Econ 101 - By Dan Liebman

The day off from selling at the Keeneland September yearling sale provides consignors and buyers alike a chance to catch their breath after the first four days of the auction while preparing for the remaining days of the two-week long sale.

The harsh reality of the severity of the drop in the market had set in (for the first four days, the gross was down 42.5%, the average decreased 31.6%, and the median was off 38.9%), and as consignors showed horses Sept. 18, they universally agreed the law of supply and demand dictated they were in for more of the same.

Oh, not just more of the same for the remainder of the sale, but more of the same for years to come. Markets don’t correct themselves overnight, especially ones like for Thoroughbred horses that take a long time to bring the product to the buyers.

It is tough to admit when the market problem you encounter is caused by none other than yourself, but breeders and consignors recognize they are paying dearly now for years of sending too many mares to the breeding shed. They couldn’t resist temptation to take the money off the table in the short term during a lengthy up market which has caused harm to the breed in the long term.

The economic downturn has certainly exacerbated the current market correction, but in this case, too many horses and too few buyers, as one breeder/consignor said, “is Econ 101 no matter what the product is.”

As they discussed the market conditions, and the situations that caused them, on this day of non-selling, most breeders were not singing the blues, but rather offering solutions for the future. Breeders are a resilient group, and as business people, are good thinkers about why things happen and what can be done to change them. That they were not hanging their collective heads and preaching gloom and doom is a positive sign. More than anything else, they appear to be looking for leadership as they face the recovery period in their industry.

One breeder/consignor, who also stands stallions, wants The Jockey Club to limit the size of stallion books to 110 mares, starting with next breeding season. “The breed registry is responsible for the breed, plain and simple,” he said. “They have the power to do this; this action is what is best for the overall health of the breed.”

Asked about the inevitability of a lawsuit claiming restraint of trade, this horseman was even more pointed in his remarks. “They should anticipate it and budget for it. They have regulations now to ensure the integrity of the breed and the sustainability of the breed. They are the only organization that can do this. They have the power to do what is right.”

A second-generation horseman, whose family breeds and consigns horses and stands stallions, is looking to the American Graded Stakes Committee for a policy he thinks will help the industry.

“Let’s make Saturday the big day at the races,” he said. “The (American) Graded Stakes Committee can inform tracks that if they get a race graded, on that card they cannot run any state-bred races or any claiming races. That card has to consist of some of the best races the track offers. Fans will understand that on Saturday, racing is offering its best product.”

A third-generation horseman, again a breeder, consignor, and person who stands stallions, wants to see far fewer racing dates, and wants the NTRA to lead the way in working with racetracks on a fair and equitable schedule.
“No one wants to watch a baseball game the day after the World Series ends,” he said.

While a few months off is certainly good for the horses, it also could mean fatter purses, which would help incentivize new owners to enter the business. Attracting new owners should be the goal of everyone in the industry.

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