The proposed introduction of a cap on stallion covers by The Jockey Club in the United States has sparked a significant debate in Australia about whether a similar cap would be beneficial to the thoroughbred industry here, with leading industry figures divided on its merits.
The Jockey Club's position emerged on Friday as it cited the decades-long decline in the thoroughbred foal crop and the narrowing diversity of the gene pool as significant factors in it proposing that stallions be limited to serving 140 mares in a season.
The Jockey Club will be taking considerable consultation before any mandated cap is put in place, but said it would make a final call by the end of the year, which would impact the 2020 breeding season with a phased-in approach taken to cater for new and emerging stallions.
According to the Australian Stud Book, foal crop numbers steadied at around 12,700 in 2016/17, halting a decade-long decline from near 19,000, while the number of active stallions continues to fall, down from over 1000 15 years ago to around 581 in 2016/17.
John Messara believes diversity is the key to future prosperity
The narrowing of the gene pool is something which concerns Arrowfield Stud Chairman John Messara, who is a supporter of stallion caps being introduced in Australia, albeit on a voluntary level across the industry.
"I think it's a sounder base for the industry to have a broader gene pool. It's as simple as that, it’s good for the long-term sustainability of the industry and of the breed," he said.
"I think it's a sounder base for the industry to have a broader gene pool... It’s good for the long-term sustainability of the industry and of the breed." - John Messara
Messara cited a study he asked the Australian Stud Book to conduct a few years ago which revealed that around 50 per cent of horses in Australia had the champion stallion Danehill (USA) within three generations on their pedigree.
He said diversity was key to future prosperity across the board.
"It would also give more stallions a chance to make it, because it would broaden the base quite significantly. More horses would get support, which I think is probably a good thing," he said.
"I would be a great supporter if it came in. I've got two of the most popular horses in the country and I'm not worried. Others may take a different view."
'Protectionism doesn't work'
That different view is evident in the assessment of the diversity of the gene pool. Godolphin Australia's Managing Director Vin Cox said he doesn't see it as a major long-term issue for the Australian industry.
"Nature sorts it out. No-one has unlocked the key as to who is going to be the leading stallion and the leading bloodline in the future. They can come from anywhere," he said.
Vin Cox believes a cap would restrain the industry
Cox said that the benefit of any cap, whether it be voluntary or regulatory, would be outweighed by the restraint it would put on the industry.
"I think it’s a great concept but the practicalities just won't work," he said. "From my point of view, protectionism doesn't work, in any industry, at any level."
"I think it’s a great concept but the practicalities just won't work." - Vin Cox
"People may say they will support it, but when denied access to a stallion because he's quickly fully booked, then there is a good chance they won't support the concept. The reality is that it wouldn't work."
The market approach
This perspective Twin Hills Stud Owner Olly Tait agrees with, he is a supporter of the market correcting any imbalance when it comes to diversity of pedigree.
"It sorts itself out," he said. "There are a lot of Danehill-line stallions standing in Australia at the moment but a stallion like I Am Invincible comes along - an outcross stallion - that evolves and changes things, just as it did before Danehill came along and there were a lot of Star Kingdom stallions standing at stud."
The outcross factor was mentioned by several people TDN AusNZ spoke to as an example of the market working through the gene pool problem, with several of the most popular stallions of recent years not descending from Danehill.
Olly Tait is concerned a cap would impact the economics of the industry
"Over time it has proven breeders adapt and therefore the gene pool adapts. I don’t think the thoroughbred is getting worse, there are improvements all the time," Tait said.
Tait's other major concern with a regulatory approach to change, is the impact it may have on the economics of the industry, which could flow right through the value chain.
"It's a free market economy and the ability for stallions to cover a lot of mares in turn impacts on the value of stallion prospects, which impacts on the value of horses in training and yearlings," he said.
"It's a free market economy and the ability for stallions to cover a lot of mares in turn impacts on the value of stallion prospects." - Olly Tait
"The horse economy has different moving parts and a stallion's ability to earn money is a big driver of the whole industry. If you limit the number of mares a stallion can cover, it would potentially impact on that value."
Messara, however, believes the law of supply and demand would balance out any issues.
"I don’t see the owners of the popular stallions losing too much, because at the end of the day, their fees will go up in accordance with the limited supply," he said.
Solution needs to be researched
A key point of contention in the debate is whether a restricted supply of covers would actually increase the value of an individual service fee. There is also the prospect of a myriad of other impacts from working inside a restricted marketplace, through regulatory intervention or through a volunteer code of practice.
Sebastian Hutch noted that there would need to be significant research before any decision is made
Inglis General Manager Bloodstock Sales Sebastian Hutch says that's why there would need to be significant research and study taken before any caps could be introduced in Australia.
The industry's commercial ecosystem involves complex relationships which sees foal crops determine participation rates and field sizes, which in turn fuels wagering turnover, which then funds prizemoney, which encourages investment at yearling sales, which then of course effects the stallion market.
Any interference to this cycle would have significant impact across the board and it’s not surprising that Inglis would be apprehensive to see any major change made without proper research being conducted.
A complex issue
The complexity of both the regulatory and commercial frameworks of the industry were laid out when Bruce McHugh challenged the legal position against artificial insemination earlier this decade. McHugh lost the case, but to Tartan Fields breeder Hamish Esplin who was involved as a solicitor, it highlighted how difficult regulation of the breeding industry can be.
"It did involve very difficult legal questions of markets, competition and rules of sports, so whether we should have stallion caps is not an easy question to answer by any means," he said.
Hamish Esplin (left) is not a believer in regulation as a solution to the problem, but is adamant behaviour needs to change
In his capacity as a breeder, Esplin doesn’t believe that big books of mares currently served by stallions is to the benefit of the industry.
"My family and I actively avoid trying to go to stallions who cover a big number of mares for several reasons. It's not only for genetic reasons, but for commerciality as well," he said.
"I think what has got lost in the discussion is the effect over-servicing has on the yearling market. That's a huge factor for all of us breeders."
"I think what has got lost in the discussion is the effect over-servicing has on the yearling market." - Hamish Esplin
"If you are turning up with 200 of a stallion's crop every yearling sales season, it not only puts a lot of pressure on those stallions but also smaller stallions to get any exposure to those commercial markets".
"It's a disappointing aspect of current breeding practices."
Esplin is not a believer in regulation as a solution to the problem, but is adamant behaviour needs to change for the betterment of the industry.
"A stallion serving 250 mares is absurd, in my view. I don't care which way you paint it, it’s a money-making exercise. I don't care whether the stallion justifies it or not," Esplin said.
"It's been out of kilter for ten to 20 years and should change. Is regulation the best way to do it? Not in my opinion, but from a philosophical standpoint, something needs to change."
Esplin believes that from a philosophical standpoint, something needs to change
Esplin also pointed to the fundamental difference between the regulatory frameworks in Australia and the United States, in that The Jockey Club is largely comprised of those involved with breeding.
"They’re making a decision by and on behalf of breeders. The involvement of breeders in that process speaks volumes for mine. We don't have that in Australia," he said.
"The Stud Book is owned by Racing Australia and was once owned by the clubs. Racing Australia is finding it very difficult to get a consensus on a huge range of issues. There is a serious lack of involvement at an administrative level, by breeders."
"It should change so breeders can have this discussion, and be involved with the process."
Consensus the only path
In this way, Esplin's position begins to echo Messara. The Arrowfield Chairman believes an industry-wide agreement is the only way to achieve change.
About 15 years' ago, Messara began limiting his Arrowfield stallions to books of 125 but having struck out on his own, he believes it put his own business at a disadvantage.
"I did that at the time and nobody followed, and as a result, I got ravaged in the market because I was serving smaller numbers. All I did was assist my competitors," he said.
"It's something that needs widespread voluntary support. I think it’s a good thing for the industry. I don’t know whether other breeders are willing to be as generous to the industry, or whether they need to take a selfish approach."
And that, it appears, is where the greatest challenge lies.
To submit feedback on the stallion cap concept, email vicky@tdnausnz.com.au
