It has not been a good year for Thoroughbred sales and the commercial breeding industry in California.
The entire auction world was dragged down by the struggling economy in 2008, but Barretts Equine Ltd., based on the grounds of Fairplex Park in Pomona, California, had a particularly tough year.
Barretts took in a reported $26,886,050 in 2008, a decline of $16.8-million (38.5%) compared to 2007. Barretts’ two-year-old in training sales – the strength of its auction menu – suffered a 34.3% drop in total sales. That was considerably worse than the American two-year-old market’s overall decline of 8.6%.
Barretts had to cancel its new Classic I sale of horses of racing age, scheduled for the day after this year's Breeders Cup at nearby Santa Anita Park, because of insufficient entries.
Then on Monday night came word of Barretts President Jerry McMahon’s resignation. McMahon, 57, co-founded Barretts in 1989 with Ralph Hinds and Fred Sahadi.
McMahon said his departure was a personal decision based on “timing in my life and where the industry is.” He said the downturn of 2008 played a minor role in his decision.
“Only in the context that you kind of get used to operating at a certain level. The most fulfillment in an auction is to play at the top of the game, and times are a little more challenging now,” McMahon said. “I still believe in California. I think California is too big a piece of the industry for it to stumble too much longer. I have a lot of confidence that this market will come back, and California will play a role.”
The Los Angeles County Fair Association, a self-funded, privately held, not-for-profit organization, owns Barretts. I spoke with Chief Executive Jim Henwood regarding the future of Barretts.
What is your commitment to holding horse sales?
Henwood: I think that’s not really our call. That’s going to more come from the horse industry. Barretts as a business cannot afford to lose money, but we’re willing to take less of a return, predicated on the improvement in our belief that California Thoroughbred racing can find its way through all the challenges and strengthen itself.
How would you grade Barretts’ performance in 2008?
Henwood: It was not good. I don’t know how you put a grade on it, but it was not where we wanted it to be. But this is not anything new in coming. We’ve had concerns, as everyone has in California, dealing with the state of our racing. And fundamental to racing is the Thoroughbred breeding industry as an important agricultural business in our state.
What changes are in store for 2009?
Henwood: I would say all the sales companies are looking at their business right now. These are tough economic times. You make adjustments, which are predicated on market conditions, and we have to make sound financial judgments. Will we be conducting as many auctions in 2009 as in 2008? The answer is no… See story on cancellation of October sale
We are not looking to walk away from the Thoroughbred auction business. For us, it’s a $15-million capitalization – that’s the capitalized cost of the business. We have developed a very, very strong business as it relates to the auction environment for Thoroughbreds in the Western U.S. We consider Barretts to be the very best of the region, and comparable to the sales climates one would see at Fasig-Tipton or at Keeneland.
Our challenge is to work through these challenging economic times and help improve the breeding structure in California. We’re also talking with the industry about a training center here at Fairplex, dealing with questions like what would happen if we see the loss of a racetrack like Hollywood Park and how would Fairplex fit into that?
How is recruiting for the March sale coming?
Henwood: We are actively out there recruiting horses for these sales and we’re about to go into our catalog for the January sale, and things are looking good in that regard.
Bill Baker and Kim Lloyd (Barretts vice presidents) are talented professionals in their own right, and my hope is that the industry will see that we still have very, very competent leadership as we work through the loss of Jerry McMahon.
At this moment they are going back to the East Coast to finalize our catalogs and try to get more horses for the March sale in 2009. Recruiting has been a fundamental problem, but things are looking as good as they can right now. We have great buyers and a great Thoroughbred industry in California, and we want to bring the best of the best and present them in our March sale for buyers on the West Coast and around the world.
Subscribe to:
Post Comments (Atom)
5 comments:
It sounds like everyone is having a tough time of it lately. If major Kentucky auctions are having problems, I can only imagine it is worse for the more regional outfits. Do you think there is anything they can do, or is it a wait it out kind of situation?
is it fair to say, in this climate, states like illinois which have terrible owner/breeder incentives to begin with will suffer greater than others?
Patrick- A good incentive program can have a positive, sometimes dramatic impact on a state's racing and breeding industries.
Look at how Louisiana and Pennsylvania are growing under the opportunities their statebred programs are presenting.
New York has an excellent statebred program and a viable commercial market for New York-bred horses. (I could do with a few less NY-bred races when I'm playing Saratoga)
Likewise, a weak or non-existent incentive program can put a state at a competitive disadvantage.
In the case of Illinois, purses have been stagnant for years, and the breeding industry is emaciated.
But honestly, the Illinois-bred purses, stakes program, and bonuses for winning in open company are pretty good. If you breed a decent Illinois-bred horse, you can do ok.
When I look at the Illinois program, I see decent earning opportunties and the ability to breed to out-of-state (Kentucky) sires and drop the foals in Illinois.
The Illinois model does not provide much incentive to create a breeding industry, but it does give some hope for the bottom line of owners who breed (or buy) a decent Illinois-bred.
The goal should be to breed a horse that can win in open company, but statebred purses are a good fall-back.
Mandy- the regional sales had a really rough year in '08, particulatrly the breeding stock sales. There's little or no demand for low-end breeding stock, and several of those sales will disappear from the calendar in 2009.
The regional yearling sales will struggle with the bad economy, but I think the breeding and sales industries in California, Florida, New York, and the Midlantic can weather this storm. I'd like to see a few more of the regional breeders put their good horses in their regional sale instead of shipping to Kentucky.
Buyers will find quality horses whatever sale they are in, and more often than not the big fish in a small pond strategy seems to work out.
It is fair to say all breeding stock sales (with the possible exception of FT November) had serious problems this last selling season. It is also naive to believe that only regional sales will be affected by the new economy. One only has to look at the percentage of foals and/or yearlings that are sold for a profit in Kentucky to realize this is going to be a problem everywhere.
Post a Comment