The object of the game

Like most horse sales these days--and for the foreseeable future--the first session of the Fasig-Tipton July sale was a mixed bag. Yes, average and median both increased, but, with a significantly smaller catalog, total proceeds to breeders declined by $1.2-million compared to the same session in 2009.

The killing statistic for commercial breeders, though, is the actual clearance rate. 107 of the 170 horses through the ring were listed as sold, which leaves a 37.1% buy back rate, which is bad enough, but not disastrous on the surface. When you consider the fact, however, that 203 horses were cataloged for the first session, that means that only 52.7% of the horses breeders planned to sell at the first session found apparent buyers--and there are always a percentage of reported sales that remain the property of their owners.

The only reason that the final buy back rate was not over 40%--where it hovered throughout the day--was that Fasig-Tipton now (correctly) includes after market private sales that are reported to them in their statistics. A dozen yearlings were listed in the final results with "PS" for private sale beside the price.

Everybody in the business knows that this crop of yearlings was bred on stud fees that reflected the inflated market that existed before the economic crash of October 2008, and that it is going to be very difficult to make money overall this year. That's why it was so disappointing--shocking really--to see so many yearlings listed as not sold for substantial multiples of their stud fees.

Consignors and breeders always have excuses (they're called "reasons" in their minds), but it is difficult for a disinterested observer to understand why anyone would not accept $70,000 for a yearling by Sun King, $75,000 for a Bob and John, $74,000 for a Flashy Bull, or $100,000 for a Rockport Harbor. All of those hammer prices represent more than four times the stud fee presumably invested, and, regardless of how promising the yearling is or how much the breeder paid for the mare, that should be an acceptable return on investment in a severely depressed market.

I don't mean to pick on any breeder or any consignor by mentioning those particular failed transactions, but it should be clear to everyone by now that we live in a changed environment. If the object of the exercise is to sell the horse, then sell the damned horse when offered a reasonable profit.

Fasig-Tipton removed the second-year horses from their young sire showcase (the first 144 hips) since they'd been getting killed on those horses the last couple of years. That is, in fact the main reason the average was up slightly. Take a big chunk of the least desirable horses out of the sale, if your average doesn't go up then you're really in trouble.

But buyers clearly are no longer paying the same kind of premium they once did for first-year sires. If they were, the average would have been substantially higher. This is a good thing. Paying more for progeny of first year sires just because they were by first year sires never made any sense. It was a fantasy cleverly exploited by breeders and pinhookers that has severely distorted the stallion market.

The reversal of that 15-year trend is the best thing that happened today.