LEXINGTON, Ky. — Next to the first Saturday in May – the date of the Kentucky Derby – now is quite possibly the most exciting time for racehorse enthusiasts in the Bluegrass State. The fall meet at Keeneland Race Course is about to start, following its September Yearling Sale.

And, the Breeder’s Cup isn’t far away, set to take place this year at Louisville’s Churchill Downs Nov. 4-5. All these events are important to the horse industry, especially in an economy that has brought a steep decline in equine cash receipts and in a state so widely known for its horses and horse farms.

David Switzer, executive director of the Kentucky Thoroughbred Assoc./ Kentucky Thoroughbred Owners and Breeders’ Assoc., said there are encouraging signs in the marketplace right now despite a sluggish economy. This has prompted many horse farm owners to put their farms on the market.

“I think there’s going to be changes as far as ownership of some of the farms because of the recession. Just like any other small business, there are going to be some that will be affected and probably go out of business. But there’s going to be someone else come along and buy that farm,” he said.

Switzer noted no matter how many horses leave the state, land is generally something that is a part of any investor’s portfolio. He also said many people come to Kentucky to visit horse farms, a fact that means big business to the state’s tourism sector.

“I don’t know of anybody that has ever planned a vacation to come to Lexington to look at a housing development,” Switzer said. “We do have people coming to Lexington (and surrounding counties) to look at the farms.”

Of those, only the biggest and most noticeable farms come to mind for many; places such Calumet, Lane’s End and Three Chimneys. But Switzer pointed out many horse farms in Kentucky are small operations.

“About six years ago I did a very unscientific survey by talking with some of our farms. They had gross sales of about $450,000, but their net income was about $50,000 a year,” he said. “Now we do have some very wealthy people and we’re darned glad we do have them, but it’s mostly mom-and-pop operations, farming less than 75 acres, that are a lot of the backbone of our industry.”

In Kentucky, those horse farmers don’t always get the same tax breaks other livestock producers do, such as paying taxes on feed when cattle producers don’t. Switzer said his organization will be in Frankfort when the General Assembly convenes in January to try to get some of that changed.

“We will be going back in the 2012 session trying to get relief from that sales tax on the feed, the fencing and farm equipment that the horse industry is subjected to, that other livestock industries are not,” he said. “We will (also) try to see if we can find some revenue sources to bolster our purse accounts at our racetracks, as well as our breeders award program, so that we can be a little more competitive with other states that have sources of revenue that we don’t.

“If we can get this economy jump-started, I think our reserves in the General Fund are going to increase. The legislators want to help us, we just have to figure out how to get some revenue in here.”

While horse owners wait patiently for those revenues to arrive, Switzer said the industry is concentrating on producing a quality product, as opposed to quantity.

“There was a time in the early 2000s when you could have taken a billy goat up to the sales ring and sold it, but that’s not what the market is demanding now. They’re demanding quality and that’s what we’re producing,” he said.

The Keeneland Yearling Sale, which finished up last Saturday, serves as a barometer of sorts to indicate just how well things are going in the Thoroughbred industry. According to information from the Lexington racetrack, the September sale, which is one of four there each year, is the “world’s largest horse sale and is widely acknowledged as the world’s premier marketplace to buy and sell yearlings.”

As of the 13th day of the two-week sale, Keeneland noted “gross receipts for (the 13 days) totaled $223,487,800 for 2,921 horses, an increase of 12.7 percent over last year’s 14-day sale, when 3,059 horses sold for $198,254,900.”

Switzer said this year’s sale has seen a median increase of about 20 percent over last year, something that is positive for the equine business. “The median is a better barometer than an average and we had some days where the median was up by 40 percent,” he said. “Those are good signs.”

Switzer said 1,000 fewer horses were cataloged this year over last year’s sale, meaning horse breeders are culling their stock by breeding only the best to get the best foals.

“It’s like breeding to a dairy cow that doesn’t produce milk; you’re not going to do that for long,” he said. “We’re seeing smaller numbers, and one of the rules of economics is you like to have more demand than supply to drive prices up, and that’s what we’re seeing.”

Switzer said this year’s sale had more participants than he has seen since 2007, the last year before the current economic downturn. Those include foreign buyers and American domestic buyers. In fact, last year approximately 48 countries were represented at this sale.

“We’re seeing a lot of new people coming into the industry,” he said. “I guess they’re getting tired of playing in the stock market, and decided to invest in horses! We are really encouraged by what we’re seeing in the market right now.”