Bloodstock Market Dropped at the Top in 2002

Published in the Dec. 21 issue of The Blood-Horse
The most dramatic development in North America's Thoroughbred auction arena in 2002 was the decline at the top of the yearling market, where the horses with the fanciest pedigrees were offered.

The gross revenue at the Keeneland July select yearling sale plunged 32.9% from 2001 while sinking to its lowest point since 1978. Meanwhile, the average and median prices fell 31.4% and 30.2%, respectively.

At Fasig-Tipton's Saratoga select auction, the setbacks for the same categories ranged from 23.4% to 43.5%. And they ranged from 19% to 30.9% during the select portion of Keeneland's September sale.

The number of yearlings sold for seven-figure prices plummeted from 52 last year to 27 this year.

In retrospect, a readjustment at the top of the market was not too much of a shock. After all, the Thoroughbred marketplace is a cyclical business, and upswings do not last forever. From 1995 until 2000, the number of seven-figure yearlings sold increased annually (from two to 57) before falling in 2001. But the size of the setback in 2002 caught just about everyone by surprise.

Many people blamed the sagging economy, the volatile stock market, corporate scandals, and the threats of war and terrorism. They also thought that mare reproductive loss syndrome was an important factor.

But there were other major developments that also had an impact. One major yearling buyer, Prince Ahmed Salman of Saudi Arabia, died in July, and another, Satish Sanan of Padua Stables, cut back on his spending, mentioning the stock market's problems as one reason. Pharmaceutical executive Eugene Melnyk did not buy as many horses because he is breeding most of his own.

In addition, shoppers at the upper end of the market said the 2002 yearling crop lacked quality. Some complained about the weakened sire power in pedigrees, citing the deaths of such great stallions as Mr. Prospector and Seattle Slew. Some said the yearlings just weren't impressive physically.

However, there was some good news for yearling sellers. The median for the Keeneland September sale as a whole was up 20%, a sign of middle market strength. Some regional sales also prospered. For example, the Fasig-Tipton New York-bred preferred sale posted all-time highs for number sold, gross, average, and median. The Del Mar yearling auction had a record average.

The results were mixed for sales of 2-year-olds in training. The combined statistics for the five major juvenile auctions showed increases in gross revenue, average, and median from 2001, with the median soaring by 16.9%. But the buy-back rate rose for the fourth year in a row while reaching an all-time high of 40.2%. The auctions from which those figures were compiled were the Ocala Breeders' Sales Company's February sale in South Florida; Fasig-Tipton Florida's February sale at Calder; Barretts March sale in California; the OBS March sale in Ocala, Fla.; and Keeneland's April sale.

Because of its large size, the Keeneland November breeding stock sale offers the best opportunity to evaluate the health of the broodmare and weanling markets. This year's edition turned in a surprisingly solid performance, with the gross and average rising 4.3% and 9.9%, respectively, from 2001. The median price shot up 40% (another sign of middle market strength) while the buy-back rate dipped from 26% last year to 20.3% this year. The average for broodmares of $96,906 represented an upswing of 3.7%. The average for weanlings of $49,502 was a 14.5% increase. In addition, the number of horses sold for $1 million or more grew from 18 to 20. The broodmare portion of the market was boosted by the millions of dollars spent by two investors, ClassicStar--a breeding and racing venture headed by David Plummer--and Klaus Jacobs' Newsells Park Stud, which is based in England.

MRLS has sharply reduced the number of broodmares and weanlings in the Keeneland November market in recent years, bringing supply more back in line with demand. Prior to the MRLS outbreak, people complained there were too many horses and not enough buyers.

With the exception of the big decline at the top of the yearling market, the Thoroughbred auction business in North America in 2002 was a resilient enterprise, weathering the financial and political storms without too much damage. When asked why they continued to invest in horses, many buyers expressed long-term confidence in the health of the Thoroughbred industry. They also said they expected racing purses to increase because of the expansion of slot machines at racetracks. b