Poor economy impacts horses

By Rochelle Haliburton

Lexington is often called the horse capital of the world, hosting huge events such as the Blue Grass Stakes, the Rolex Kentucky Three-Day Event and Keeneland racing.

With the economy going through hard times, horse sales have decreased but the industry continues to strive to hit higher sales than last year.

David Switzer, executive director of the Kentucky Thoroughbred Association and Kentucky Thoroughbred Owners and Breeders, said the Thoroughbred industry is a manufacturing industry. By breeding horses, the industry is manufacturing a product that will hopefully be used for racing.

“We are not immune from downturns in the economy,” he said. “Our sales in Kentucky were down about 40 percent last year. 2007 was a record year so we were down from a record year. Sales worldwide were down a bit more than that.”

Switzer believes that the U.S. economy will show positive movement in the second or at least the third quarter, and that this will be a positive move for the horse industry.

“It is important to note that Kentucky’s Thoroughbred industry is an international industry. Foreign buyers play an integral role in our economy, and as foreign economies are seeing a downturn, so too have the foreign buyers slacked off,” Switzer said.

In the mid-1980s there was a similar economic downturn due primarily to a change in tax laws. The industry adjusted after a few years, as is evidenced by a strong sales market in the ‘90’s and early 2000, Switzer said.

The same will happen as the nation’s and world’s economy rebound, he said.

“We are in a belt-tightening year, so we are dependent, like all businesses, on a healthy economy,” Switzer said.

Jim Williams, director of communications at Keeneland Thoroughbred Racing & Sales, said that in general, Keeneland saw a steep decline in prices last year.

“In our September Yearling Sale and our November Breeding Stock Sale, we felt the decline was a reflection in the downturn of the economy,” Williams said.
As compared to years before 2008, gross sales, average prices and the average median were all down significantly because of the economy.

“You make adjustments in your operations where you can, and you look forward to the day where the economy will improve,” Williams said.

Williams said it is difficult to predict sales for this year and the future of the horse industry because much of it will depend on the general economy.

“If we are fortunate enough to see an upturn in the general economy, then we would hopefully see a parallel upturn in the Thoroughbred economy,” he said.

Kenneth Troske, the director of UK’s Center for Business and Economics Research, believes the economic conditions are affecting the sales.

“People who participate in the horse industry or those who are buying horses may be affected negatively by the economic crisis, and it seems to be having a depressing effect on their businesses and prices in the industry,” he said.

The amount of gambling has gone down, the amount of money wagered at tracks has gone down and purchases have gone down, Troske said. If people partake in the horse industry as a luxury, people are more likely to cut back when an economic crisis hits, he said.

“Economic conditions are affecting sales and to spend millions of dollars on a horse might be classified as luxury, unless you are participating in the industry as a business,” Troske said.

Switzer believes that the World Equestrian Games in 2010 will provide a significant economic impact on Kentucky. Many businesses, including the Thoroughbred industry, should experience a positive impact, he said.

“As an optimist, I believe the market will soon adjust, thus allowing our breeding industry a chance to make a fair return on their investments,” Switzer said.