Craig Bandoroff, Denali Stud

Craig Bandoroff, Denali Stud

Anne M. Eberhardt

Market Chatter: What's Happening at Keeneland

Buyers and consignors discuss the market during the January sale.

Lack of quality stock in the Keeneland January horses of all ages sale in Lexington contributed to an overall decline in prices during the first three days, according to buyers and consignors. Following are some of their comments:

Craig Bandoroff, Denali Stud: “I think (Keeneland director of sales) Geoffrey Russell says it every time you all (reporters) talk to him. You can’t compare breeding stock sales because the quality changes so much from year to year. It was a very weak catalog on the top end, so I think it’s hard to compare to previous years. But I think when they led something in with quality, that’s where people wanted to be and that’s the way this market has always been. Especially right now, with the (tight) credit situation and guys not being able to get money, it takes the top (richest) guys to be able to play. And the top guys, usually they want quality.”

Tommy Eastham, Legacy Bloodstock: “The sale has been positive and encouraging on the quality horses. The horses that are lower end horses or ones of less quality have really been a war (to get sold). Mares that we’ve had that we could make a case for and babies that have quality – that are good and correct and vet good – have sold well. But it’s just getting so expensive to own horses -- and keep them and raise them --  that the risk tolerance has been reduced for the horses that have a limited upside. People don’t want to take a risk of putting in $20,000 and getting out $30,000. They want to be able to put in $50,000 and have an upside of $250,000.

“We are seeing a drop in population. We are losing some people who aren’t here buying. But overall the barn activity has been good. There still are some people who are looking around and asking questions and things along that line. Have they gotten aggressive yet? No. Have they been really cautious? Yes. It’s a very cautious market. That’s about where it is right now.”

Case Clay, Three Chimneys Sales: “When you look at the catalog, about 75% of the good stuff was out. There were still a couple of gems in there that sold well. But with 75% of the good stuff being scratched, it is what it is, which is not that great. It’s a pretty typical January sale to me.

“I think it (the downturn in business) is (because of) a lack of quality. January is kind of a time (to sell) if you’ve got a real gem or if you just want to cull and downsize your broodmare band. Obviously, it’s no fault of Keeneland’s. It’s just a (typical) January sale. It seems to be a cull sale or a really nice mare sale with not a lot in between.

“We’re getting horses moved because  we had some decent stuff in on Monday (Jan. 11) and today it’s mainly because of not very aggressive reserves. The main way to get them moved is to not be that aggressive on reserves.

“In general, we feel like we’ve hit the bottom, and we may drag along the bottom for a little while. But our toes are touching the bottom and we don’t feel like we’re going to go that much deeper. It doesn’t feel quite as scary as last January. Last January, people were panicking, and people don’t seem to be panicking right now. Stud fees have been adjusted downward. The (Keeneland) September (yearling) sale still may not be that great because of (high) 2008 stud fees, but next year we’ll  start to get back in alignment (with breeding costs and yearling prices). Hopefully, we see a rise next year.”

Chad Johnson, Florida-based weanling-to-yearling pinhooker: “The bulls-eye in the market has gotten so much tighter. You’ve really got to be careful and very selective with the horses that you purchase because in the end, the bull’s-eye will be tighter yet again. That’s why I think right now the market is down whatever percentage they say that it’s down. But I think the good ones (yearlings) are up 20%. If you walk in there and really want to buy a good one, you’ll have to pay more than you expect. If you appraise him at $75,000, you better be ready to give $100,000 to $125,000.

“There are two (really good yearlings) a day, maybe three a day that really fit the profile. It’s narrowed down pretty tight. Sires play a big part right now. For years, first-year sires were the flavor of the month. Now, the end users are a little more restrictive; they like more proven types of sires, so you have to take that into consideration. The proven sires, the good ones (yearlings by them) are really hard to buy. Horses that worked three years ago or four years ago, will not work now. They may work if someone else buys them and everything goes right. But to keep the averages in your favor, you’ve got to really narrow your field way down.

“There were less good horses here I thought, overall less good individuals. I didn’t see a huge overall deterioration of the market by any means. It was just overall the lower quality of the horses. And people are just tighter (with their choices and money). The last few years, you would come in here and have six or seven horses on your short list; this year you’re coming in here and knocking that down to two.

“It (the market) will be the same way when we go back (to sell). There will be plenty of money for the right horses, but the bull’s-eye is going to keep getting tighter. A lot of the people now who control a lot of the money are good horsemen, they know what they’re doing, and they’re keying on the same horses.

“I don’t think it (yearling market) is going to get worse (statistically). I don’t know if it’s going to get better, but I don’t think it’s going to get any worse. It’s kind of where it’s going to be now. The people who were going to get out, are out, and the people who were going to stay in, are in. I don’t think that’s going to change much right now.”

Carrie Brogden, Select Sales: “The only strong sectors of the market are young mares with bulletproof pedigrees and great physicals and the exceptional weanlings that vet. How much of a premium the top foals are bringing has been surprising. You either have it, it, it, or you have nothing.

“Anything with quality brings plenty of money. There was a young Dixie Union mare in foal to Elusive Quality. I have a client who is looking for a nice mare to upgrade, and I told him to come here and look at her. I said, ‘She’ll probably bring $75,000 to $85,000,’ and she brought $135,000 because there were 10 people duking it out for her.

“Yes, absolutely, I do think we’ve hit bottom, and the reason I say that is because of supply and demand. People are not going to breed these (low quality) horses anymore. You look through the entirety of book three (of the January sale catalog) and the majority of those horses shouldn’t have been conceived (based on this market). We still have too many horses. We need to have four books in September (for the Keeneland yearling sale). Once it reaches five books in September, it (the market) is going to be more stable.

“Obviously, we have a lot of other problems and issues, which we are working on. The good thing is, right now, I feel like the industry is having some meeting and working on trying to make a difference. I am optimistic things are going to move forward. I think rebuilding is a wonderful time. I have the sense that people are starting to cooperate. The leaders in this industry are realizing now that they have to cooperate or face extinction. They’ve accepted that reality. I think in the end, there might be some big changes coming, hopefully.”

Meg Levy, Bluewater Sales: “I’m actually pretty optimistic about what’s happening here right now. Yesterday (Jan. 12, when horses sold for $950,000 and $1,085,000) looked good to me. We sold on Monday (Jan. 11), and we got good money for the horses that were commercial. It was either one or the other. We were either culling or we were trying to get some cash flow for people, and I think we were successful in both areas.

“It’s difficult, but we’re going to live to see another day. Yesterday (Jan. 12), I think we saw just how resilient this business can be with those top mares. I thought a couple of them brought considerably over what they might have (last year). The buyers galvanized on those few really special ones.

“I do think there is (a lack of quality) overall. Flipping through the catalog, I thought it was light for a January catalog in my experience in the last 10 or 15 years. Last year’s catalog was stronger, definitely. But yearlings sold well and any mare that we had that had a little bit of quality sold just fine.”

Kerry Cauthen, Four Star Sales: “I think it’s a typical January sale where it’s difficult to correlate the results to the status of the overall marketplace. It would be faulty analysis to look at this sale and try to draw overall market conclusions from it because the quality in the January market varies from year to year. Overall, there is a lot of stock in this sale that people are trying to move on to other homes.

“Quality is bringing money in this sale. We have people with mares and even foals, but particularly mares, in the lower end of the marketplace that would have probably sold better in November when there were quite a few regional market players, who may have filled their orders by now or just didn’t want to come here in the cold. There are fewer buyers at the different class levels throughout (in January), and they are not always having to compete head-to-head and therefore, they’re getting a little better price.

“There is no bottom for certain segments of the market, and that’s the lowest end of our marketplace. We still need to have those horses exit our breeding pool. But I think we are at the bottom of the market for what will remain after the fallout is completed. November was a great sale. We sold mares with some substance in their pedigrees and carrying their third, fourth, or maybe even fifth foal by a decent sire, a $40,000 or $50,000 sire, for $250,000 or $350,000. People were starting to gravitate toward the quality that will still be around when the fallout is complete.

“What upsets markets is when people don’t understand where the market is going. Once the market has established a set of ground rules, it starts to create confidence. People bring their money off the sidelines and back into the business and say, ‘OK this market has stabilized. I know that with this mare plus a $25,000 stallion, their offspring will be worth ‘X’ amount.’ I feel based on what I’ve seen from what goes through my consignment that we are at a stabilization point, but there will still be horses that have to get out of the system. I think there will be a segment of the yearlings that are still going to be tough sells, so we are going to have some rough sales ahead. But much of the rest of the market has stabilized.”