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Guarded optimism as sale season opens
As they prepare for the imminent select 2-year-old sale season, executives at the nation's major auction houses agree about one thing: The 2008 select juvenile season probably will look similar to last year's, at least in terms of financial returns.
But there will be some differences here and there. The Ocala Breeders' Sales Company, which kicks off the season with its select sale on Feb. 12 in Ocala, Fla., will become the first to test for exogenous steroids at a juvenile auction, a step the other auction houses will watch closely. And Keeneland's April sale in Lexington, Ky., will undergo a dramatic format change, moving from a single afternoon session to two night sessions a week earlier than usual, on April 8 and 9. That auction also will have only one breeze show, rather than two, beforehand.
Rounding out the rest of the season are Fasig-Tipton's Calder sale in Miami, Fla., on Feb. 26, the Barretts March sale in Pomona, Calif., on March 12, and the Ocala Breeders' Sales Company's March auction on March 18-19.
After a general market downturn at 2007's major select juvenile sales, catalogs will be smaller this season, because yearling-to-juvenile resellers collectively scaled back when they restocked their inventory at the 2007 yearling sales. But auction officials say they are optimistic that the top 2-year-old sales can perform within 5 to 10 percent of their numbers last year. That's despite a recent up-and-down trend in the stock market, a threatened shutdown by the New York Racing Association on Feb. 14 if the state government hasn't worked out a franchise agreement by then, and repeated cancellations at Santa Anita because of weather-related issues with its new Cushion Track synthetic surface.
"I'm a little surprised and encouraged at the response that we've gotten thus far in our recruiting initiatives," Fasig-Tipton's chief operating officer, Boyd Browning, said. "There still seems to be a great deal of interest in people buying quality racehorses, both colts and fillies. We live in a time now where changes in the economy, the ups and downs, we're maybe a little more used to that. It used to be that the Dow dropping 300 points would create a panic. Now, it's just another fluctuation in the market. And I don't think those changes have the short-term effect that many of us figured that they might.
"I think we saw the downturn last year in the 2-year-old market. We saw a lowering of the top end of the marketplace in 2007 compared to 2006, and I think the top of the market will be similar this year to 2007. It might give a few more people the opportunity to compete this year where they might not have been willing to play there in the past. It might work that it could be stronger at the top this year."
Last year, the bellwether OBS select sale saw a slight decline of $136,000 in gross receipts ($12,831,000) while the average price fell 4 percent to $133,656, and the median fell 9 percent to $100,000. The losses were steeper at Fasig-Tipton's Calder sale, where the 2006 auction had featured the world-record $16 million sale of The Green Monkey. The 2007 topper brought $2.5 million, the gross ($43,622,000) dropped 30 percent, and the average ($351,790) fell 13 percent. But the $250,000 median reflected a 25 percent gain.
The trend of mixed results continued at the OBS March sale and at Keeneland's April auction. At OBS March, gross ($26,541,000) and average ($104,905) fell 15 percent and 3 percent, respectively, but the median ($82,000) rose 9 percent. At Keeneland a month later, gross ($16,637,000) dropped 10 percent and average ($202,890) dipped 4 percent, but median ($155,000) climbed 3 percent.
Barretts bucked trend<.strong>
The only major sale to gain in all categories was the Barretts March auction in Pomona, Calif., which posted high double-digit gains in gross ($19,340,000), average ($219,773), and median ($147,500).
Buy-backs rose at all venues except the OBS February sale, where they went from 33 percent to 30 percent.
Not surprisingly, yearling-to-juvenile resellers, known as pinhookers, who spent aggressively at the booming 2006 yearling sales took some losses when selling into a weaker market in 2007. These sellers, the staple of the select juvenile market, have curtailed on quantity, but auction houses insist consignors have not compromised on quality.
Quality seen as key
"You have to be slightly apprehensive," Keeneland's sale director, Geoffrey Russell, said of the market, "but I think quality sells, and I don't think that aspect of the market is going to change in 2008. The major select 2-year-old sales will all have less numbers than last year, and we all knew that going into the year. But the quality is still there. These are professional horsemen who don't just buy horses because they need to buy horses. They retool their buying to find quality even if they have to reduce the number of horses they buy."
At Barretts, the number is almost the same, with 191 juveniles cataloged versus 200 last year.
"Our number in general isn't real large, and I think it probably has to do with the fact that our core of consignors is pretty consistent, so we don't have as much fluctuation as markets who have access to a lot of people who can make different choices about where to sell," said Jerry McMahon, president of Barretts. "Our sale was good last year. There were plenty of rewards there, and I think that brought people back."
McMahon has kept a close eye on Santa Anita's cancellations but believes that, once the surface renovation is complete and racing returns to normal, there should be no ill effect on the Barretts sale. The auction traditionally has enjoyed good patronage from California-based trainers and their clients, who appreciate the chance to buy a horse who is almost race-ready.
"When consistency returns, I think optimism will come back," he said. "Once people start winning races and purses again, our local guys will be back in their normal situation."
As for the stock market, McMahon said, "Some people have said that when the stock market is not strong, their customers seem to want to put money in horses. If your investments are rolling along and making money, you tend to want to leave them there. When they're not, you might be inclined to pull some of it out and put it in horses."
If that theory is true, then the bloodstock market could see a boost from the bucking stock market. But it will certainly continue to be highly selective, officials warn.
"There will be intense competition for the top 25 percent of the horses," said Fasig-Tipton's Browning. "For the bottom 25 percent there will be virtually no activity, and in the middle, you better have a damned good idea of who you've got on your horse and what kind of reserve you're thinking, because it's going to be not as deep there as you'd want."