'July factor' and new tax law lift sale

LEXINGTON, Ky. - Keeneland's 12-day September yearling sale, which ended late Saturday with a record average and median, surprised almost everyone with its strength.

The auction was the only Keeneland sale dedicated to yearlings in 2003 after the auction house, citing a lack of horses due to mare reproductive loss syndrome, decided to cancel its July sale this season.

Following a 2002 season that saw 30-percent declines in the select yearling market, the 2003 September sale soared. It sold 2,969 yearlings for $274,125,300, second only to the record-setting 2000 auction's $291,827,100 gross for a thicker catalog of 3,313 horses. The 2003 average price of $92,329 cruised past the 2000 record of $88,085, and the 2003 median of $34,000 broke the previous mark of $30,000, set in 1999.

The top of the market, the segment most drastically affected by price declines in 2002, was especially healthy. Twenty-seven yearlings sold for $1 million or more this year, up from 15 last season. But the middle market was also strong, as evidenced by the significant jump in median.

"Never in my wildest dreams to did I think it would be that strong," said Keeneland sales director Geoffrey Russell. "I felt that the top would be strong, but the middle market was so strong last year, and I really didn't think it could go up that much again."

Upper-market increases, Russell believes, were due to what he calls "the July factor": the presence of blue-blooded July yearlings who switched to the September sale when Keeneland canceled the July auction. The knowledge among buyers that September was the last chance to buy select yearlings also made bidders more committed to spend, he theorizes. Big buyers' determination to fill their stables from this auction appeared to have a trickle-down effect. As horses sold expensively early in the sale, buyers who had been shut out stayed later in the auction to find stock they liked and could afford.

But Russell believes the surprising middle-market gains had even more to do with recent tax changes that allow buyers to write off up to $100,000 in purchase costs, provided their total purchases don't exceed $400,000. The changes also allow a first-year depreciation of up to 50 percent on racehorse purchases.

"Sessions 4 to 9 were record-growth sessions for us," Russell said. "We put it down to the fact that the majority of new buyers who established accounts with us bought at that level. I think the tax changes had a big effect there."

So what does the September sale's spectacular performance mean for the July sale's future? Russell cannot say yet, but he's hedging his bets.

"All I can say is that we have calendared the July sale for next year, and it will be a topic of discussion between now and the January sale," he said. "I'm sure this sale will make those discussions more interesting."

Dubai Millennium tops all sires

The September auction's leading sire by average was a sire with only one crop: the late Dubai Millennium, who had a single foal in the auction that went for $1.6 million. But the sale's other leading sires by average proved that established stallions still rule the marketplace.

Dubai Millennium aside, Storm Cat was the top seller by average, with 12 yearlings averaging $956,666. Danzig, whose foals included the auction's top colt, a son of Queena that sold for $3.6 million, sired seven with an average sale price of $873,571. Rounding out the top five were the late Unbridled, whose last yearlings sold this year with 17 averaging $725,882, and A.P. Indy, whose 25 lots brought an average final bid of $543,400.

MRLS researchers press on

Researchers continue to explore possible causes for mare reproductive loss syndrome (MRLS), the illness that caused thousands of mare abortions in 2001 and 2002. Scientists at the University of Kentucky still view Eastern tent caterpillars as the leading suspect. In recent experiments, researchers in the College of Agriculture induced fetal loss in two of five pregnant domestic pigs fed 40 grams of Eastern tent caterpillars. Five control pigs, which received no caterpillars in their feed, did not abort.

In reporting the findings, researchers drew attention to the fact that they found caterpillar hairs, called setae, in the digestive tracts of the pigs that ate caterpillars, although the significance of that find and the role setae may play in abortions remains unclear.

On Sept. 19, the College of Agriculture announced that it had discovered "hair remnants resembling ETC setae" embedded in the digestive tract of a single mare that also had been fed caterpillar larvae. Like the affected pigs, the mare had developed an inflammatory reaction to the hairs, but again, the significance is unclear so far.