MARKET CRISIS HITS THE HORSE BUSINESS
While Congress begins deliberations on the proposed economic bailout package that could cost taxpayers as much as $1 trillion, Thoroughbred owners and breeders are beginning to feel the effects of the turbulence on Wall Street and other world markets.
The financial markets meltdown came smack dab in the middle of the industry’s most important transactional event: the Keeneland September yearling sale. The sale began with a lowered price ceiling during opening select sessions that saw some resilience in the middle market, but, as many consignors feared, the bottom fell out after the first week. Most yearlings going through the ring in the latter part of the Keeneland sale will reflect economic losses to their owners once stud fees, mare investment and boarding costs are taken into consideration.
In addition, many yearling-to-juvenile sale pinhookers from Florida depend on bank loans to fund at least a portion of their investment, and those loans or lines of credit from banks are evaporating in the current crisis that actually began last August with the sub-prime mortgage fiasco.
Loans of all kinds will be more difficult to acquire, one banker told the Paulick Report, whether it’s for pin-hooking, stallion and mare acquisitions, or real estate. “A wide range of people need bank financing to buy farms or mares,” he said. “Some people who didn’t start off thinking they wanted to borrow end up taking out loans just like any other business often does. Stallion deals are often supported by banks. No matter what you are borrowing money for, it’s harder now and it will cost more. Everything is going to be more difficult.”
The crisis could have a severe effect on the bloodstock markets at Fasig-Tipton and Keeneland in October and November, especially for mares in the $50,000 and under price range. It is expected the top end of the market, which is unlikely to establish any new records for high prices, will maintain some semblence of strength. The deadline to enter mares and weanlings in Keeneland’s massive November breeding stock sale preceded the financial market meltdown. What will be interesting to follow is the number of horses entered for Keeneland’s January sale of horses of all ages. Will breeders look ahead at cutting their losses on marginal mares and newly turned yearlings?
“Things that have some value in the real world, like real estate loans, have no value in the market,” one analyst said. “Assets that used to be like cash no longer are like cash.”
Copyright © 2008, The Paulick Report
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Tags: Breeders' Cup, breeding stock sales, credit tightening, fasig-tipton, Frank Stronach, horse business, Keeneland, keeneland january horses of all ages sale, keeneland november breeding stock sale, keeneland september yearling sale, magna developments, Magna Entertainment, market meltdown, meca, mid, Paulick Report, pinhookers, Ray Paulick, real estate market, stallion acquisitions, Thoroughbred breeding, wall street crisis, yearling sales
September 23rd, 2008 at 10:26 am
Harking back to foal crops of 50,000, it seems we need 10,000 new owners or 10,000 foaling mares not to be bred in 2009 or some number of each summing to 10,000.
Spending money for vet care, stud fees and mare depreciation to sell yearlings for $4500 makes no sense at all.
Current owners should be recruiting newbies.
September 23rd, 2008 at 10:50 am
Instead of a regular trickle, will we see a flood of Thoroughbreds including pregnant mares and foals heading to slaughter once again like during the last crash, 20 years ago? The NTRA just declared that it is pro-slaughter: what an impeccable though macabre timing. It reassured the industry that it stands behind the expedient though cruel disposal of their unwanted Thoroughbreds at 40 cents a pound or less. Timing is everything!
September 23rd, 2008 at 11:20 am
Little brain, the NTRA is not pro slaughter despite people like you saying they are. Come up with a plan to save unwanted horses and funding for it and maybe you can make a difference instead of promoting propaganda and your misguided agenda.
September 23rd, 2008 at 11:42 am
There is money to lend to responsible borrowers. One of the problems confronting banks and borrowers establishing values on bloodstock. The sales companies continue to publish summaries that not reflect what actually happened at the sale. Keeneland still lists the Medaglia d’Oro — Amizette filly as sold to Paul d”Arcy for $1,000,000. There are hundreds of sales results involving millions of dollars that are different from what actually happened. Taylor Made Farm alone has sold more than forty yearlings that were listed as RNA. I would hope that Keeneland would follow Arquana Doncaster Sales, and publish the true results from the sale.
September 23rd, 2008 at 1:59 pm
Wesly:
Daily Racing Form, 9/19/2008.
Jay Hovdey (big brain - recipient of multiple Eclipse Awards) ended his article titled “Slaughter bill needs backing” with:
“”I can assure you we’re not stopping any of these bills,” Waldrop said. “Our association is simply taking no position on this bill at this time.”
Sorry, but when it comes to something like the slaughter of racehorses, no position is a position. And it’s the wrong one.”
September 23rd, 2008 at 10:23 pm
Ray makes a great point about the tightening of credit hitting the pinhookers. Nobody was talking about it openly at Keeneland, but it had to be a factor in the lower prices that all the Ocala guys were prepared to pay. If the credit squeeze continues through the winter, the April Ocala and May Timonium two-year-old sales could be a real bloodbath.
September 24th, 2008 at 8:02 am
Note to Gipper - Arqana has nothing to do with the Doncaster sales. Arqana is the French sales company that handles the Deauville yearling sales, and now the St. Cloud sales after absorbing the French side of Goffs. But I’m sure the fine folks at Arqana appreciate the compliment.
gina rarick
http://www.gallopfrance.com
September 24th, 2008 at 2:26 pm
I’ve already heard that many horses are being “dumped” this November and January. God help those unfortunate creatures that bring no bid, because the “industry” certainly isn’t going to be on their side.
The Killers will have their cattle trucks lined up and waiting….I’m sure Alex Waldrop and his cronies at the NTRA don’t have a problem with that, do they? Sure is a good time be a an owner of a horse slaughterhouse, isn’t it? Maybe Keeneland Assoc has already invested. They know a money making opportunity when they see one.
September 24th, 2008 at 10:21 pm
Here is a great opportunity for Keeneland to give back money to the people who made it into a goldmine.
On all horses that did not bring more than $20,000 - refund the thousand dollar entry fee.
Be generous, raise that to $30,000.
All in favor - say “Aye”.
I did not have a horse in the sale, so no conflict of interest.
The chance of a lifetime for Nick Nicholson to earn the plaudits he has recently been receiving.