2000 Auction Review: Mixed Messages

Published in Dec. 30 issue of The Blood-Horse
Based on gross revenue, the rally in Thoroughbred bloodstock prices in North America stretched to its eighth year in 2000. The total amount generated by the four main categories of horses sold at public auction -- yearlings, 2-year-olds, weanlings, and broodmares -- continued its record-breaking climb, while rising above the $1-billion mark for the first time in history.

The number of horses sold for prices of $1 million or more also soared to a new high. For the four main categories combined, 109 horses (57 yearlings, four weanlings, five juveniles, and 43 broodmares) were hammered down for seven-figure prices in 2000, compared to 85 in 1999. In addition, one other horse sold in 2000 for above $1 million that did not fall into those classifications. Graded stakes winner David Copperfield, a 3-year-old colt, brought $2.6 million during the dispersal of the late Marshall Naify's 505 Farms stock at Barretts in July.

At first glance, 2000 looked like another banner year in an era of prosperity. But upon closer examination, there was compelling evidence that the growth in the Thoroughbred marketplace, as a whole, was slowing down and that certain parts of the auction business had already passed their peaks.

In 1999, new standards were set for gross, average price, and median price in each of the four categories of auction horses. In 2000, there were no such across-the-board upswings. Every classification experienced a setback in at least one of those statistics. Particularly vulnerable was the median, which fell by 4.2% for yearlings, 33.3% for both weanlings and broodmares, and stayed the same as the previous year's comparable figure for 2-year-olds.

Additionally, the gross revenue for the four categories combined rose by just 8.3%, from $987,455,100 in 1999 to $1,069,193,033. The difference between the 1998 and 1999 totals had been a much more robust increase of 20.9%. The combined average also slowed its rate of advance, moving upward by only 2.4%, from $51,142 in 1999 to $52,393. Between 1998 and 1999, the average had risen by 12.4%.

Why did the roar that ended the 1990s diminish in 2000? Several trends, it appeared, had an impact, creating an environment that was less conducive to success in the Thoroughbred auction business.

The number offered in the four major categories of sale horses rose by 10.9%, from 24,801 in 1999 to 27,492 in 2000. Compared to the slight increase between 1998 and 1999 of 1.2%, it was a sharp swing upward. A number of sales had their largest catalogues ever in 2000, and it wasn't uncommon for supply to outstrip demand, especially in the mixed auctions at the end of the year.

The rising cost of doing business also began to have a negative impact. Both weanling-to-yearling and yearling-to-juvenile pinhookers experienced declines in profits when the prices they spent to acquire stock rose to a record level, on average, and increased faster than the amounts brought by the horses when they were resold. Even though the Keeneland September sale, as a whole, posted a record average, profits did not increase from 1999 at the world's largest yearling auction for breeders, who had to spend more money for stud fees.

The slowing American economy and a volatile stock market didn't help the situation either. While many of the biggest setbacks didn't become apparent until the end of 2000, they no doubt influenced some Thoroughbred investors to become more cautious in their spending before the auction season was completed.

A Mixed Bag

Yearlings constituted the strongest part of the North American Thoroughbred market, with increases in gross revenue and average price of 18% and 8.2%, respectively, that allowed both figures to break records. Much of the upswing was due to demand at the top end of the yearling business, where big spenders from America, Dubai, Europe, and elsewhere continued to battle each other for the best-bred stock available. Demand also remained high for quality breeding stock, helping to generate modest gains of 6.3% and 2.6% in gross and average, respectively, and pushing those statistics to all-time highs.

The figures for juveniles remained about the same as in 1999, with only minor declines. Gross slipped 1.1%, and average dropped 3.1%. The weakest link in the Thoroughbred commercial market was the weanling category, where gross was down 14.6% and average decreased 16.7%. In recent years, surges in prices at the yearling auctions have caused many breeders to save their best foals for later sales, thus reducing the supply of quality weanlings whose presence could have improved the statistics.

All in all, 2000 was a year filled with mixed economic messages for the Thoroughbred auction business. On one hand, prices for some horses had never been better. On the other, downturns and flat results in some areas of the market suggested that the boom times enjoyed by the industry for much of the 1990s might be nearing their end.