Bill's Columns

The flurry of activity at the end of the Sept. 14 session which closed out Keeneland Book 1 – four of the last 11 horses through the ring commanded seven-figure final bids – could not have been a stronger indicator that in spite of everything top yearlings command top dollar, and that momentum is sure to carry on at least for the next few days. Between Fasig-Tipton’s ‘Selected Yearlings Showcase’ Sept 9-10 and Keeneland Book 1, Sept 13-14, a total of 546 yearlings sold for a total of $148,210,000 (average $262,783).

A total of 13 buying entities, each of which spent $1.8-million or more, accounted for 104 yearlings (19% of those sold), for a total spend of $49,950,000 (33.7% of the combined gross); 12 of those 13 buyers can be classed as domestic, headed by the SF/Starlight/Madaket combination which has been responsible for finding two of the last three G1 Kentucky Derby winners at the September Sale. They have bought 20 yearlings between the two sales, spending $9,195,000, but among the supporting cast have been a number of other prominent domestic partnerships and individual buyers, including the Repole/St. Elias combination, BSW/Crow, the Eclipse Partnership which bought the $2-million sale-topper, Courtland Farm, Larry Best’s OXO, Robbie Medina for Joe Allen, the Albaugh family, WinStar’s Maverick Racing, Ron Winchell, uber-agent Mike Ryan, and trainer Kenny McPeek. The only foreign buyer among the top 13 was Shadwell, which bought two yearlings and a colt by the sales’ leading sire on average so far, Medaglia D’Oro.

In spite of the tremendous momentum at the end of Keeneland Book 1, and the herculean efforts by the sales companies, consignors, and buyers to create a viable marketplace, the results are inevitably down from the past few years. Calculating precise measurements of the decline are of course complicated by the fact Fasig-Tipton was forced to create some combination of their three summer sales (July Yearlings, Saratoga, NY-bred Yearlings), plus Keeneland’s Book 1 shrank from three days to two. In some respects, measuring the declines are irrelevant; all people care about right now is getting their yearlings sold and bought, and rightly so. But if for no other reason than that 2021 stud fees need to reflect the realities breeders are contending with, it is actually quite important to be able to assess the level of declines at the top of the market. Hopefully the accompanying tables will help you follow along.

If we simply added together the three 2019 Fasig-Tipton summer sales plus 2019 Keeneland Book 1, the total catalogued and sold was 890/1488 (59.8%), grossing $257,098,00, and averaging $288,874. However, the reality was the NY-bred sale actually split in half, between the Showcase Sale in Kentucky and Fasig-Tipton’s Mid-Atlantic Fall Yearling Sale scheduled for October 5-6. So the first way I’ve manipulated the figures to try and describe reality is to count the Showcase as 2 ½ sales – July Yearlings, Saratoga, and 50% of the NY-bred sale. So rather than compare the 662 yearlings in the Showcase Sale to the 919 catalogued in the three sales last year, I’ve compared them against 753 yearlings, and we’re sending the other 166, at least in theory, to Maryland.

This doesn’t affect what happened this year, only in comparing what happened this year to last year. So, using 50% of the NY-bred sale, the 2019 comparative ‘Fasig Showcase’ figures would have been: 753 catalogued, 430 sold, gross of $83,414,000, and an average of $193,986. That’s what we come out with using half the 2019 NY-bred sale.

Next step is to adjust those projections for the decline in the number catalogued, which we calculate as 12% (662/753 atFasig-Tipton), so if we subtract 12% from the $83-million figure, what we projected was, if prices and the clearance rate from the catalog (57.1% last year) stayed the same, that Fasig-Tipton would have ended up with 378 yearlings sold, for a gross of $73,327,000, and an average of $193,986. Therefore, in our view, the deviation from those projections should measure the decline in the market. The sale finished up with 348 sold (-8% below projection), for a 52.6% clearance rate from the catalog (-4.5%), grossing $61,765,000 (-16% below projection), and an average of $177,486 (-9%). So rather than saying the Fasig-Tipton summer market fell by a third, from $90-million (for the three sales) to $61-million, in fact the proper benchmark, we calculate, should have been $73-million, and the gross was ‘down’ (from projections) by 16%.

Keeneland catalogued 21% fewer horses in Book 1 (448 vs 569), therefore we projected, if prices and clearance rate from the catalog remained the same, there would be 289 yearlings sold, for a gross of $131,294,000, which would maintain the 2019 Book 1 average of $454,305. In the event 216 yearlings sold (-25% below projection), for $86,445,000 ($45-million, or 34%, below projection), an average of $400,218 (-12% below projection). Those who sold are understandably thrilled that the average dipped by just 12%, but the big problem was there was a precipitous drop in the percentage sold, dropping by a third, from 64.5% sold in Book 1 last year, to just 48.2% this year. In other words, for every 20 yearlings catalogued to 2019 Book 1, there would be 13 of the 20 sold; this year, there were 10. Never has it been more true that breeders need a home run horse to keep going, if they’re only going to get one out of two sold. The good news is that historically the clearance rate at Keeneland improves a lot after Book 1.

Adding the two sales together, there were 1,110 yearlings catalogued between the two sales, 16% fewer than in the ‘adjusted’ number from last year. A total of 564 sold, just 50.8% of those catalogued, a steep 9.5% decline from the corresponding 60.3% from last year’s 2 ½ Fasig-Tipton sales plus Keeneland Book 1. The combined gross was down over $100-million (-41%), from $250,144,000 last year to $148,210,000, and the average dropped 16%, from $313,857 last year to $262,783. However, because of the 17% decline in the combined number catalogued, my assessment is that the ‘real’ decline in the gross was 28% - the gross should have been down by $46-million because of the decline in the number catalogued. When we finish all the slicing and dicing, my reading of the market so far is that the average is down 16%, but because the clearance rate from the catalog has dropped from 60% to 50%, the gross is down 28% - that’s my version of the comparative gross, anyway.

Against this backdrop, breeders are entitled to feel nervous about what they’re going to be asked to pay in 2021 stud fees: when the top of the market, which we can say this is, shows a 16% decline in average and a near-10% decline in the clearance rate, it’s clear there will have to be some adjustment to stud fees. Here’s another clue: there are six sires which go into Keeneland Book 2 with 2020 Fasig-Tipton/Keeneland Book 1 averages over $400,000. Medaglia D’Oro (18 sold/avg $645,278) tops the charts, followed by Into Mischief (37/$535,946), Tapit (16/$490,000), Quality Road (17/$489.706), War Front (10/$417,500), and Curlin (24/$405,417). Combined, they’ve had 122 yearlings gross $61,515,000, and average $504,221. But last year at this stage, these six sires had a combined 160 yearlings sold, for $94,637,500, an average of $591,484. So the six top 2020 commercial sires in North America have had 24% fewer sell, for 35% less money, and a 15% drop in average. Of course some of these losses will hopefully be recovered in the next few days, but if the farms were forced to set 2021 stud fees right now, a 15% reduction from 2020 levels would reflect, from what we can tell so far, the reality of the 2020 North American yearling market.

For more articles by Bill Oppenheim, APEX ratings, and Brianne Stanley’s Worldwide Sales Ticker, please visit www.billoppenheim.com. Twitter @billoppenheim