Market Gamble - by Dan Liebman

Handicapping is an integral part of the Thoroughbred game, a cerebral exercise that involves time and patience, skill and luck, risk-taking and rewards. But the ultimate handicapping is not done by those who look at exactas and Pick Threes, but by the owners and breeders who realize how high the odds really are.

Commodity brokers know how hard it is to predict whether a market will be higher or lower in the future—from petroleum to pork bellies to corn or soybeans. But they have nothing on a Thoroughbred breeder or owner.

When a mating is planned, a breeder has no real idea if the sire he has chosen will be in or out of favor at the time he will sell the resultant foal as a yearling. This is one of the reasons more and more foals have been sold as weanlings in recent years, presenting an opportunity to take some cash off the table sooner rather than later.

In 2009, however, there figures to be both more weanlings and yearlings to be offered than ever, for several reasons. For one, the 2008 Keeneland November sale plummeted, causing many to scratch mares and foals. In numerous cases, as the sale dragged on, it seemed as though there were two types of consignors—those whose debts forced them to sell, and those who were not in such dire straits and withdrew their horses hoping things would be different next fall. Because of those decisions, many scratched weanlings will be offered as yearlings, and many in-foal mares will have their offspring consigned as weanlings.

The Thoroughbred auction market followed the general economy closely in 2008, dropping more as the year progressed. The amount spent in North America on juveniles in training was $182,671,515, down 5.4% from the 2007 total of $193,075,244. By the time summer and early fall arrived, global financial markets were sliding, and buyers spent $468,283,587 on yearlings, a decrease of 16.7% from $561,846,659 a year before. Then the bottom dropped out when the fall breeding stock sales were going on, with the amount spent on weanlings falling 34.2%, from $86,770,649 to $57,066,068 and the total paid for broodmares dropping 30.5%, from $370,099,831 to $257,153,903.

For all sales in North America in 2008, buyers spent $965,175,073, the first time in the past five years that number has not reached $1 billion. The dollars that flowed to owners and breeders at public auctions was $246,617,310 less than the $1,211,792,383 spent in 2007, a sharp decrease of 20.4%.

With nearly a quarter of a billion dollars less in gross receipts, Thoroughbred breeders find themselves facing tough times as the calendar flips to 2009. Though many stud fees for the coming year have been lowered, breeders who sold yearlings in 2008 did so based on high 2006 stud fees, seasons paid for in 2007.

The trend, by the way, was not seen just in North America, but around the globe. While the Central Kentucky auction house Keeneland, since it offers more horses than anyone else, felt the biggest hit, English-based auction company Tattersalls saw its gross decline from 244,835,900 guineas to 167,555,450 guineas, a 32% drop.

As we appoach the new year, pinhookers prepping 2-year-olds for sale have to be worried, considering when they purchased yearlings in July, August, and September the Thoroughbred market was still fairly healthy. Now, the same cannot be said as they prepare to send those horses through auction rings next February, March, and April.

If pinhookers, who have become such an integral part of the auction market, realize few gains in the spring, they obviously will have less to pay for yearlings next summer and fall.

By nature, Thoroughbred breeders have two important things in common—a love of the horse and an optimistic nature. Those qualities become even more important in such challenging times.

7 Comments

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NEVERKICKYOURDOG

FOR THE MOST PART, I AGREE WITH YOUR BASIC PREMISE BUT I HAVE TO TAKE ISSUE WITH YOUR USING THE WORD "ULTIMATE."

IN NORTH AMERICA, RACING IS DEPENDENT ON PURSES...PURSES DEPENDENT ON HANDLE...HANDLE DEPENDENT UPON CHURN...CHURN DEPENDENT UPON CASHING TICKETS.

IN ADDITION TO ATTRACTING NEW FANS AND PLAYERS...AND KEEPING THEM...KNOWLEDGE IS POWER AND KNOWLEDGE LEADS TO PASSION FOR RACING.

THERE ARE ALOT OF INFORMATIVE SOURCES,e.g., THE BLOODHORSE, BUT ONE WILL HAVE TO LEARN TO READ THE DAILY RACING FORM TO REALLY LEARN AND LOVE THE GAME.  THE "SHEETS" ARE MEANINGLESS.

23 Dec 2008 1:25 PM
KYTBREDS

Having been involved in the Thoroughbred industry for some 30 years, I remember when we bred a horse to race. Then, somewhere along the way, we began to breed for the commercial market. As soon as a horse showed he could run a little, he was yanked from the entry box and entered into the Breeding Shed Stakes(G1). Racing became little more than a marketing tool for stallions and the sales. The John Henrys, Foregos and Kelsos were nowhere to be found. There were no more racing heroes- little to keep the fans' interest. The last rivalry in racing was Sunday Silence & Easy Goer and that was 20 years ago. There's been little to keep the fans interested in the sport. The industry needed this wake up call as a reminder why those of us who truly love the sport suffer for it- because we love horseracing. We needs our four-legged heroes on the oval, not en mass in the breeding shed. Isn't racing what it's supposed to be all about anyway?

23 Dec 2008 8:12 PM
STEVE STONE

Hello Dan..Another insightful and compelleing op-ed piece as always..As you have discussed here in previously authored columns..thoroughbred breeding is unquestionably an major business..however no different than other businesses..however with disimilar dynamics to an extent. And like any other business..the way breeders and owners conduct their breeding business today is diametrically different than the way it was conducted years ago..even an year ago or so..The playing field has changed as has the business model. Again this is true in all businesses..You now have overproduction..excess of product and an diminishing number of end-users to acquire the product...Major problem..Toyota just announced that after 70 years of being in the auto business they are faced with an major economic crisis..the most acute in their august history...no market for their cars..It has dried up...What to do when them now?..They will be rachetting down their overall 2009 production lines appreciably. The thoroughbred breeding business is no different. Obviously no one could have foreseen this meltdown coming..and if they did..even to this extent ...and as you noted..thoroughbred breeders have two common vital components....an love for the horse and being optimistic in nature...both essential ingredients..however in  todays marketplace you now have to weave in being prudent and realistic in your overall business plan in order to succeed..The new year will dawn shortly with an plethora of vexing complexities confronting both owners and breeders alike..as well as the industry itself as an whole..2009 will undoubtedly be the most challenging one in the sports/business long and colorful history..Hopefully prudent industry leaders in every aspect of the game will emerge with an sensible and judicious  blueprint for its future..Thank you always for your kind window and an happy and healty and successful New Year to everyone..Best wishes always..Steve Stone..East Hanover..New Jersey...

24 Dec 2008 2:05 PM
Coco Fernandez - Farrier, Owner

Hey Dan, I'm a bit disappointed with the blood-horse news media right now.I wrote to you because I didn't know where else to go.

Barbaro ! Eight bells ! big news !

Our own Jockey Sam Thompson Jr. Got critical injured dec.20 in Los Alamitos race track and died yesterday on x-mas day. Not a word on him in this web ! Why ????????

27 Dec 2008 1:11 AM
Blood-Horse Staff

The story about Sam Thompson's death can be found here.

27 Dec 2008 4:09 PM
C Bea

Could it be time to change a few rules of the game? The fact is the business model between the horsemen, distribution partners (ADW/OTB) and the tracks is out of whack. We're breeding more and more for the commercial market than the racetrack (undermining the soundness and value of our breed) and we're losing fans due a less exciting and less marketable product.

How about modifying when a horse can be retired to the breeding shed? Horses must be at least 4 (I could be okay with 5) in order to be bred.

If this were the case it would ease the pressure on early 2 year old racing which may keep some horses more sound (don't get me wrong I'm not against running a horse at 2 just not early in the year). We would have more 3 and 4 year old rivalries since these horses would only have value at that age as race horses. And we would positively impact field size as there would be more available "racing" stock.

By establishing a "retirement" age requirement, a simple rule change, we could positively impact a number of areas of need in our Industry.

28 Dec 2008 6:11 PM
Another Tired Racing Fan

C Bea has it right.

Make the Derby, Triple Crown and BC eligible for horses sired by 5-year-olds and up.  That will take the value out of 4-year-old sires.  

There is absolutely NO reason not do do this but GREED of the BIG BREEDERS.  The tracks (CD, Pim, Bel) could do this on their own but they haven't the guts to stand up to the wealthy breeders.

31 Dec 2008 4:33 PM

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