Tuesday, March 9, 2010

A Closer Look at the Calder Sale

Initial reports on the Fasig-Tipton sale of two-year-olds in training at Calder last week were cautiously optimistic. For example, the Daily Racing Form focused on the increase in the average and median price for those horses that actually sold, and devoted much of its story to positive comments from, who else, Fasig-Tipton's Boyd Browning, and from the lucky consignors who sold the $2.3 milion sale topper, a colt by Distorted Humor out of Tomisue's Delight.

But, on closer examination, the numbers from the sale look rather like US unemployment figures; the rate of decline may be slowing, but any real upturn isn't in sight yet.

For a start, the auction grossed $3 million less than in 2009, and nearly $40 million less than just four years ago, in 2006 (though that year's $62 million total was inflated by the lunatic bidding war between John Ferguson and Demi O'Byrne for the $16 million colt who subsequently became the lifelong maiden The Green Monkey).

True, this year's catalog for the premier two-year-old sale was substantially smaller than in recent years -- 237 horses in the catalog for 2010, compared to 271 last year, and 308 back in 2006. That accounts for the lower gross. But even with more selectivity on the part of Fasig-Tipton, the proportion of catalogued horses that were actually sold (i.e., after subtracting both scratches and horses that failed to meet their reserve --"RNAs") failed to improve from the 38% level where it's been stuck since 2008. In contrast, in the boom year of 2006, fully 50% of the horses catalogued were actually sold. The failure to improve the percentage sold even when the catalog itself is shrinking is definitely a worrisome sign.

And the actual number of horses sold at this boutique auction continued its steady drop, from 154 in 2006, to 111 last year, to just 91 this year. The market may have been there for a good horse, as several consignors and Fasig-Tipton folks said, but evidently buyers' definitions of what a good horse looks like are getting more stringent.

Another interesting way to analyze the data from the sale is to look at some of the major buyers who've been active at Fasig-Tipton Calder, and see whether those who are becoming less active are being replaced by new buyers with equal resources. The short answer is no, they're not. Let's fill in some of the details.

The top end of every thoroughbred sale is dominated by Sheikh Mohammed of Dubai, usually in the person of his bloodstock agent John Ferguson, and by the Coolmore powerhouse of Ireland, bidding through Demi O'Byrne. Dubai interests, of course, now own Fasig-Tipton, so it wouldn't be surprising to see that Ferguson continued to buy actively at F-T Calder. After all, he'd bought five back in 2006, nine in 2007, five in 2008 and six in 2009, big numbers for a sale this small. But this year, Ferguson signed for only two horses. And the Coolmore contingent, who'd bought six back in 2006, including the ill-fated The Green Monkey, also bought only two this year.

The sale topper this year was bought by Jess Jackson, who's been a buyer at every F-T Calder sale since at least 2006. But this year he bought only that one horse, compared to as many as four back in 2006. And Public Storage mogul B. Wayne Hughes, who's been among the leading buyers at this sale for years, didn't buy a single horse.

Another familiar name missing from the sale list was Ahmed Zayat, who'd bought at each of the past three sales. It's just possible that the Fifth Third Bank and the Bankruptcy Court might have clipped his wings a bit.

Some of the slack in recent years had been taken up by high-end racing partnerships, looking for horses likely to make it to the racetrack soon enough to head off partners' complaints about the delays. Cot Campbell's Dogwood, for instance, has been a regular buyer at F-T Calder; he bought nothing this year. Centennial and Sovereign bought one each. West Point, bucking the trend, bought four, the most they've ever purchased at this sale. But the partnership operations as a group have not stepped up to fill the gap left by the retreat of the big individual buyers.

The most stable part of the demand for high-end horses seemed to come from British and Japanese buyers, who've been a mainstay of this sale for years, and who continue to purchase at least 15% of the horses sold. It's difficult to put precise numbers on the sales to foreign owners, since many of them operate through agents, and the ultimate buyer's name isn't disclosed on the sales reports, but that portion of the market seems considerably more stable and secure than the North American segment.

Overall, the sales results support the proposition that the US racing industry needs to continue its shrinkage -- fewer foals, fewer horses sold at auction, fewer tracks, fewer race days. There's still way too much product out there, whether it's the horses themselves or the races being run with five-horse fields and nobody watching. It's a process that's ongoing, and without some sort of centralized coordination, it's a process that's going to leave a lot of good, conscientious horsemen and women out in the cold. Some of the consignors who entered those 146 horses that didn't sell at Fasig-Tipton Calder could well be among them.

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