Optimistic View Heading Into Leaner January Sale

Buoyed by the strong commercial market of 2017, strength of the U.S. stock market, and recent federal tax law changes favorable to investing in horses, there is an air of optimism heading into the Keeneland January horses of all ages sale.

The Jan. 8-11 auction in Lexington, with sessions beginning at 10 a.m. ET daily, will be the first test in the new calendar year of whether the gains realized in all markets in 2017 will be sustained.

The catalog consists of 1,583 entries, representing a 16.3% decline from the 1,893 cataloged last year, with four sessions compared with five in 2017. The catalog includes 678 broodmares and broodmare prospects, 628 yearlings, 264 horses of racing age, and 13 stallions and racing or stallion prospects.

Topped by the $1.025 million price paid by Don Alberto for Siren Serenade, an Unbridled's Song mare in foal to Tapit , the 2017 sale resulted in 961 of the 1,401 head offered selling for $28,785,500, with an average price of $29,954 and a $10,500 median.

Bob Elliston, Keeneland's vice president of racing and sales, said there is every reason to be optimistic about the January sale, especially if returns seen in the sale company's September yearling and November mixed sales are an indication. Overall in 2017, Keeneland had its highest gross of $538.6 million since the $600.3 million total in 2008 and with fewer horses sold (5,940 in 2017 versus 8,194 in 2008).

"It took nine years to get there, but it was a dynamite year," Elliston said of Keeneland's post-recession recovery. "Can it continue in 2018? I think there is still some wind in those sails."

Elliston said higher receipts for fewer horses indicates sellers are motivated to bring quality stock to sales.

"I think folks are being more selective about what they bring to the commercial market," the Keeneland executive said. "Less is not necessarily a bad thing. Quality is the key. It doesn't make sense to bring something to the sale, especially when you have the weather elements you have in January, if it's not viable. We score differently these days. We're talking about the quality of the horses we are offering, the depth of what we are offering, and not just about how many we can roll through here."

Consignor Archie St. George said the November sales numbers, especially returns for weanlings and broodmare prospects off the track, bodes well for January venue.

"Based on November, it should carry over," St. George said. "November was very strong for the foals that are now yearlings. The top end was really good and quality horses brought plenty of money, especially fillies off the race track with good pedigrees. The mare market was hit and miss."

Among the positive factors also affecting the market heading into 2018 are the recent record levels of the U.S. stock market and the Tax Cuts and Jobs Act approved by Congress and signed by President Donald Trump late last year, which includes provisions favorable to some equine holdings, including broodmares and yearlings.

NTRA: Tax Bill Benefits Owners, Breeders, Horseplayers

"It speaks to the treatment of expenses and depreciation and it speaks to the treatment of hobby situations, where you can recoup those expenses against your income streams quickly," Elliston said. "The life cycle of a racehorse, unless you have a 20-year-old stallion, is very limited and the ability to push that expense recovery up against your revenue streams earlier is a dynamic situation ... There are a lot of things here with positive elements relative to the horse business."

Mark Taylor of Taylor Made Sales Agency said he believes the new tax laws will have minimal impact on the January sale, particularly since they only took effect Jan. 1.

"I don't think you will see the full implications of the tax law change at this sale for a couple of reasons," Taylor said. "I don't think people have had time to adjust to it and really plan. I don't think it's going to move the needle on the lower-level horses, of which there are more at this sale, by percentage, than in November. The middle market and up gets the biggest benefit from the tax changes. The upkeep to take care of those horses on the bottom end is the same as it is at the top, and I just don't see it trickling all the way down to the bottom."

One inescapable aspect of a sale in Central Kentucky in January is the potential for weather that challenges both those showing and looking at horses, and this year's frigid temperatures leading up to the sale tested the resilience of industry professionals.

On the Saturday preceding the sale that begins Monday, temperatures were in the single digits early and rose only to the mid-teens by the afternoon. Sunday's weather was only slightly better, rising to just above freezing for the first time in Lexington since before Christmas.

Those showing and inspecting bloodstock in the barn area were bundled to levels that made it hard to recognize each other as portable heaters blasted hot air into the walking rings.

Looking for a silver lining, Elliston said the brutally cold temperatures could be a positive, not negative, factor on trade.

"In some respects, inclement weather pushes people to another level," he said. "They feel 'If I'm putting this much effort into this process, I'm going home with something.' On the selling side, they don't want to take those horses back home if they've gone through the elements and shown their horses when it's 8 degrees. They're going to put reasonable reserves on their horses and try to get commerce done."