Why consignors avoid the Keeneland July sale is a mystery

So much for the expected downturn in the yearling market. The law of supply and demand is still in force in the commercial marketplace.

In a sale that offered just 0.36% of the estimated 36,700 North American foal crop of 2000, the Keeneland July yearling auction achieved its highest average in history, $710,247, an increase of 14.4% from last year. In a poll on the Thoroughbred Times Web site prior to the sale, a minority of the respondents, 25.8%, predicted an increase in average price at Keeneland.

The Keeneland July sale may be diminished in size but not in its stature as the place where industry titans show off how much money they have (or had before the sale, anyway).

But is the Keeneland July sale still the bellwether for the health of the yearling market? Probably not. That mantle is now held by the Keeneland September yearling sale, which presents a far broader spectrum of commercial horses and affects far more breeders and stallion owners than does the Keeneland July sale.

The Keeneland July sale, however, is still very important because of its psychological impact on the overall commercial market. As the first yearling sale of each year, the Keeneland July sale kicks off the sales season. A strong Keeneland July sale is usually a good barometer of the general trends for the remainder of the sales year.

In the 25 years since 1975, the direction of the Keeneland July sale average and the overall average for all yearlings sold in North America for the year have differed just four times. Generally, if July is up in average, the overall market is up.

The last times the two differed were in 1993 and '94, when the Keeneland July sale was still on a downward trend that began in 1985, declining in average price every year except for one, 1989, from '85 through '94. The broader yearling market, which also began its downturn in 1985, broke its downward trend in 1993.

The strength of this year's sale flies in the face of the general economic malaise in the American economy and on Wall Street. In fact, the day after the Keeneland sale, Federal Reserve Bank Chairman Alan Greenspan testified before a congressional committee that he does not see an economic upturn in the United States any time soon.

So, if the American buyers are not feeling good about the immediate future, the strength has to come from overseas, right? Yes, but despite the decrease in interest rates in the U.S., the dollar has strengthened against almost all currencies. With the Keeneland July sale so dependent on foreign buyers, that economic circumstance in theory should weaken demand and prices.

But that did not happen, either. Foreign buyers showed no signs of dampened enthusiasm for Keeneland July yearlings.

This is an enriching situation for commercial breeders-at least those few who still send their yearlings to the Keeneland July sale.

For owners, however, the cost of staying in the game has increased without any immediate signs that average purses or earnings potential will increase any time soon. Purses are still far too low on average to support such lavish prices. Average purse in 2000 was $18,053, and average earnings per runner were $15,798. In 2000, just 168 runners earned $300,000 or more. That amounts to 0.2% of the 69,230 runners, or about as many yearlings that went through the sale ring at Keeneland.

For the top 1% of sires, such as those represented at Keeneland July, their average horse starts 22 times in their career and earns $71,349-one-tenth of the Keeneland July average. The top 1% of sires average 9.1% stakes winners from foals. The Keeneland July sale has produced an average of 11.3% stakes winners from sold horses in the five-year period from 1994-'98.

Of course, no one goes to the Keeneland July sale hoping to buy an average horse, but hope springs eternal in racing, particularly among buyers at the Keeneland July sale.

In light of the sale's continued strength, one wonders why consignors are so keen on avoiding the sale and waiting for the Keeneland September yearling sale, among others.

There is no better time to sell a yearling than when people are willing to spend a lot of money on one. Mark Simon is editor of Thoroughbred Times.