07/13/2014 12:52PM

Fasig-Tipton July: Mixed signals heading into yearling market

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Optimism springs eternal as the auction calendar moves from one segment to the next, but this month’s transition into the yearling market arguably does not bring with it the same wave of momentum that preceded the major yearling sales in 2013.

The first canary in the yearling market’s coal mine will be the Fasig-Tipton Kentucky July select yearling sale Monday. The one-day sale will begin at 10 a.m. Eastern at the auction company’s Lexington base, kicking off a day of selling that also includes the dispersal of broodmares and weanlings from the noteworthy program of Eugene Melnyk, along with the summer sale of select horses of racing age.

“We’re very enthusiastic and optimistic,” said Fasig-Tipton president Boyd Browning Jr. “We’ve got a good, solid catalog coming off of a good sale last year and a fairly healthy 2-year-old market in 2014, so all signs should be pointed in a positive direction. I think the addition of the horses of racing age sale last year was a very positive addition for the overall sale. I think both sales benefited each other and complemented each other very well.”

The 2013 yearling season came on the heels of a bull market in the juvenile sector, with records falling across the board at the three Ocala Breeders’ Sales Co. auctions and sales by other major companies posting nearly unanimous gains. That led to especially competitive bidding throughout the ensuing yearling sales, including in the middle and lower markets, where pinhookers look to restock for the following year.

Best illustrating that point was the Keeneland September yearling sale, the industry’s bellwether yearling auction, which posted a record median in 2013. The Fasig-Tipton Kentucky fall yearling sale, another large-catalog auction, also enjoyed a record-breaking renewal.

“We all were very bullish buying last year,” said 2-year-old consignor Cary Frommer. “The yearling sales were strong, and it was because the 2-year-old pinhookers, who kind of prop the market up a little bit, were feeling really good about things.”

However, the juvenile sales were not as consistent this spring. While OBS continued its run of improved financials, catalogs for the remaining select sales became alarmingly slim, especially after outs, while the open sales largely took a step back in average and median figures.

Those buyers focusing on the elite end of the yearling market are expected to continue their normal course of swarming toward the blue-chip offerings, as they did during the 2-year-old sales, but Frommer said the contingent buying for resale might reconsider their strategy for the upcoming auctions.

“We all got ripped up on a little bit in the 2-year-old sales,” Frommer said. “Thank goodness, everybody had a big horse or two to make sure we [could stay] in business, but everybody I’ve spoken with feels the same, that we as pinhookers need to make a little adjustment.

“For whatever reason, the strength of the yearling market didn’t follow through into the 2-year-old market,” Frommer added, “which isn’t to say there weren’t some great sales, but if you have six horses in a sale, and one sells really well, and the others just get sold, that’s hard to keep a business going.”

Browning’s outlook regarding the 2-year-old market’s residual effects on the upcoming yearling sales was not as cloudy.

“I’ve been in the Thoroughbred auction business since 1988, and every year since then, the selected sales certainly had a little bit higher buyback rates than we would have wanted, but that’s the nature of the product,” he said. “When you put them under extreme scrutiny, there are going to be some horses that fall by the wayside. All in all, I think we saw a healthy overall marketplace and a healthy interest in horses [during the juvenile calendar], which I think will translate into a positive for the yearling sales this year.”

Instead, Browning focused on the big picture, both in the Thoroughbred market and the overall economy, which he said remains similar to, if not improved from, last year.

“I don’t see any dramatic changes in the marketplace,” he said. “The economy that we live in, for the most part, has remained solid. We’re at a record Dow level right now, but it’s not that dramatically different than it was throughout most of 2014, so there’s been no dramatic economic change.”

One factor that could work in the favor of yearling sellers going forward is the ever-shrinking foal crop. North American yearlings of 2014 number approximately 23,000, according to The Jockey Club’s estimates, making it the lowest population since the late 1960s.

With fewer projected opportunities to purchase a yearling at public auction, Headley Bell of consignor Mill Ridge Sales said this reduction could increase urgency for buyers and help keep prices at healthy levels.

“I think it’s to the sellers’ advantage that our supply is down on the foal crop, so if you’ve got solid demand, that’s an advantage,” Bell said. “I hope there’s enough demand and not quite the depths of supply, and maybe that’ll benefit some sellers.”

This year’s edition of the Fasig-Tipton July sale features a catalog of 265 yearlings, 3 percent more than last year. As the first yearling auction on the North American calendar, the July sale is often targeted by sellers with early-developing youngsters and is the first opportunity for first-crop sires to display their foals during the proper yearling season.

“It kicks us off,” Bell said. “Fasig does a great job to select some athletic individuals, and that’s what it is, a sale of select athletes. It’ll be the first step toward defining the market.”

Last July’s sale finished with 163 yearlings sold for revenue of $14,635,000, down 5 percent compared with the 2012 edition. While a 24 percent smaller catalog led to a smaller gross, it also helped the average sale price rise 10 percent and the median rise 20 percent. The buyback rate fell to 27 percent after finishing at 33 percent in 2012.

Canadian businessman Nat Rea of Regis Farms purchased last year’s sale-topper, a filly from the first crop of sire Desert Party, for $460,000.