Anne M. Eberhardt

Outlook Positive for Yearling Selling Season

The market's first major test will the Fasig-Tipton Kentucky auction July 10.

With the American economy limping along, a debt crisis in Europe, and racing struggling over medication reform and other issues, conditions don’t seem ideal for the yearling selling season. But auction officials, consignors, and buyers have expressed optimism that the upswing will continue following 2011's rebound.

"There’s still some sorting out to do, but I believe it (the outlook) is more positive than not," said Headley Bell of Mill Ridge Farm and Nicoma Bloodstock.

The market will get its first major test during the Fasig-Tipton Kentucky select yearling sale July 10 in Lexington. Following are some of the reasons why Bell and a lot of other people are expecting news to be good about the performance of auctions involving young horses:

Supply is down. In 2008, when America’s Great Recession was getting started, 35,163 foals were born in North America. By 2011, when this season’s yearlings came into the world, the size of the crop had fallen 23.2% to an estimated 27,000. This, according to horsemen, will help put the number of yearlings offered at public auction in 2012 more in line with demand.

"People realize that there are going to be less horses to choose from, so the battle to try to get some of the best ones is going to be full-out from the Fasig-Tipton July sale to the end of Keeneland's September sale and into October," said Mark Taylor of Taylor Made Sales Agency.

The health of racing is improving. Based on statistics released recently by Equibase, wagering on North American races was up 2.4% from 2011 through June and purses were up 8.3%. In New York, revenues from video lottery terminals at a casino that opened last year at Aqueduct have increased purses in that state significantly.

"The purses for these maiden races they’re going to be running in New York are just incredible, and I do think that could pull some people of the woodwork who have been dormant for 10 or 15 years, but still love racing," Taylor said. "It kind of picks their heads up a little bit because they can say, 'You know what, the horse I buy doesn’t have to be a grade I winner for me to get my money back and have some fun.'"

Tax benefits are still enticing. A buyer can deduct 50% of the cost of a yearling acquired in 2012. Even though that’s down from 100% previously, it’s still a considerable amount.

"When I mention that to any guys making a lot of money, they pay attention," said John Stuart of Bluegrass Thoroughbred Services.

I’ll Have Another’s Triple Crown bid built excitement. Even though the colt failed to complete the historic sweep, his victories in the Kentucky Derby Presented By Yum! Brands (gr. I) and Preakness (gr. I) were an inspiration to buyers of young horses. The son of Flower Alley sold for the modest prices of $11,000 as a yearling and $35,000 as a 2-year-old in training.

"It shows that a good horse can come from anywhere and it gives anyone who buys a yearling hope," said Fred Hertrich, a commercial breeder from Delaware. "The people with the most money don’t always have the best horse in a race."