Breeding Futures - By Evan Hammonds

As the results of the presidential election unfolded before the nation Nov. 8, it didn’t matter whether one was tracking the vote tallies on FOX News, CNN, or MSNBC—all spectrums of media pointed to the plunge in the futures market of the New York Stock Exchange as Donald Trump’s victory seemed more likely.

The thought that crossed our mind at the time was that regardless of how the country—and the financial markets—would receive the results, at 10 o’clock the next morning Thoroughbred horsemen would start buying and selling broodmares and weanlings at the second session of Keeneland’s November sale.

The stock market didn’t crash, and, of course, trade heated up in Lexington. By the day’s close the sale company’s November sale Book 1 had rung up more than $100 million in transactions. Election eve saw 88 horses bring more than $54 million at Fasig-Tipton Kentucky’s November sale.

Earlier this year the 2-year-old market fizzled out late in the season and the yearling market didn’t drum up much excitement in the first few venues. Enthusiasm for yearlings did improve during Keeneland’s September sale, with the market labeled “strong,” despite a year-over-year drop in average price.

With that in mind and with the global economy delivering flat-line results why does there appear to be renewed enthusiasm for the breeding stock segment?

Despite what nearly half of the country sees as dark times ahead with a new guy and a new political party holding sway in Washington, most everybody in the horse business sees better days ahead. Optimism is part of the DNA of anybody involved with Thoroughbreds.

There could also be another underlying factor facing the industry over the coming years: lack of product.

Based on conversations with breeders of all shapes and sizes over the last several months, we were somewhat perplexed when The Jockey Club released its Report of Mares Bred a few weeks back. The figures support the notion that the estimated 2016 foal crop would come in around 20,600—the same number as projected for 2015 and only around 150 more foals than the 2014 crop figures to be.

All three of those figures are below the crops of 2013 (21,377), 2012 (21,440), and 2011 (22,644). We are all aware that since the Great Recession of 2007-08, the foal crop has fallen by 40% or so.

The last time the North American Thoroughbred foal crop was below 22,500 for five successive years was 1963-67. Needless to say, a lot has happened to the sport in the last 50 years.

Conventional wisdom suggests the teeter-totter supply and demand of Thoroughbreds would have tilted back toward the side of the breeder a season or two ago, but that hasn’t happened...yet. Continued underproduction will eventually catch up to the market, and we suggest it will come sooner rather than later.

The spigot cannot be turned on and off as quickly in the horse business as it is in other industries. Those looking toward the future should be—and apparently are—bullish and are stocking up for the days ahead. While there are mixed reviews on the 2016 weanling market, we are hearing more about its strength at Keeneland rather than its weakness, which is another sign that bodes well for the yearling market, if not in 2017, then in the coming years. 

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