Moving Forward: Yearling Sales Prognosis

There is general consensus this will continue to be a buyer's market.

Uncertainty reigns in the Thoroughbred marketplace after more than a year of economic turmoil in this country and a financial crisis last fall that spread around the world. In many markets, prices for broodmares plunged 40% or more, and prices for select 2-year-olds in training dropped 30% or more. The damage to the 2008 yearling market wasn’t as great because most of the horses in that age group already had been sold before the economic downturn reached its worst. However, as the 2009 yearling selling season approaches, the global financial situation continues to remain grim, and nobody is really sure how much the demand for young horses will be impacted. Yearling auction participants discussed their plans and expectations with The Blood-Horse.

Barry Irwin, Team Valor International
“I’m looking forward to the yearling sales because, No. 1, the private market is as unrealistic as ever, and No. 2, I just think that this year and next year, it’s going to be a buyers’ market. A lot of people need to sell horses this year to pay their bills, and I think there are fewer buyers around. You read all this stuff about a horse shortage (at the racetracks). I don’t think there is a horse shortage; I think there is a shortage of owners willing to pay the bills to keep horses in training. So, therefore, there aren’t as many horses in training as there normally are. There’s going to be less competition at the sales, and I just can’t wait. I’m hoping to buy between 15 and 20 yearlings.”

Mark Toothaker, Legacy Bloodstock
“Everyone’s sights have been lowered some by the economic conditions that we’re dealing with. I think it’s going to be challenging. The bull’s-eye is still going to be small. Pinhookers, at least the ones I’ve talked to, are going to be adjusting down. From what I’m hearing, the $25,000-to-$75,000 range is the market level they’re going to be buying in. That’s also the price range where a lot of trainers and end users like to buy, so that part of the market might turn out to be OK.”

Boyd Browning, Fasig-Tipton president
“There’s going to be continued emphasis on quality, and there definitely will be a premium associated with those top horses. We’ve hopefully been through the worst of the economic times. We’ve seen a significant recovery in the stock market from its bottom end earlier this year, so I anticipate that we’ll have a reasonably healthy yearling marketplace in 2009. Will it be at the absolute height that we’ve seen it in previous years? Probably not. But there will still be a fairly broad base of support for yearling sellers who are realistic with their reserves.”

Cot Campbell, Dogwood Stable
“I would like to buy six or eight yearlings between the Fasig-Tipton Kentucky and Saratoga sales and six or eight at the Keeneland September sale. I expect to buy them for 30% less than I usually have to pay for them. The (select) 2-year-old sales were off around 30% to 35%, and I don’t think we’re going to suddenly move from a bear market into a bull market. Unfortunately, the horse business has its own little set of nasty negatives with racetracks closing and going bankrupt and idiotic legislators not understanding the value of the game.”

Kitty Taylor, Warrendale Sales
“I’ve told all my commercial breeding folks that times are still real tough, even though there are starting to be little glimmers of economic hope, and I’m encouraging them to be very realistic as far as their expectations for the Fasig-Tipton July and Saratoga sales and the Keeneland September sale. And I think they will be. The pinhookers will be a diminished factor this year, and that will hurt the yearling market. What I’ve heard from them is that they’ve shopped privately or have retained the weanlings they bought for resale as yearlings or that are out of their own mares (to offer as 2-year-olds).”

Jack Wolf, Starlight Racing Partners
“Our investors over the last two years are all going forward, so we’ll probably end up with a little more money to spend than we had last year. In the past we’ve averaged (spending) about $210,000 per horse. If we could escape with a $160,000 or $170,000 average this year, I would be tickled to death. We’re still going to buy the quality that we’ve bought in the past. I just hope we can buy the same quality that we’ve bought in the past for somewhat lower prices.”

Mike McMahon, Kentucky bloodstock agent
“We’ll shop the Fasig-Tipton (Kentucky and Saratoga select) sales as hard as we usually do, and we’ll shop all the way through the Keeneland September sale like we usually do. We’re always looking for top-notch fillies, and we’ll spend practically the same (as in the past) if not more. Most of our people are coming off positive experiences, so we have a little bit of momentum going into the yearling sales season. I think buyers will be able to get more for their money this year if they’re opportunistic. The bull’s-eye horses are always going to be hard to buy, but if you’re willing to be opportunistic and give up a little bit on the physical (appearance), pedigree, or birth date, you can certainly find horses for reasonable prices. If you can’t find horses to buy right now, you’re really not getting the job done.”

John Stuart, Bluegrass Thoroughbred Services
“My guess is that we’re going to be within 10% of last year in the average price. I think, in general, that the economy is going to be brighter and that there will be surprisingly more money coming out of the woodwork. There is going to be some foreign and regional spending that is going to take place that I’ve heard about. For example, there will be some money from the Far East that wasn’t there before. When people sense there are bargains, they will show up. But I still think 30% of the yearlings won’t find a new home.”

Niall Brennan, Florida pinhooker
“It’s safe to say pinhookers will be buying fewer yearlings just because of the nature of the time that we’re in. They will probably be conservative because they’re afraid to spend too much for horses not knowing what the market they’ll be selling into next spring will be like. Will the economy have recovered? Will people be spending more money (for 2-year-olds)? It’s doubtful. Hopefully, for the country’s sake, we’ll start working our way out of this slump, but you can’t have a lot of confidence that we’ll be selling into a much better market next year.”

Headley Bell, Mill Ridge Sales, Nicoma Bloodstock
“I think the yearling sales will be down 30% to 35% based somewhat on what happened at the sales of 2-year-olds in training this year. There is more confidence in the economy now, and that might make a difference. Keeneland and Fasig-Tipton have made a genuine effort to grow the buyer base, and that’s a very positive thing. It isn’t all desperate.”

Terry Finley, West Point Thoroughbreds
“As the months go by, people are coming to the realization that the horse business isn’t what it was two or three years ago. Prices are more sensible, and end users have a better shot to get a return on their investment at the races. This turbulence in the market isn’t all bad.”

Nick de Meric, Florida pinhooker
“I have to think there will be some opportunities in the yearling marketplace this year. You’ll probably be able to get a little bit more bang for your buck. The problem that a lot of yearling sellers are facing is they will be selling horses that were bred on stud fees that didn’t reflect the changing times. I’m sure there will be a lot of them who will be upside down on prices relative to their expenses. We’re emerging from a season in the 2-year-old market where that was quite common.”

Michael Hernon, Gainesway Farm
“It’s a very different world that we’re operating in. This has been the most significant recession since the crash of Wall Street back in 1929, and there’s been a huge amount of wealth written off the boards around the world. Last November we saw mares bring 50 cents on the dollar, and there was a drop in the 2-year-old market somewhere in the region of 30% this year. Bearing all that in mind, one would have to be cautious and realistic in the yearling market this year. There is some confidence coming back into the American economy, but sellers will still have to be very careful with their reserves. If they don’t sensibly reserve their horses, they most likely will be racing them.”

Duncan Taylor, Taylor Made Sales Agency
“As sellers, we’re probably pretty realistic and realize that this is not going to be the best year for horse sales. We’re hoping for the best and preparing for the worst. Basically, we’re going to have to take what the market will give us. If buyers still have cash and are going to remain in the horse business, I think they’ll get more value than at any other time in the last 10 or 20 years. They’re going to be able to add some real quality to their operations. But I don’t think the horse market is going to just crash. I think you’re going to hear buyers at the end of a sale say that if it was something they liked, they still had to pay a lot. ”

Eddie Woods, Florida pinhooker
“We’ll be approaching the yearling market very tenderly. There will be way more common sense than bravado. For the next little period we’ll have to buy horses we love, not horses we just like. We’ll be more particular, and we’ll aim at the better end of things because that’s what seems to hold up the best. The only danger there is if a lot of people are doing the same thing and that top end gets saturated. Then we’ll be in a bigger hole than we ever thought we could be in. The yearling sellers aren’t going to have any fun.”

John Moynihan, Kentucky bloodstock agent
“With everything that is going on in the world and the economy, I would have to think the yearling market is going to be down considerably. From the sellers’ standpoint, I’m sure people want to see horses bring as much as they can bring. But any time horses are cheaper, it’s better for the buyer because it’s so difficult to buy an unproven horse and get it from that stage to the point where it’s winning races. It’s not easy to earn back a portion of the purchase price.”

Dr. Steve Carr, Centennial Farms
“There will be some softening in the price of the everyday yearling that would be nice to own as a racing prospect. Horses that are slightly better physically and have a pedigree to go along with that still will be fairly expensive, but probably not as expensive. Fortunately, Centennial and the other couple of clients I buy for have remained fairly enthusiastic. We plan to look at a lot of horses and be fairly active.”