a record price for a 2-year-old. That was up from the $56.3 million gross revenues at 2-year-old sales in 1992 and $52.5 million in 1985. The fact the 2005 average for 2-year-olds in training was more than triple the 1992 price ($60,851 vs. $19,010) suggests two things have happened in that sector: 1) the quality of horses at juvenile sales is improving; 2) leading buyers are migrating to these sales. The $16-million Forestry colt is a microcosm of that trend. It's a big risk to invest $425,000 in a yearling you plan to put into training and sell six months later, but that's what big-time pinhooking is all about, and Randy Hartley and Dean De Renzo made that investment with the knowledge that buyers like Coolmore and Sheikh Mohammed view juvenile auctions as a very legitimate source of championship-caliber racehorses and future stallion prospects. And there is nothing irrational about that.
So how do you "get out" on an unraced horse you just bought for $16 million? Well, maiden specials at Keeneland are worth almost $50,000 these days. And I hear purses for the eight Breeders' Cup World Championships races will total $20 million in the next few years. On the downside, the $5-million bonus for winning the Triple Crown is no longer available for lack of a sponsor. And no matter how much is put into the Breeders' Cup program, a horse can only win one of those races a year. With extraordinary luck to go with soundness, speed, heart, and three full racing seasons, the Forestry colt bought by Coolmore and its partners for an all-time record price for a horse sold at public auction could dig nearly halfway out of that $16-million hole while racing. But what the horse could do in its next life--the breeding shed--is why the Coolmore team and a representative of Dubai's Sheikh Mohammed locked horns in the bidding and did the unthinkable--surpass the previous record of $13.1 million established at the 1985 Keeneland July select yearling sale for a half-brother by Nijinsky II to Triple Crown winner Seattle Slew. Dan Liebman has more about the revenue a top-class stallion can generate in this week's Final Turn. When the price paid for valued bloodstock first reached eight digits at Keeneland in July 1983 with the $10.2 million purchase of a Northern Dancer colt by newcomer Sheikh Mohammed, The Blood-Horse's longtime editor Kent Hollingsworth called it a "world record for irrationality." Two years later, when Robert Sangster outbid trainer D. Wayne Lukas and established the $13.1-million record--a price many thought would never be broken--there was additional proof of irrational behavior. Breeder Ralph C. Wilson established an all-time high reserve price at that same sale when he bought back a Northern Dancer colt for $7.5 million after getting a $7.4-million bid from Sheikh Mohammed. The bloodstock market then began a severe decline, the average price of a select sale yearling (Keeneland July and Fasig-Tipton Saratoga) plunging from $416,515 in 1985 to $193,987 in 1992. Overall, yearling averages dropped by nearly one-half over that same period, from $41,311 to $22,791.