Median Key to Maintaining Record September Tide

As most of us can attest from painful experience, this business will always be an exception to the axiom that “a rising tide floats all boats.” Even a record, boomtime sale like the one just completed at Keeneland will inevitably have left many a vessel beached or taking on water. As usual, the September Sale extended a wide spectrum even among the losers, never mind between losers and winners, from the single colt that changed hands for as little as $1,000, to the granddaughter of Take Charge Lady who fell short of her reserve even at $1,450,000.

Overall, however, the single most instructive bloodstock auction of the year yielded gains sufficient that we can once again gratefully defer the revelation famously anticipated by Warren Buffet: “Only when the tide goes out do you learn who's been swimming naked.”

While a $5-million colt provided fresh entertainment for your friends outside the industry (“What do you mean, he's never had a saddle on his back?!”), the two most significant indices were embedded deeper in the sinews of the sale.

One was a median of $70,000, back up from $67,000 last year to match the sale record set in 2022, and maintaining an extremely wholesome consolidation relative to the years preceding the 2020 pandemic. During what had been depicted as a bull run, the years 2016 to 2019 produced fragile and fluctuating medians of $40,000, $55,000, $50,000 and $47,000.

But while the median is always the key barometer, perhaps the most astounding metric of the whole auction was the one reported after its opening session, when the 21 highest prices were paid by 20 different entities. It's hard to believe that anything like that could ever have happened before in Book 1. And while geopolitical uncertainty continues to haunt the wider world, with the next auction at Keeneland scheduled alongside a febrile election, our own parish is evidently feeling comfortable in raising the stakes. For we can do so in an environment favored, among other things, by a communal (if hardly unanimous!) effort to stamp out cheating and abuse and a purse structure, in places at least, that threatens to dignify many a yearling investment with viability.

The sheer range of the September Sale makes it uniquely informative, combining as it does every layer of the pyramid. As has been said, it isn't just a market, it is the market. So while the overall picture will only be completed by blue-collar domestic auctions this fall, not to mention the premier yearling auction in Europe, we have certainly reached a point where we can validly quantify the vigor of current trade.

The accompanying table (Table A) charts the summer-through-September U.S. yearling circuit across the last decade, excluding the emergency calendar improvised for 2020. It shows that the overall value of the market, between Fasig-Tipton's July and Saratoga (Select and NY-bred) auctions and Keeneland September, reached its post-2008 crash/pre-Covid peak in 2018 at $478.2 million. Having virtually matched 2019 trade as soon as 2021, at $448.2 million, it surged 14.8% to $514.4 million in 2022, when both houses set records. Having stabilised last year at $510.8 million, this time round trade has reached a new peak of $530.5 million.

These numbers having been realized from generally stable demand–3,230 American yearlings have changed hands this year, compared with 3,271 to this point in 2014–it stands to reason that the average price of an American yearling has behaved accordingly. Sure enough, having retrieved its 2018 high in 2021, at $139,264, the average has jumped ($152,774) and consolidated ($153,039) before now making another 7.3% leap to $164,225.

Privately, no doubt, the Keeneland team will be relieved by a record-breaking sale as the imperative response to the pressure being applied by their great rivals across town. Despite having sold 495 yearlings this summer, down from 584 last year, Fasig-Tipton actually achieved a marginal increase in gross for a significant hike in average, rounding out to $240,000 from $200,000.

That reflects a particular encroachment on the elite sector, precisely when the biggest spenders have been intensifying competition. As Table B shows, between 2016 and 2021, a total of 120 seven-figure yearlings changed hands at the auctions under review; of these, Saratoga accounted for 19 (15.8%). In just three years since, there have been 132–and its share has advanced to 36 (27.3%).

Both houses have prospered from this increased muscle at the top of the market. Yearlings selling for $1 million or more have accounted for 12.7% of overall turnover, building on a tick over 11% in the two preceding years. These returns at least double the proportion of the market credited to seven-figure sales in 2016 and 2017. So much for all those complaints, over recent years, about the dilution of competition by partnerships between big spenders!

On the other hand, growth at the top could easily disguise what is always the consignors' greatest fear: a middle market hollowed out by polarization. It feels all the more crucial, then, that the September median should have proved so resilient. The median made year-on-year gains across all 12 sessions, sometimes only marginally, but peaking with a giddy 25% hike on day four.

There is, moreover, far more coherence to the measuring of performance since Keeneland resolved to stop meddling with the sale format. However irritably consignors receive the distribution of their drafts, it does feel as though the structure is bedding down in such a way that buyers can reliably find big fish in the biggest pond. There is supposed to be give and take, though one major consignor just seems to pull its late allocation altogether. In total one-fifth of the catalogue was scratched, a rate recently exceeded only in the exceptional circumstances of 2020 (22.3%).

No fewer than 804 hips, moreover, left the ring unsold–equivalent to 22.7%, up from 20.2% last year. In some cases, true, that might actually reflect the kind of ambitious reserves stimulated by a strong market, and post sales have evidently been brisk. Nonetheless the RNA rate must qualify our satisfaction with all these records, for the reality is that the conventional indices of median and average will always exclude the weakest elements of any sale.

That always feels especially pertinent to the performance of stallions. Sometimes, admittedly, vendors retain a horse as a sign of faith, persevering in the hope that it can get closer to a deserved value at the 2-year-old sales or even racing in their own silks. In other cases, however, cold horses will be dumped at a loss. So while there are duly no hard-and-fast rules, I always feel a little wary about “rewarding” a stallion, through a higher average yield, for failing to find buyers for a relatively high proportion of his stock.

Those caveats duly noted, let's take a look at how the new sires have been faring with their debut crops. (Table C)

As we all know, despite the certainty that the great majority will never again command so high a fee, these horses are the annual refuge for an appalling proportion of commercial mares. Hard to blame the breeders, who are merely anticipating ringside demand, but history shows that a warm reception at the sales is no guarantee that a new stallion will actually sire runners. It's becoming pretty clear, however, which ones have (or have not) done their job to this point.

To their credit, the pair that most exposed clients to catalogue saturation have maintained demand in pretty emphatic fashion. Charlatan stands top of the class, by average and median alike, much as you would hope if you had paid the second-highest fee of the intake. He has already offered as many as 107 yearlings, finding homes for 88 of them, for a median four times the conception fee.

But even that pales next to Yaupon, whose next yearling to bring down the hammer will achieve his 100th sale of the crop! That's out of 112 offered to date, yet they have managed a median five times his $30,000 opening fee. This horse impressed a lot of people on inspection and proves how some bandwagons can nowadays keep rolling even against the challenges of inundation. Next year, of course, we will have a record-breaking rookie coming to market, but Yaupon and Charlatan are giving supporters of that horse room for optimism.

Yaupon is actually matching the $150,000 median of two pricier stallions, neighbors at Darley, who divide him from Charlatan in the averages. Of this pair, Essential Quality will for now be avoiding Maxfield's eye around the barn–but these remain the very earliest of days.

Charlatan and Maxfield both landed a seven-figure sale at Keeneland, where Yaupon sold a colt for $900,000. In terms of punching above weight, meanwhile, Tacitus has a pedigree that has become still more regal since his retirement, and is multiplying his $10,000 fee very nicely on median and average alike. But the standout performer, strictly on yield, is Beau Liam. Priced at little more than a case of good bourbon, he is registering an eightfold yield by median–and hitting a factor of nearly 12 by average! The sensational speed he exhibited in a curtailed career make him a luminous candidate for the 2-year-old pinhookers, in particular, but he also has an auspiciously seeded family.

Among the established sires, the big guns remain Curlin (50 of 59 sold so far, at a median $455,000, with his September sale-topper contributing to an average of $610,800); Into Mischief (53 of 73 at $450,00/$593,679); and Gun Runner (74 of 87 at $425,000/$546,729). The venerable Tapit's diminishing output has been duly prized (26 of 32 at $501,230/$355,000). But it's the next in the list, Not This Time, whose supporters have most to celebrate. These yearlings were still only conceived at just $45,000, remember, and he has processed 97 of 115 at $300,000/$388,855.

Given what he is also doing in Europe, meanwhile, it felt rather surprising at Keeneland that Justify did not beat a single sale of $1 million (a very glamorous colt presented by Woods Edge), matching one son sold at Saratoga. I would willingly wager that one or two major European programs will end up reproaching themselves for missing a trick or two, among his less expensive sales. Perhaps Norman Williamson and Mags O'Toole will instead have to be rewarded for having the good sense to go back to the well!