Keeneland Sale Tests Depth of Short Yearling Market

When Gerry Dilger and the team at his Dromoland Farm shopped last year's Keeneland January Horses of All Ages Sale for just-turned yearlings that could hopefully be resold later in the year at a healthy profit, they hit the mother lode.

The two top-priced "short yearlings"—so named because they had just become yearlings Jan. 1—at the auction were a Union Rags  colt bought by Albert Racing for $390,000 from Indian Creek, agent, and a $375,000 Into Mischief  colt purchased from Taylor Made Sales Agency by Ardfield Bloodstock.

Consigned by Dromoland to the Keeneland September Yearling Sale, the Into Mischief and Union Rags colts were sold for $850,000 and $750,000, respectively, and serve as examples of why the short yearling market is attractive to some investors.

"They were just very good horses, and if I could have bought them in November, I would have. … And I paid a lot for them," Dilger said. "I just shop the sales. I come out of the November sale and go on to January, and I will be at the Fasig-Tipton February Mixed Sale. I buy them expensively and hope it works out as well."

Buying and selling short yearlings is a popular niche, and the depth of the market will be tested during the Jan. 13-17 Keeneland sale with 804 short yearlings cataloged, representing 43.3% of the 1,856 entries.

At last year's Keeneland January sale, there were 346 yearlings sold from 465 offered, totaling $13.9 million.

There are a number of reasons why some breeders prefer to sell foals in January and February that otherwise would have been offered two months earlier as weanlings during fall mixed sales or to hold on to them until the traditional yearling sale season later in the year. 

Mark Maronde, the director of sales development at Keeneland, said the strong weanling market in November is one reason for the large number of yearlings entered in this year's January sale. By entering in the January sale, breeders avoid the headier competition found in November and hope to capitalize on foal buyers still needing inventory.

"Selling short yearlings has been a good market for breeders the last couple of years as they don't have to compete against top November offerings," Maronde said. "We were still taking entries for the January sale throughout the November sale."

Also, the January market has become a more popular venue for pinhookers such as Dilger who have found themselves outbid by a larger number of end-users buying weanlings.

"With more end-users buying foals, pinhookers have left November with money and fewer horses," Maronde said.

There were 1,193 weanlings sold in North America last year for $71.2 million, down 10.1% from the $79.3 million paid for 1,240 the previous year, continuing a historical pattern in which an up year is followed by a downturn. Last year's weanling average of $59,706 and $23,000 median price represented declines of 6.6% and 14.8%, respectively.

According to BloodHorse MarketWatch data, of the 665 yearlings sold prior to July 1 (the window for classification of a short yearling) last year, 248 were resold later in the year. The resold short yearlings were acquired for an average price of $39,031, well above the overall short yearling sale average of $28,605. When resold, the pinhooked short yearlings averaged $66,777, according to MarketWatch.

Consignor Stuart Morris said most of the short yearlings in his consignment are late foals—born in April or May—that needed more time to develop and present themselves better than if they had been offered for sale in November.

"A lot of the babies just need more time to mature and grow up," Morris said, adding the additional two months benefits both buyer and seller. "Older horses have more reliable X-rays and less chance of those X-rays changing for the worse. And you have a better idea of what you may have to address."

Morris said he added more yearlings to his January consignment after seeing higher than normal weanling buying activity among buyers who are end-user rather than re-sellers.

"Some of my January yearlings were entered at the last minute because I saw what appeared to be a higher number of end-users aggressively shopping for nice weanlings," the consignor said. "I thought that because it was so strong in November, it would continue on through January. I also did that last year and had a great sale and am trying to do the same thing."

In addition to taking advantage of a robust market for foals, Morris said some breeders elect to sell their yearlings earlier in the year to drive cash flow and cut down on the expenses and risks associated with maintaining the individual until later in the year.

"Sometimes it is financially driven," Morris said. "I have a lot of clients that like to get through the yearling sales season and then look at their income and determine whether they want to sell in January. There is less risk, less exposure, and fewer bills."

But not all breeders are optimistic about the short yearling market this year.

Brendan and Olive Gallagher, whose Frankfort Park Farm's seven-horse Keeneland consignment consisted only of short yearlings, withdraw all of them from the sale after analyzing the weanling market in November. Brendan Gallagher said a closer analysis of the mixed sales showed there was stiff demand for those foals deemed to be the best offerings but weakness at lesser price points.

"My short yearlings were all nice individuals, but the pedigrees wouldn't be considered top bracket," Brendan Gallagher said. "At the November sales, we got money for the top foals, but we found it a bit softer below that."

Gallagher said the influence of pinhookers within the weanling and short yearling markets led him and his clients to target the late-season yearling sales, where the buyer base is comprised of more end-users, trainers, and traditional yearling pinhookers more receptive to the individual's physical attributes than relying so much on pedigree.

"The foal market is a different market than the yearling market," Gallagher said, "because you are playing more to the pinhookers, and they are influenced by fashion. I believe we will get more if we can bring them to market next fall."

Though Frankfort Park's Keeneland consignment has been withdrawn, Gallagher said two of the farm's best-bred yearlings—one by Hard Spun  and another by Frosted —will be offered as short yearlings through other consignors at another mixed sale.