Bill's Columns

The North American and European auction marketplace enjoyed a 10-year run, from 1998-2007, when prices continued to climb until, in 2007, the auction marketplace broke through the $2-billion barrier, when over 30,000 horses sold averaged $75,463. But the horse market itself was overheated, and after the World Financial Crash of 2008 the auction market, like the North American and European foal crops, collapsed by 40%; by the end of 2009 the auction market gross had plummeted to around $1.2-billion. The market then literally crawled along the bottom for three more years before beginning to rebound in 2013. In that year the auction gross shot up 24%, by almost $300-million, to $1.488-billion, and the average jumped 19%, from $58,028 in 2012 to $69,005 in 2013.

Auction market revenues grew by about 10% total over the next two years, 2014-15, but then dropped back a touch (3%) in 2016. After a slow first couple of months at the January and February mixed sales (down 5%, but these constitute less than 4% of the annual auction marketplace), the market picked up consistently and finished 2017 with post-crash revenue highs of $1.751-billion, and a $76,298 average for 22,961 horses sold, which was 63.3% of the 36,293 catalogued. Gross sales increased by 11% over 2016, while the average gained 8%.

The North American and European auction marketplace divides itself into four sectors, beginning with "first-half" (of the calendar year) mixed sales, which take place, as mentioned, in January and February. The Two-Year-Old sales are the second sector, March – June. Yearlings sell from July – October, and “second-half” mixed sales wrap up the sales season in November and December. For the most part, the North American sales take place first in each sector.

The North American two-year-old sales were up 10% in gross and 21% in average (to $98,525) in 2017, though the number catalogued dropped by 10%, and the number sold by 9%. The European two-year-old market jumped 21% in gross and 14% in average, though the European sales account for just 25% of the combined two-year-old market, whereas European sales total 45% of the combined overall market. Taken together, the combined two-year-old market was up 13% in gross and 19% in average, and the $259-million two-year-old sale gross accounted for 15% of the total auction market gross of $1.751-billion.

Combined yearling revenues increased by almost $100-million in 2017, from $755.9-million to $851-million, a gain of 12.5%; and, of course, yearlings are the biggest single sector, accounting for 48.5% of the total combined auction revenues. The North American yearling sales were up by $56-million, or 14%, while the European sales were up by €33-million, or 10.7%. The year closed out on a high with combined mixed sales of $506-million, up 11% from 2016, though in this sector the big jump was in Europe: US second-half mixed sale revenues were up by just 3%, whereas the European mixed sales were up 22%. The level to which the European sales have achieved at least parity is illustrated by three metrics: Europe accounted for 48% of the combined yearling revenues; 45% of the mixed sale revenues; and 49% of the 22,961 horses sold.

There is plenty of evidence that the biggest growth in the 2017 auction market was at the top; on both sides of the Pond there were a lot of alarm bells going off in the much broader numerically middle market. People who don’t know much about the breeding side of the industry tend to assume breeding is a ‘safer’ investment than racing; it probably is, but it’s still highly risky, and only really works financially if you can hit a home run. They key to success for breeders, realistically, is to at least break even on the horses which are ok but not stars; and to have stars, and get paid for them. The second part of the equation is working fine, but a lot more horses are ok than are stars, so even though the market is up, breeders aren’t doing cartwheels.

The other notable factor is how the market has shrunk in the last ten years; we can measure it precisely: 24%. In 2007 the average price for 30,063 horses sold (62.8% of the 47,854 catalogued) was $75,413. In 2017, the average price for 22,961 horses sold (63.3% of the 36,293 catalogued) was $76,298. The clearance rate from the catalogue and the average were virtually the same; the number catalogued and number sold were each down 24%. Probably a higher percentage of horses bred are sold now than they were ten years ago, but that’s another matter; we can say, with a good deal of confidence, the North American and European auction market has dropped by nearly a quarter in the last ten years. For those who have survived or come in since, the market is looking pretty good, though it has to be somewhat tempered by the fact there has been, in fact, just 4% annual growth (17% in four years) since the big 2013 recovery.