Anne M. Eberhardt

Keeneland Sale Ends With Major Declines

Overproduction, high production costs, and tight credit cited for declines.

The marathon Keeneland September yearling sale drew to a close Sept. 28 with some of the biggest declines in key statistical categories in recent history as the gross receipts fell 41.5%, the average was down 33.2%, and the median was off 40.5% for the 14 sessions.

Keeneland reported 3,159 yearlings were sold this year for a total of $191,859,200, compared with a 2008 gross of $326,863,500 when 3,459 horses changed hands. This year’s cumulative average was $60,734, compared with $94,579 last year, and the 2009 median was $22,000, compared with $40,000 in 2008. This year, 27.5% of the horses through the ring did not sell, compared with a reserve not attained rate of 24.8% last year. The sale gross and average were the lowest since 1999 and the median was the lowest since 1996.

Geoffrey Russell, the Keeneland sales director, said the downturns are a market correction resulting from overproduction, production costs that have been at their highest levels in history, and the effects of the worldwide financial crisis.

"The buyers were here, but they weren’t able to spend because they didn’t have credit (lines at banks)," Russell said. "I don’t think anyone was surprised that we were down, but I don’t think anyone thought it would be this much. But no one could have imagined that we were going to have an international financial calamity.

"The Thoroughbred industry, like all markets, has been deeply impacted by the global financial meltdown which is unlike anything we’ve seen before," Russell said. "The last two weeks have been very challenging for everyone. "The good news is that even though buyers were highly selective, bidding during the sale remained competitive and quality yearlings were difficult to buy."

While the consignors and breeders who took huge losses at the sale may beg to differ, Russell said there were some silver linings in the 2009 auction.

First, he said that recent forecasts of fewer mares being bred and smaller foal crops being produced indicate the breeding industry is taking steps to curtail the recent runup in production. "That foal production is down indicates the industry has taken steps to adjust to overproduction," Russell said, noting that Keeneland officials had been encouraging the trend toward restraint for several years.

Russell said another positive at the sale was increased activity from international buyers, especially those from "emerging markets" such as Russia.

"The good news is the international program is working," Russell said of the program directed by Keeneland sales associate Chauncey Morris. "The Russian story is a good example. When they first started coming, the Russian buyers would come later in the sale. Now, as they have gotten a taste for better horses and the horses they have bought here have done well over there, they are coming in earlier and buying better horses."

Keeneland’s reported the sale attracted buyers from more than 30 countries.

The September sale also ushered in Keeneland’s new Kee-Bid service, which allowed buyers to submit a bid via on horses that did not reach their reserve. There were 26 such transactions during the sale.

"We were delighted with the introduction of Kee-Bid, which proved very popular with both consignors and buyers," Russell said. "Kee-Bid held international appeal as we had bids from all over North America, South America and Europe."

While his job is to sell horses, Russell said he believes some elements of the industry have lost focus of the main component within the industry: racing. Selling horses for large sums is important to any breeder and to Keeneland, Russell said, but there must be a correlation between sales and the ability of owners to have a chance at profitability on the track.

"We have to get the focus back to racing," Russell said, noting that attendance and handle at U.S. tracks are in a tailspin that must be reversed for racing and sales to prosper. "This (the sales) is not the end-all. Racing is the most important part of this. The fact you sell a yearling here is great. But if he doesn’t have a chance to get to the races, it isn’t so great. It is something the industry needs to address."

During the concluding session, Keeneland reported 175 yearlings were sold Sept. 28 for a total of $985,500 and an average price of $5,631. The session median price was $3,000. During the comparable session a year ago, 211 yearlings grossed $1,585,700, averaged $7,515, and the session median was $4,500. The RNA rate was 25.8%, compared with 21.6% last year.

The top price of $35,000 was paid by Diamond G Ranch for Hip No. 4904, a Forest Grove filly consigned by the Blake Agency.

The number of buyers at the Lexington sale pavilion was sparse, but they seemed to be as active as those who bought the highest price horses during the first week. But those on hand, especially consignors, had no delusions about what was going on.

"It’s rough," acknowledged Pat Costello of Paramount Sales. "There are people letting them go without (setting) reserve. (They are) just cutting their losses."

For some horses, however, there continued to be spirited competition. Citing Hip No. 4924 shortly after it was sold for $23,000, one of the day’s highest prices, Costello said the Bernstein colt had undergone two endoscopic examinations requested by potential buyers.

Eric Hamelback, general manager of Adena Springs, said he was encouraged by the number of people still at the sale on the final day and that trade had been brisk.

"The individuals we have going through today have no reserve or a very low reserve. We still need to move horses," he said. "We have a lot of horses and not all of them are correct (in conformation). But the truth is that not all of the best horses are correct. I wish people would start learning that."

Hamelback said a lot of potential buyers pass up potentially good horses because the X-rays available for inspection in the Keeneland repository show some faults.

With the sale now history, Russell said Keeneland will review the results and feedback from "our constituents" before deciding whether to undertake any format changes for the 2010 fall sale.