The results from the Keeneland September yearling sales are extremely disappointing. According to the Louisville Courier Journal, "During the first four days of the 14 day sale--a period when the finest horses are usually auctioned--buyers spent 42.52 percent less on yearlings than last year." Many feel that this trend is indicative of a doomsday scenario being played out across the entire industry.
"We're going to see farms close," said Keeneland sales director Geoffrey Russell. Others are predicting lower stud fees across the board and the ripple effect will mean lower state sales taxes collected on stud fees. Last year, those fees fell 14 percent. The money from those fees is pumped into a fund for breeder incentives, so that, too, will continue to suffer. In addition, businesses that supply hay and feed to horse farms may face hard times along with smaller boarding operations.
It is a crash that many saw coming. Like many other industries, the horse industry had become infatuated with making big money, fast. Horses sold for big bucks, stud fees were astronomical and too many foals were being born. Investors popped in and out of syndicate deals where big bucks could be raked in, quickly.
"The speculators, two years ago, they were here," noted Case Clay, president of Three Chimneys Farm. "We're not hearing that much from them right now."
Many are at risk and none more so than breeders who sold yearlings way under the cost of their stud fees as well as investors who may have borrowed money to pay those stud fees.
The bright side may be that if the industry learns its lessons, breeds fewer foals (ideally mating the best to the best) at reduced stud fees, the correction will ultimately result in fewer, stronger horses selling for realistic prices. The other point to note is that there are bargains to be had if you have the cast to spend on horses, a luxury in any economy.
Dare I say it is no different from what happened on Wall Street? The big question will be who wises up going forward to prevent this from happening again and again.
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