Friday, January 23, 2009

COMMERCIAL BLOODSTOCK MARKETS: The Supply's the Key


by Jerry McMahon

From Hokkaido, Japan to Newmarket, England and points in between, vibrant Thoroughbred auctions hum along in support of regional, national, and international racing circuits. It’s been my longtime observation, particularly as industry costs and risks have increased, that very few individuals have the wherewithal to breed horses as a primary means to achieve success on the racetrack. Nature being what she is, the odds against success are simply too high to be borne by one individual, except in very unique circumstances (aka lots of luck or VERY deep pockets!). It’s no coincidence, then, that in this country the old-money families that dominated racing through the 1940s were gradually replaced by owners who utilized the auction ring or the claim box to fill their racing stables.

Other than the happy outcomes brought by the occasional Stymie or Lava Man, claiming is usually for those who love the day-to-day action and arbitrage that goes with it. Owners shooting for the home run most often find their way to auctions composed of unraced Thoroughbreds: weanlings, yearlings, or 2-year-olds. Perhaps the best West Coast example of this type of owner would be the late, great Bob Lewis, who rode the auction ring to success in the Triple Crown races and beyond.

So what makes a successful commercial market? The simplest answer would be a credible market that has a large, dependable supply of horses with enough depth in quality to attract large numbers of buyers. The only way to achieve this is for the auction company to have access to plenty of professional breeders and consignors whose over-riding goal is to produce the best runners possible. For the whole process to work, the auction prices have to be high enough to support the investment by the breeders; and… oh yeah, the resulting runners have to be successful enough to keep the whole cycle in motion year after year, even through difficult economic times like these. Ultimately, buyers have to believe they’ll get runners from that particular auction.

Next up: Sires and the Ring

McMahon is an auction industry consultant and former founding president of Barretts Equine Limited, California's premier regional sales company. He has more than 35 years experience in the racing industry, having previously served as auction sales manager for CTBA Sales and vice president of Fasig-Tipton California, Inc. Watch for his upcoming guest posts.

Photo by Benoit & Associates

4 comments:

Larry Zap said...

nice article...i know how tough it is for people who race to knowingly sell their good ones...not too many people in California who are capable of breeding multiple good horses have any intention of selling their good ones...this is what i find is wrong with the localized industy here in CA...Wygod has sold some good ones fairly cheap, but they are usually conformationally challenged- he did sell Officer and i bought a good cheap one off him Rush with Thunder for $20k...i guess my point is there is no big breeder in CA who tries to breed good ones for the market and that includes Harris farm andf Old English Rancho...my biggest worry is that the small breeders who have been capable are going to have a difficult time staying in...what will that leave us at the auctions...i will say that the Unusual Heat folks have tried to spread the wealth and have tried to sell numerous good Unusual Heat's- Golden Doc A, Leathal Heat, etc. with no success and bought them back...Suances, who has impressed me with his yearlings that were offered were put in the last two Barretts yearling sales only to be bought back by the breeder which left a bad taste in mine and other people's mouths...thanks for letting me vent

Jerry McMahon said...

Thanks Larry. I thought it would be a good idea to begin a balanced dialog about auctions in order to seek out some ideas regarding the California market. There's currently a lot of negativity in place, and it's time the whole industry leaves that behind and begins looking for practical solutions to all the inherent problems. Your perspective as a buyer is a great place to start.

sidfernando said...

Jerry, you and Larry actually make the same good point: You need quality product to sustain a commercial marketplace, and supply usually exceeds demand when the quality starts to drop.

roia said...

We've been watching the Karaka Bloodstock market here in New Zealand and thinking what fabulous buys there are here for the US Dollar. Right now the NZ Dollar is .50 to the American dollar and the horses are fabulous. Hong Kong and Singapore (to say nothing of Australia) are scooping up some very decent horses. With the exchange rate what it is, American buyers would be smart to have a look.

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