09/22/2008 11:00PM

Further proof supply exceeds demand


LEXINGTON, Ky. - Keeneland's September yearling sale ended Tuesday with double-digit declines and a couple of take-home messages: It could have been worse, and, unless racing addresses long-term marketing issues and owner recruitment, these drops could be just the beginning for the United States yearling market.

The 15-day auction sold 3,605 horses for $327,999,100, down 15 percent from last year's aggregate for 3,799 horses. The $90,984 average and $37,000 median fell 10 percent and 12 percent, respectively. In the falling market, buybacks rose from 23 percent to 25 percent. The sale topper, bought by Sheikh Mohammed al-Maktoum's Darley Stable, was a $3.1 million A.P. Indy-Chimichurri filly that Jess Jackson (Gainesway, agent) sold.

Maktoum led all buyers, spending $18,185,000 for 27 yearlings.

The auction cataloged a record 5,555 yearlings, prompting renewed warnings that the supply of horses at auction has outstripped demand in a time of general economic stagnation. Those fears were borne out in these and earlier auction declines at Fasig-Tipton July and Saratoga. But given current worldwide economic woes, sale participants and observers said, it could have been worse - especially when worldwide stock market turmoil struck during Keeneland September.

"If Wall Street had imploded earlier, in the middle of August, it would have been a totally different sale," Russell said. "It could have been dramatically worse."

Consignors credited an influx of foreign buyers relatively unaffected by stock worries or from nations with stronger economies as buffering the crisis; Russell also praised consignors for adjusting their reserves to fit the commercial reality.

"One of the good things about this sale was how well consignors and breeders reacted and changed the reserves to get these horses sold, not based on the cost of the yearling but based on the price it would take to sell it," he said.

Continued economic instability or downturns certainly will exact a toll on spending for luxuries like Thoroughbreds, but a large long-term concern, Russell and others say, is over racing's popularity even once the general economy recovers prosperity.

"We've got an amazing attraction in Thoroughbred horse racing, because there are a lot of people that want to play the game all over the world despite us doing a very poor job of marketing, packaging, promoting, and innovating our sport," said Mark Taylor of Taylor Made Sales, which consigned about 500 horses to the sale and was the auction's leading consignor with a $48,929,900 gross. "We've done everything possible to screw it up, and it's still better than I imagined it could be. If we can get together and do the right thing as an industry and take better care of our customers entering the game, the future will look bright. If we don't, the writing's on the wall."

The Keeneland September sale is the world's largest yearling auction, making it a good indicator for the health of Thoroughbred sales overall. The verdict coming out of September this year, says market analyst and bloodstock agent Michael S. Brown, is that the commercial breeding business is resilient, at least for now.

"This year, everything has gone bad in the general economic climate, but the Thoroughbred business was resilient enough to remain fairly solid," Brown said. "But we don't have enough end-users, there are too many high-priced stallions breeding too many mares, and everybody wants to be a commercial breeder. There's just not enough major money at the very top, and, as in the general economy, there's no such thing as trickle-down.

"People can't afford to breed horses just to be able to say 'I'm a horse breeder,' and people can't afford to buy half-million-dollar horses if there's not enough economic reward at the end of the day," Brown said.

The key for sellers in the coming few years is to reduce production costs where possible, including pressing stallion owners to lower stud fees and culling unprofitable mares.

Taylor, whose massive consignment had an overall buy-back rate of about 17 percent after selling about half their buy-backs privately, was blunt.

"There are a huge number of mares with yearlings that came through here that need to be taken out of production," he said. "If I owned them, I wouldn't be breeding them next year. I wouldn't put a stud fee in them."