Yearling Market 2011: A Fragile Recovery

The yearling market in 2010 showed signs of
stabilization. The average price for horses sold in North America at public
auction declined less than 1% from the previous year and the median price remained
the same.

In 2011, a recovery appears to be under way.
Numerous positive results have been reported at various auctions. Most
important of all, the yearling market's barometer - the huge Keeneland
September sale - recorded upswings in its gross revenue, average, and median. Breeders
are earning more profits from the yearlings they are offering.

But this recovery is a fragile one and there are
threats to its continuation. The American economy continues to struggle. One
day, it seems to be getting better. The next day, alarms are being sounded that
a double-dip recession imminent. Europe's debt problems still haven't been
resolved to everyone's satisfaction. The domestic job market is dismal.

The Thoroughbred racing industry, meanwhile, faces
its own considerable challenges. Purses and wagering continue to fall. There is
no central authority for the sport and little hope of developing one. The
debate over race-day medication still is raging, and most sports fans could
care less about what is happening at the nation's tracks. In addition to a lack
of fans, there is a lack of people who want to own racehorses.

Many horsemen are enthusiastic about the prospects
for increased purses in New York because of a video-lottery-terminal casino at
Aqueduct that is scheduled to open later this year. But that rising tide won't
lift all boats. Kentucky, the cradle of America's Thoroughbred industry, is
lagging way behind in the racing end of the business, and its legislature doesn't
seem inclined to help.

On a more positive note, the commercial marketplace,
out of a dire necessity, has dealt with some important issues. Non-commercial
horses have been taken out of production, so there are smaller foal crops,
putting the supply back more in line with demand. Stud fees have fallen,
decreasing breeders' costs.

For at least the next several sale cycles there will
be fewer horses offered that were less expensive to produce. That gives
breeders some wiggle room, if the market recovery stalls. But they don't have
enough resources to hang on very long without some help from the economy, racing's
leaders, and politicians.  

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