Strong Keeneland yearling sale provides some relief for horse industry

A Bernardini colt, ushered into the ring by handler Cordell Anderson, sold for $625,000 Wednesday.
A Bernardini colt, ushered into the ring by handler Cordell Anderson, sold for $625,000 Wednesday. photos by Z

This must be what it felt like when it rained after the Dust Bowl: Big fat drops of real money finally started falling at Keeneland's September Yearling Sale this year, and it wasn't just a passing billionaire cloud.

The steady downpour could reach the roots of an industry that has been in a sales drought since 2008.

At first, when the sale opened Sept. 11, it looked like another case of dark clouds but no storm. Almost a third of the first 60 horses that went through the ring went unsold, and the buyback rate for the night stayed about 32 percent.

But the second day showed steadier gains, and momentum built through the week. On the fourth day, lightning struck twice for small-time breeder Catherine Parke: Her Valkyre Stud consigned a Bernardini colt for Oakbrook that sold for $625,000, and a Bernardini filly went for $1.2 million.

Even after a one-day break on Sept. 16, the sale continued to show surprising strength. By Monday, the eighth day, the 2011 sale had surpassed the total for 2010's entire 14-day sale. And through the second week of this year's 13-day sale, the key measures — cumulative, average price and median price — showed increases.

"It was huge," Walt Robertson, Keeneland vice president of sales, said Saturday after the sale ended. "In this day and age, that's huge."

After the hammer fell on Hip No. 4317 for $30,000, the final horse on Saturday, here were the final numbers compared to those in 2010:

 2,921 horses sold for a cumulative $223,487,800, up 12.73 percent.

 The overall average price of $76,511 was up 18.05 percent.

 The overall median price of $30,000 was up 20 percent.

 The buyback rate of horses going unsold for the entire sale was 20.8 percent, down from 26 percent.

That last number might be the most important, Robertson said. The gains held through every session of the sale.

"All segments of the market. Everybody got a taste of the increase," Robertson said. "You've got to pull for the small players."

The top consignor, Lane's End Farm, sold 335 horses for $27,437,000.

The biggest buyer was John Ferguson, buyer for Sheikh Mohammed bin Rashid al-Maktoum of Dubai, who bought 36 yearlings for $8,870,000. His older brother, Shiekh Hamdan bin Rashid al-Maktoum, buying under the name Shadwell Estate, bought 17 yearlings for $6,355,000.

"We are very pleasantly surprised by the market being up pretty consistently throughout the sale," Bill Farish of Lane's End said in a statement. "The decrease in (the size of) the foal crop, lower production costs and lower stud fees have given buyers a new sense of confidence. They are more apt to want to race because they can get in at lower rates."

The daily gains throughout the sale seemed to give confidence to sellers who have been sorely stressed the past few years.

"It's going really well. The market is far better than I imagined it would be," said Ben Walden of Pauls Mill Bloodstock, who sold a Dynaformer filly for $300,000 and a Candy Ride colt for $225,000.

Walden said the enthusiasm in the sales pavilion this year is reminiscent of the atmosphere 10 to 15 years ago, when the economy was growing.

"What happened? I have no idea," he said.

Others seemed just as surprised.

Has the industry turned the corner? "I don't know the answer to that," said Case Clay, president of Three Chimneys Farm, one of the top consignors. Four sales so far this year have been very good, he said, but he hadn't expected much out of this one.

Clay credited buyers from foreign markets. A colt by Dynaformer, who stands at Three Chimneys, sold to Sheikh Hamdan for $725,000.

"Our friends from Panama, Central and South America also are here, and they have money to spend," he said. There were buyers from 29 countries.

Clay said the strong yen has helped Japanese buyers, and he expects that to continue into the November sales at Fasig-Tipton and Keeneland.

The weak dollar, plus strong recruiting efforts by the Keeneland staff, have attracted buyers from Russia, Korea, Peru and Mexico as well.

One big change this year: Many of these yearlings were sired as stud fees began to drop in 2009. That eased price pressure and might have allowed breeders to set more realistic reserve prices.

"Breeders had a better chance to make money," Clay said.

Also, a contraction in breeding meant that there were fewer foals competing for buyers.

"Nobody's getting rich in this marketplace, but they're not losing their shirts," said Kerry Cauthen, managing partner in Four Star Sales. Cauthen said the biggest change he has seen is a change in confidence levels.

"People feel confident that we've reached a base level," Cauthen said. "That makes them a lot more comfortable. People say, 'I understand the game.'"

Robertson said several factors made a difference: "We did have real good horses, and that's always a big part of the reason. The horses that weren't commercially viable weren't here."

Despite appearances, the margin for many horse breeders remains thin, said Mark Taylor, vice president of public sales for Taylor Made Sales Agency, one of the largest consignors of horses.

"The numbers look really good, but there's still a lot of people getting hurt," he said. "The fact that it looks good this year is because it's been so tough."

This year's sale total was just 56 percent of the 2006 peak of nearly $400 million.

Taylor said some buyers are eager to take advantage of a tax break for horses that expires at the end of the year. But others seem simply to be ready to buy.

He said the feeling seems to be that the stock market is crazy, real estate's in the tank, and the banks are paying no interest, so what the heck, buy a horse.

"A lot of people have some wealth accumulated, and they just want to go have some fun," Taylor said. He said several trainers have clients telling them, "Life's short; let's buy horses."

He hopes they come back to reinvest in November and that the September roll continues.

"It's been better than I expected," Taylor said, "but it would be a mistaken perception that everything's resolved and everything's rosy."

Robertson said Keeneland plans to continue to do all it can do drum up strong business for the key broodmare sale in November, which begins after the Breeders' Cup Championships in Louisville on Nov. 4 and 5.

"We've got three teams going out next week to India, Australia, Europe, Asia and South Africa," he said.