18th April 2011, 10:14am
Overproduction of Thoroughbred racehorses is result of market failure, study finds
Racehorses Overproduction of Thoroughbred racehorses is an endemic problem caused by market failure, according to new research by a University of Lincoln academic and business consultant published in an economics journal.

Philip Rodgers, lecturer in the Lincoln Business School at the University of Lincoln and Managing Director of Erinshore Economics Limited, applied microeconomic theory to assess why the world market for unbroken yearlings has shown signs of overproduction for a number of years.

His conclusion, that the problem is endemic and the result of market failure, has serious implications for the future of the horseracing industry.

In his paper ‘Overproduction of Yearling Thoroughbred Racehorses’, published in the latest issue of the academic journal ‘Economic Issues’, he explained how the unique qualities of each mare mean that in general the best will be chosen for breeding. As the market tries to satisfy demand, poorer quality mares are added to the breeding stock. Breeders hope that the foals produced by these poorer quality mares will be as profitable as the better quality ones but this is seldom the case owing to progressively weaker pedigrees which ultimately make losses.

“Normally a market limits production to where the expected price would cover the cost of production but in Thoroughbreds it is common to see not even the cost of the stallion fee reached. These losses are supported by the profitable foals but dissipate the profits they make,” said Mr Rodgers. “This self-ordering nature of the market, where the best sell first, means that the problem is endemic. It will appear less obvious in an expanding market and worse in difficult times such as we now have, but it is always there. Market forces are failing to do their job correctly and any solution will need to correct this.”
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