Internal Forces - by Evan Hammonds

Every year there is a certain amount of hand-wringing from sellers and sales companies in anticipation of the coming yearling sales season. Players hone in on stock market charts, commodity prices, and global economic affairs, seeking clues as to how their yearling crop may sell.

The Dow Jones average goes up 200 points one day; then “Brexit” occurs and the market drops 600 points the next. The perceived effects of how Britain’s leaving the European Union will affect the Thoroughbred market will likely spin like pinwheels in the wind between now and Keeneland’s September sale. Our guess is the matter won’t be settled until well after the sale.

What about oil prices? A barrel of oil was selling for $125 in August 2008. By February 2009 it was under $50. From 2011 to July 2014, oil prices hovered above $90 per barrel, and now they’re below $50. Oil prices may have less effect than some think.

In the last 30-plus years the two biggest external factors on the yearling market have been the Tax Reform Act of 1986 and the Great Recession that began in 2008.

The Tax Reform Act took away many of the tax write-offs for owning Thoroughbreds, and subsequently the average of an overheated and speculative top of the yearling market (Keeneland July and Fasig-Tipton Saratoga sale) fell 31.9% from 1984 to 1986. The Great Recession saw a sizable drop in buyers in the market at all levels, but it especially hit the lower end of the market.

Heading into the 2016 season, what are the factors?

Purses have a major impact on yearling prices; look at the market for New York-breds. The average price at the Fasig-Tipton Saratoga preferred sale of New York-breds has advanced from $54,238 in 2011 to $81,739 in 2015.

However, the two biggest components to success in the sales ring are having a broad audience of potential buyers to look at your horse, and, of course, putting the right horse in the ring.

Sellers have to leave audience participation up to the sales company. The job of everyone at Keeneland, Fasig-Tipton, the Ocala Breeders’ Sales Co., Barretts, and any other outfit worth its salt is to get as many potential buyers on the grounds as possible.

As for putting the best product in the ring, that’s up to the breeder and the consignor. Every year the bull’s-eye appears to get smaller. Beyond the very top of the market, demand for 2-year-olds tapered off toward the second half of the season this year.

“The second tier 2-year-olds were noticeably harder to market than they have been in the past,” said Nick de Meric, a major yearling-to-juvenile pinhooker. “Some of our buyers had changed buying formats. The Korean group was buying fewer horses and spending more for certain horses. A lot of our ‘regional’ buyers from the smaller racetracks aren’t thriving. There are fewer owners that want to pay the bills on those kinds of horses.”

As for shopping for yearlings this summer, “For what we do—selling 2-year-olds—there is one prerequisite you can’t get away from,” de Meric continued. “These horses have to show up on the racetrack. Pedigree you can tear up and toss over your shoulder if you can’t run. If you can’t run, nobody wants you. How do we define that? It’s the athlete.

“It’s the individual, the physical,” de Meric said. “We want the young, sexy sires. We want the young rising stars, the proven sires, and all of the above. But if you’ve got to give something up, it’s pedigree over the physical. We want the outstanding athletic types that can outrun their pedigrees and the competition.

“When we get it right, it’s absolutely golden,” de Meric said. “But it’s very easy to give everything back on just a couple of horses.”

Fellow pinhooker James J. Crupi puts it a little more succinctly.

“It’s the same every year,” he said. “The market is as it always is: The good horses sell good; the bad horses sell bad.”

Here’s hoping you have the former in your consignment.

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