Partial Equilibrium - by Evan Hammonds

(Originally published in the December 22, 2012 issue of The Blood-Horse magazine. Feel free to share your own thoughts and opinions at the bottom of the column.)

By Evan Hammonds - @BH_EHammonds on Twitter

By Evan Hammonds It’s getting harder and harder these days to see the future in the crystal ball. With tax hikes looming—but who knows how much and when?—and proposed federal budget cuts of various shapes and sizes being bandied about by our elected leaders in Washington, what’s a horseman to do?

Well, here’s what little we do know: All things considered, 2012 was a pretty good year in the Thoroughbred auction arena. Crawling from the wreckage that began in 2008—and hopefully hit bottom in 2010—about $100 million more in sales transactions took place this year than when the market hit the skids in 2010. That year $617,283,616 changed hands at Thoroughbred sales while 2012’s receipts weigh in at $717,091,003. And commercial breeders saw some of their costs—at least in the form of stud fees—continue to decline.

Moving forward, those in the know are hopeful the market will continue to move in a positive direction. While nobody is expecting explosive growth or outrageous bidding wars to be taking place, leading sales company officials are looking for skies to continue to brighten.

“We have seen a stabilization of the market and some forward progress as well,” said Tom Ventura, president of the Ocala Breeders’ Sales Co. “The purses in New York have risen significantly and the market is reflecting that and it will continue to be a factor.”

“The further we get away from 2008, the better for everybody involved,” said Geoffrey Russell, director of sales for Keeneland.

“We’ll look for continued improvement at modest, increased levels,” said Boyd Browning, president of Fasig-Tipton. His sales company had a solid year with boutique yearling sales in Kentucky and New York, brisk trade for New York-bred yearlings at Saratoga Springs in August, and a November breeding stock sale highlighted by the $10 million sale of 2011 Horse of the Year Havre de Grace.

“I don’t think we’ll see a dramatic move in the marketplace,” Browning continued. “The slope of the line isn’t going to be steep. Hopefully, the United States and the world’s economy will stabilize and continue to show signs of improvement.”

The auction market got a big boost in 2011 with the record-setting dispersal of the late Edward P. Evans’ bloodstock, which moved some $70 million worth of top-level Thoroughbreds as savvy investors around the globe sought to upgrade. While the Fares Farm dispersal at Keeneland’s upcoming January mixed sale won’t nearly have the same impact, it should kick-start the 2013 selling season.

“January is going to be great,” said Walt Robertson, vice president of sales for Keeneland. “The dispersal’s not going to hurt. We had just under 1,600 horses last year, and we’ve got 2,000 this year. We have a decent amount of pretty good mares other than the ones from Fares.”

Also, the marketplace has been shored up by the reduced foal crop that has been shrinking since peaking at around 38,000 in 2005 and 2006. The sales yearling for 2013 will come from an estimated foal crop of 25,500, according to The Jockey Club.

 “Supply and demand has been our enemy, and in both this year and the past year it was our friend,” said Robertson. “And it will continue to be our friend for a few years providing we don’t have any major hiccups with the economy.”

Another momentum mover will be the 2-year-old market. A hit-or-miss market for sure, the average for a sales juvenile did rise nearly 20% at the select sales last year. Also, the 2012 Triple Crown was swept by juvenile sales graduates I’ll Have Another and Union Rags. Their success should make a valuable marketing tool.

“Whenever you get high-profile horses like that to brag about, it certainly helps,” Ventura said. “Even bigger picture is the performance in general of the 2-year-old sales graduates. We had two Breeders’ Cup winners and a good second with Executiveprivilege in the Grey Goose Breeders’ Cup Juvenile Fillies (gr. I).”

“The perception of the 2-year-old sales has changed over the last 20 years,” Browning said. “It’s more legitimate now. Nowadays most significant buyers, if they’re thinking about winning Triple Crown races, better dang sure consider participating in the 2-year-old sales.”

And hopefully that participation will carry through the marketplace as 2013 unfolds. 

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