08/02/2016 7:16AM

Tough early-season market has buyers and sellers on edge

Fasig-Tipton Photo
Becky Thomas of Sequel Bloodstock said she expects the competition for blue-chip juveniles to be fierce.

The ebbs and flows of the yearling and 2-year-olds-in-training markets are closely linked through their necessity to each other.

When the juvenile market flourishes, pinhookers enter the yearling season with more capital to spend to replenish their stock for the following season. Buyers with the intent to resell horses as 2-year-olds make up a significant portion of the middle and lower markets at yearling sales, meaning their returns in the first half of the year can help forecast the health of those segments in the second half of the calendar.

With that in mind, there is an air of trepidation when buyers and sellers discuss the pinhook-buying market during the 2016 yearling season.

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Following several seasons of largely improved figures, this year’s juvenile market experienced a backslide, with five of the seven major auctions seeing a higher buyback rate and all but one posting lower returns in at least one of the key economic indicators: gross, average, or median.

“The market’s pretty tough,” said David Scanlon of juvenile consignor Scanlon Training and Sales. “It just always seems to adjust itself. When you want to get a little comfortable every three or four years, and everybody starts jumping in and saying, ‘Boy, this pinhooking thing’s pretty good,’ then the market goes ahead and snaps back like it did this year. I think you’re going to see people just dropping out of the market and people holding back and cutting back.”

The sales typically viewed as the rank-and-file events – the Fasig-Tipton Midlantic, Barretts May, and Ocala Breeders’ Sales Co. June sales – were hit the hardest. Each experienced drops of 12 percent or more in both median and average compared with 2014.

Because of this, pinhook buyers might be slower to go after horses who are less likely to end up at the high-profile juvenile sales or made marquee offerings at a later auction. Meanwhile, those yearlings who show the potential for select-level quality at age 2 will be sold for a premium as pinhookers try to best meet the increasingly selective demands of next year’s end-users.

Becky Thomas of Sequel Bloodstock said she expected to pay more per horse this year because of those bidding clashes for blue-chip pinhook prospects. However, Thomas said she also has a plan to soften that blow and better market her purchases when it comes time to resell.

“I feel like we need to be looking for a niche that’s going to separate ourselves out from the other guy,” Thomas said. “There are too many horses in production for the number of buyers that we have – is there an overproduction of horses or an underproduction of buyers? However you want to say it, we have too many horses for the number of buyers that we have.”

That niche, Thomas said, could come in buying yearlings who fit into lucrative statebred programs, giving them a specific target market of buyers and a distinct selling point for potential buyers outside the geographical radius.

Thomas has already invested heavily in the New York-bred program, standing seven stallions at her Sequel New York in Hudson, N.Y., and selling horses in the yearling market, along with her resale ventures.

“When I started in New York, it was really just to produce a good horse, and taking advantage of the New York program was a bonus,” she said. “Now, I very much believe it’s a safe harbor for us.”

Given her diverse portfolio in yearling sales, pinhooking, and breeding, Thomas said she planned to target well-bred fillies for purchase. In the event the filly does not get sold, Thomas would still have a viable prospect for her broodmare band down the road to support the stallions at her farm.

“I’m going to do everything I can to be safer because I do believe we’re headed for not just a rough yearling year, but the trickle-down effect is a known entity,” she said. “These cycles that we’ve had before, they’re not a one-year cycle. We’re looking at three to five years.”

Like any section of the market, it comes down to buying the best stock possible, whether the purpose is for racing, breeding, or resale. The definition of “best” can vary from buyer to buyer depending on capital, but Scanlon suggested the current state of the industry could put most of its participants on a sliding scale.

“The horses at the top are what we call ‘recession-proof,’ ” Scanlon said. “Those are for the top guys, and they just really want the top horses. In the middle, for the guy that wants a racehorse, the economics of racing’s gotten tough. The vet bills are high, expenses are high, and then they’re uncertain about the market in an election year. I think it all ties in together.”