Originally published in the September 4, 2010 issue of The
Blood-Horse magazine. Feel free to share your own thoughts and
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By Evan Hammonds
Once we can find the glass, we’d like to see it as half full heading into Keeneland’s September yearling sale—the largest sale of its kind in the world. The Ocala Breeders’ Sales Co.’s August sale and the Fasig-Tipton New York Preferred sale indicate a few mild upward-trending arrows in the sales arena. In Central Kentucky it has been a long, hot August, and there have been considerable hand-wringing and murmurs from consignors, sellers, and local financial institutions as we approach the major “money” phase of the industry’s crop cycle.
Much of the concern goes back to last year’s September sale where “half” had nothing to do with point of view and everything to do with the final tally after the 14-day auction. Gross receipts in 2009 were $191 million for the 4,360 yearlings sold, or just under half the $399 million that was registered for 4,560 yearlings in 2006.
Still shouldering the burden of stud fees that were set when the glass was nearly full, many breeders are on pins and needles that their sales yearlings of 2010 will bring enough to pay the bills so that they can live another day—another day that promises increased demand from a smaller foal crop. The total number of foals registered each of the last 15 years hovered between 35,000-40,000, yet is pegged at 27,000 for 2011 and perhaps lower still in 2012.
Generally speaking, the national economy is sputtering at best. A business alert from the Wall Street Journal Aug. 27 noted gross domestic product in the United States rose at a seasonally adjusted rate of 1.6% for the second quarter, far less than the 2.4% initially estimated. The national housing market—which along with housing services accounts for about 12-13% of GDP—is trending lower still, according to just about any expert polled. A recent report stated housing values in Central Kentucky could slide another 20%.
While the Thoroughbred industry grapples with its own peculiar problems, the market for other luxury items, particularly art, is on the upswing so far this year. The world’s two leading art auction houses have rebounded in the first half of 2010 after losing as much as half their business the previous year. Sothebys has auctioned $2.2 billion in art in the first half of 2010, more than double a year ago. Christie’s International, with sales of $2.57 billion to date, is up 43% from the previous year. Christie’s sold a Picasso in May for $106.5 million, the highest price ever paid at auction for a work of art.
“We’re not going to lull ourselves into a false sense of security,” Christie’s chief executive, Ed Dolman told the Wall Street Journal in early August, “but the art market does seem to be recovering more quickly than anyone here expected.”
The sale of other luxury goods—cars, jewelry, champagne, pricey accessories—is inching upward, with industry analysts predicting gains of 4% this year.
We’ll take those last facts, and the New York preferred and OBS August figures, as positives…and pour them into the glass.
Most would assume this year’s yearling sale would be a good one for the savvy buyer. With a sparse group at the top also watching their pennies, the froth should clearly be off the top of the market, as it was at the Fasig-Tipton Saratoga sale and at Deauville in France in August. The market also seems thin at the lower end. Many are concerned about what becomes of the September sale from Book Four on.
That pins sellers’ best hopes on the higher-middle segment of the market. One prospective buyer noted that getting a really nice yearling later this month will cost between $200,000-$300,000. While much less than a few years ago, it’s still quite a bit of money. The market at the $100,000-$200,000 level should “firm up nicely.”
Today, that sounds encouraging.