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The yearling sales in Kentucky are clearly defined as a much improved marketplace over 2009 and 2010. The statistical guidelines show nice percentages of gain over last year’s heinous sales results, and they hold promise for better things in 2012.

Well, it’s about time because that’s about all the good news.

The yearling market is still seriously oversupplied, and the percentage of profitable yearlings is still very low and is fundamentally unhealthy for everyone: breeders, stallion owners, and sales companies.

Not to pummel Fasig-Tipton, which put on a heck of a positive sale with essentially every horse that wanted a new home finding one, but let’s dissect the profit line for their October sale, which concluded a three-day run yesterday.

With an average price of $24,010 and a median of $12,000, the numbers improved massively over the 2010 stats ($13,616 and $5,000), but one must consider expense and profitability even in light of the much improved stats. With a median of $12,000, there is no chance that even half the animals sold made a profit. By the lowest estimates of cost for raising a yearling, a breeder is perched right on the median figure. And probably more if it is raised in Kentucky.

Then there is the cost of the stud fee. And sales expenses that will run between $1,500 and $2,000 per horse.

So the least expensive yearling that could have made a profit brought a hammer price in the neighborhood of $17,000 to $20,000. But a lot of the yearlings commanding that price or higher were also bred on the higher stud fees.

Some of those who probably were profitable around $20k were hips 427 (Sightseeing), 245 (D’Wildcat), 851 (Run Away and Hide) or 56 (Put It Back) because of the lesser cost of the stud fees.

But quite a lot of the yearlings bringing the sales average or less were bred on stud fees equal to or higher than the hammer price for the yearlings.

Now, we are getting to the point of recognition about why this situation is unhealthy for all parties.

Even with an improved sale that was well attended, the difference between profit and loss was not the difference between good horses and poor horses. The issue is the volume of yearlings on the market, and the excess of yearlings creates a hyper-selectivity among buyers.

The average hyper-selective yearling buyer wants a colt that is big enough to be a 2-year-old, even if it scarcely grows between now and next year. The buyer also wants thickly muscled, well-defined, powerful-looking prospects with no comments on the vet report and a sheen or glow to them that attracts the eye.

If a breeder misses any of those markers, he is selling in the no-profit category.

The horses who managed to tick all the boxes, however, did very well at this sale.

Overall, 23 yearlings sold for $100,000 or more at FTK October, a remarkable achievement in contrast to the results from last year’s yearling environment. A bit more than 100 additional horses sold well enough to turn their breeders a profit, taking the price list down into the $40,000 range. Between that level and the $25,000 barrier, profit or loss is too fine to estimate by statistics. The yearlings that cost less to produce in that range made their breeders some level of profit; the rest did not.

This should be viewed as truly horrifying news by stallion owners and managers. From 885 horses through the ring, fewer than a quarter made a profit. How can stallion farms then expect to buy new stallions, collect currently owed fees, or to amortize their own debts?

The results offer stern indicators to breeders. In no uncertain terms, the dictum is CULL!

If a breeder’s program isn’t producing big, very strong, very well-balanced and athletic yearlings, the place to start changing is with the elimination of producers that do not meet those criteria.

The more positive news is that Fasig-Tipton has managed to make its October sale something of a hybrid between the Keeneland September books 3 and 5, with very nice yearlings that everyone wants and few can afford, along with an oversupply of average to good yearlings that are only infrequently capable of bringing a profit.

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