State of The Horse Industry – Glimmers of Hope
December 29, 2010
By Connie Lechleitner
EC January/February, 2011
Supply and demand. It’s the golden rule of commerce, and it’s no different when it comes to selling horses. And since the Great Recession, there have been many more horses available than buyers to purchase them. But is there a light at the end of the tunnel?
Auctions See Optimism
If the results of the Congress Super Sale and the AQHA World Championship Show Sale are any indication, a stabilization may be on the way. “We’re cautiously optimistic,” said Tim Jennings, owner of Professional Auction Services, manager of both sales. “We had a very, very good sale at the Congress, and much better sale than we expected for the World Show. Our ring men made the comment during the Congress that it’s the first time in two years that they witnessed buyers who really wanted to buy and were very active bidders. I think there is a lot of pent-up demand, and people are starting to feel a sense of stabilization.”
Jennings noted that the enthusiasm and interest among buyers continued during the World Show Sale. “We had really good crowds at the World Sale, more than 500 watching it online and nearly 50 registered online bidders,” Jennings said.
The Super Sale grossed more than $1,180,000 and averaged more than $8,000 per horse. The sale also had a larger percentage of the catalog sold. Not to mention a stratospheric price for it’s high seller. AQHA Stallion Huntin For Chocolate topped the sale at a record $300,000. Consigned by the Bilek Family Trust, the stallion was purchased by Darol Rodrock. The AQHA World Championship Show Sale grossed $2,050,900, with an average sale price of nearly $6,725, up 21 percent over the 2009 sale.
Even the Appaloosa Horse Club’s World Championship Show Sale, held October 27 in Fort Worth, Texas saw strong sale prices. The sale average of $4,481 was within $200 of the 2009 average of $4,659, and the high selling horse brought $25,000, $6,000 more than the highest bid at the 2009 sale. The sale featured nearly 100 head of registered Appaloosa horses.
To get a point of view from another part of the horse industry, Jennings also pointed to two fall Thoroughbred sales, the Keeneland and the Fastig-Tipton Mid-Atlantic yearling sales. “What we found was that broodmares and yearlings were very soft,” he said. “People are looking for finished horses that they could go and race with – in the stock horse market we are seeing very similar things – not many people are breeding, but they want a broke horse they can go and do something with.”
The Numbers Game
After a period of higher numbers, the horse industry has made a serious correction through the number of mares bred in the past few years, Jennings noted. “This is the third big correction we’ve seen in the horse market since we’ve been working in the industry,” said Jennings.
Mike Jennings, also of Professional Auction Services, noted the highest number of AQHA horses ever registered occurred in 1984. “That year we had 169,000 registered horses,” he said. “By 1990, the number dropped to 101,000. We had another surge in 2006, when we had 166,000 registered horses, the second highest ever in history, and now in 2010 we’ll be below 100,000. That’s 55-58 percent below the 2006 total. Based on our past experience, we need about 105,000 horses registered to balance supply with demand.
What the numbers tell us is that the demand for show prospects in the next few years will begin to exceed the supply, the Jennings said. “We’ll begin to see not only a shortage of good quality prospects, but in a few more years also a shortage of nice finished horses,” said Mike Jennings.
Ensuring the Insured
Evan Kaplow of Kaplow Insurance Agency, Chappaqua, New York has been watching both the private sale and auction markets closely. Kaplow Insurance is the official insurer of the Reichert Celebration Sale, Congress Super Sale and the AQHA World Show Sale, and insures horses of all levels of value. “Our clientele includes everything from $1,000 horses to $10 million horses,” Kaplow said.
The economy also impacted how horse owners insure their animals, Kaplow said. “When the recession hit, owners of multi-million dollar horses made the decision to self-insure some or all of the replacement price of their horses,” he said. “They took the risk to drop some of their insurance and absorb the loss should something happen.”
Delayed Reaction
When observing the economy’s impact on the horse industry over the past few years, Kaplow noted: “What I’ve noticed is that when the economy started to slip five or six years ago, it didn’t affect the horse market right away. Over the past two years, you’ve seen more of the impact of the recession with values of horses dropping. A horse that might have sold for $100,000 in a robust market might have sold for $50,000 over the past year or so.
“And those really high-end horses – really good, proven horses – still sell and for a good price, but over the past few years they had fewer buyers than they might have had in a better economy. Those selling horses in the $10,000-$15,000 range that might be unproven or prospects are having a very hard time selling.”
Jennings noted this phenomenon was demonstrated at the 2010 World Show Sale. “We saw a greater disparity in price between the top horses and those that were not as exceptional,” he said. “We had some exceptional horses that sold at this year’s World Sale. They were talented individuals who were by popular stallions and had extremely good female families, and they sold exceptionally well.”
Professional horseman Jason Martin shares the opinion that exceptional individuals continue to sell well. “The great horses will still sell. If I had ten $100,000 horses, they would all sell, but the truth is, there aren’t that many great horses,” he said. “I find the middle and low end of the market is still pretty soft.”
Private Sales
When it comes to one-on-one private sales, a few professional horsemen and women also say things are improving in the market.
“I think I’d say that interest in buying horses has been gradually increasing all year,” said Professional Horseman Carl Yamber of Roberta, GA. “The market for those top ten horses is always going to be good, because there aren’t that many of them.”
He echoed comments that a horse owner attempting to sell the average to lower end horse is having a hard time – and offered a reason why. “Honestly, I blame more of that on the end of the slaughter plants than on the economy,” he said. “When a family had a horse that became crippled and unable to be used, they used to be able to sell the horse and get a few hundred dollars for it. Today, they have to pay $200 to have it put down and another $200 to bury it. I don’t think our politicians have any idea about the enormous impact the end of the slaughter plants has had on our industry.”
However, Yamber isn’t sure the drop in supply due to reduced breeding will be quite as dramatic as predicted by Jennings. “There are fewer people breeding horses right now, but the better stallions are still breeding and the good broodmares are also still having foals. I think there will still be plenty of nice horses around.”
Still, Yamber admits that the horse sale market is not what it once was. “During better years, we might have sold 150 horses a year,” he said. “Now, we might sell a third of that.”
Ruth Ellen from Frisco, Texas has owned The Horse Source Inc. for 15 years. She brings horse buyers and sellers together. She feels that the market is starting to change, even at the lower levels. “I think there’s a lot of people wanting to buy horses. Throughout the year, I’ve been seeing more interest in buying horses in all ranges,” she said. “We had really good interest especially during the Congress, but it’s been that way all year.”
She noted that the most popular request has been for a finished Western horse that is big enough to be competitive in the Hunt Seat Equitation. “I’m seeing interest in all levels of competition from the Novice Youth and Novice Amateur, to Amateur, to both age groups of Youth,” she said. “And the Select Amateur division is proving to be an especially big market, too.” Ellen also said there has been a steady market for futurity prospects, but the older, finished horse is still the most requested.
“I believe there are people who don’t have a lot of disposable income but who love the horses, and they sacrifice to be able to follow their passion,” she said. “They don’t go out to eat or to the movies, and save all they can to do things with their horses. They’re picking and choosing the shows they go to.”
Ellen also observed that the dynamics of buyers and sellers have changed over the past two years. “Two years ago, everyone wanted to sell but not that many people wanted to buy. Last year, you saw more people who brought horses to sell at the larger shows who said they didn’t want to haul them back home, and they compromised on price more,” she said. “This year, sellers stuck to their prices and were more willing to take a horse back home if they didn’t get their asking price.”
Kaplow noted that horse auctions that include show incentives, such as the Reichert Sale, seem to help horses retain their value better. “People value the show eligibility of programs like that one, and they do help the value of the horses,” he said.
Obviously the current economy is having a huge impact on the middle market of the horse industry. “It hurts the horse economy when fewer people have the money for training, advertising, and showing,” Kaplow said.
Ellen agrees. “I think we, as an industry, have to cater to all levels of people’s expertise and budget,” she said. “We can’t have just all high dollar horses – if we do, we don’t have an association because the wealthiest people in our business don’t make up the majority of our numbers. That’s why the programs like the Trail Riding and Introductory Shows are so important.”
Seeing the Light?
Like many in the business, Tim Jennings remains cautiously optimistic. “I still believe there is a lot of pent-up demand, and I believe it is just a matter of time before things begin to break open,” he said.
Jennings believes that the 2012 or 2013 foal crops could bring very strong sale prices because the demand for well-bred horses – both racing and stock horses – will be up, while the supply will not have yet increased.
Regardless of the price range or the supply, everyone agrees that all horse buyers have the same goal in mind. Ellen perhaps said it best: “Everyone wants to get the best horse they can for the price they can afford.”
Tips to Make the Market Work for You
So can the laws of supply and demand in the horse industry work for you? Timing, as they say, is everything. If you’ve been considering a return to the breeding business, now could be the perfect time to do it. Our sources suggested the following tips for more successfully marketing your breeding stock.
• If you want to be successful selling breeding stock, breed for what the horse-buying public wants, not for personal preference. Study auction and show results to see what individuals are winning and selling at higher prices, then plan your breeding program around the highest quality mares and stallions you can afford.
• Upgrade your broodmare quality. Horse breeders tend to underestimate the value of a high quality female line, but buyers look closely at the dam’s side when they consider their purchases. Look for broodmares with exceptional bloodlines, show records or produce records.
• Increase your stud fee budget. Horse buyers want to buy horses that are by popular stallions that are proven and producing successful offspring. Again, study auction and show results to see which individuals are producing winning show stock and higher sellers.
• Establish ongoing relationships with potential buyers long before sale time. Building relationships with potential buyers at horse shows, auctions, social events and through advertising and social media can greatly enhance your success in marketing and selling your breeding stock.
• Enrolling in incentive programs such as the AQHA and NSBA Incentive Fund or APHA Breeders Trust; show-based programs such as the Reichert Celebration, the Southern Belle Invitation or the Tom Powers Triple Challenge; or even state-based incentives such as those in Kentucky or Texas can help increase the popularity and price of your breeding stock.
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