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Fate Of Famous Kentucky Three-Day Event Uncertain

Like the vast majority of equestrian events last year, the 2020 Land Rover Kentucky Three-Day Event (LRK3DE) was cancelled because of the coronavirus pandemic. The first five-star event in North America, and one of only seven in the world, the LRK3DE has now had to postpone tickets sales for the 2021 event as the state of world health in April is still uncertain. A second cancellation of the event could lead to the end of the event and of Equestrian Events Inc. (EEI), which puts on the event.

EEI was hopeful that they could make up for some of last year's financial shortfall by hosting the 2020 American Eventing Championships (AECs) at the Kentucky Horse Park in August, but that show was also cancelled. This leaves the organization in a precarious financial position.

Though ticketholders for the 2020 LRK3DE could roll over their tickets to the 2021 event—to the tune of $900,000—a 2021 cancelation would require EEI to refund their money. EEI has received government payroll protection, an emergency disaster loan and has maxed out its line of credit, says Lee Carter, executive director of EEI. Carter says the organization is prepared to submit an application for the next round of payroll protection as soon as applications can be received.

Though the 2021 Badminton Horse Trials, held in Britain, is slated to run behind closed doors just 10 days after the LRK3DE, running without fans isn't an option for the Kentucky Three-Day. The vast majority of the event's income comes from the over 800,000 visitors who attend the event each year. The event also has a major impact on tourism in Lexington, Georgetown and surrounding cities.

EEI has produced a plan for how they intend to keep spectators and competitors safe, including limiting seating for both the dressage and show jumping phases; cross-country by its nature is socially distanced, but plans are in place for areas of the course that are notoriously crowded. The organization is awaiting a decision from both the state of Kentucky and from the United States Equestrian Federation (USEF) as to if they can host the 2021 event. USEF currently has rules in place that don't permit spectators at any USEF-sanctioned competitions.

A Look At Equine Markets Amidst COVID-19

Jill Stowe, PhD, associate professor in the University of Kentucky College of Agriculture, Food and Environment's Department of Agricultural Economics, presented at the UK Ag Equine Programs' monthly Equine Forum virtual meeting June 24 about the impact COVID-19 is having on equine markets.

She began by giving attendees a definition of a recession, which is a period in the business cycle where economic activity declines (often measured by declines in growth in Gross Domestic Product, or GDP). In the U.S., a recession is often defined by two consecutive quarters of declines in GDP.

According to Stowe, a recession results in an increase in unemployment, decrease in income, decrease in consumer spending, rising business failures and a falling stock market. Recessions have many different sources, including bursting of financial bubbles, credit crunches and, as we are experiencing, pandemics. These contractions are a normal part of the business cycle (there have been five recessions in the past 40 years as a reference), but they are normally short-lived; since the Great Depression, the longest recession lasted 18 months, from December 2007 through June 2009.

Stowe said that an “official” U.S. recession (characterized to two consecutive quarters of GDP declines) is likely if the coronavirus pandemic lasts longer than expected, but acknowledged that significant economic hardships are already being realized. For instance, in Kentucky (as of June 4), nearly 886,000 people had filed for unemployment, which is approximately 43 percent of Kentucky's eligible workforce.

Governments attempt to counteract economic contractions by getting people spending (consumer spending constitutes 70 percent of GDP) through lower interest rates and fiscal stimulus packages. Since interest rates are already near historic lows, for the current crisis, the government is relying on stimulus checks to encourage consumer spending.

She also noted that there are two types of “normal” economic goods, necessity and luxury. A normal good is one which experiences increasing demand when income rises. The rate of demand increase determines whether the normal good is a necessity or luxury good. When income increases, demand for luxury goods increases at an increasing rate; however, when income decreases (like during a recession), demand declines at an increasing rate. Consequently, industries involving luxury goods are more volatile than necessity goods. Relevant to the discussion at hand, she noted that from an economic perspective, horses are considered luxury goods.

Moreover, the equine industry is one of Kentucky's signature industries and constitutes one of the most important sectors in Kentucky's agricultural economy. In fact, the equine industry has been characterized as an economic cluster in Central Kentucky, which describes a network of geographically connected organizations and institutions.

Taken together, it is likely that Kentucky's equine industry will be hit harder than most by contractions in the economy. First, in an economic sense, equine markets act like markets for luxury goods and hence are more volatile. Second, due to the equine industry's organization as an economic cluster and its prominence in Kentucky's agricultural industry, the overall impact on Kentucky's economy is magnified and far-reaching.

Stowe considered it instructive to summarize lessons learned from the last recession in 2008-2009 in order to predict how equine markets might react to the current economic climate. Stowe said that nationwide, effects on equine markets included a decline in the number of mares bred and foals produced, a decline in organization memberships, a drop in sales prices and sales revenue, a small decline in competitions and increased animal welfare issues.

The immediate effects of the COVID-19 shutdown have been felt primarily by competitions and sales, and perhaps to a lesser extent boarding and training operations. The shutdown resulted in the cancellation or postponement of local, regional, national and international equine events, including the postponement of the 2020 Olympic Games and cancelation of more than 2,900 FEI competitions in the three-month span following implementation of COVID-19 restrictions. Losing these competitions has a number of negative consequences, including loss of regional economic development, lost income for individuals and lost revenue for organizations.

The shutdown has also resulted in “clogged” pipelines in the equine market as sales were canceled, postponed, or significantly decreased, she said. Getting the pipeline moving will be a key to recovery and noted that watching the first sales resuming in late June might provide an indication of what is to come for sales later this fall.

Boarding and training operations across the world have been faced with a variety of restrictions. In some areas, riding was prohibited and barns were closed to all but essential employees. Many equine professionals were, for a time, were unable to give lessons, clinics and coach at competitions.

At the onset of the COVID-19 restrictions, equine veterinary clinics delayed elective procedures for a time. As restrictions were gradually lifted and with human protections still in place, they are now able to operating close to normal. Hay and feed markets, which are actually more sensitive to weather variations, seem to be unaffected, but should labor shortages arise, availability issues and/or price increases may ensue.

According to Stowe, the long run outlook will depend on a number of factors. The longer the economic restrictions last, the larger the impact will be. In addition, whether the recovery follows a V-shape (quick recovery), a U-shape (a prolonged recovery), an L-shape (no recovery), or something in between. Going forward, unemployment, GDP and disposable income will all be important metrics for recovery in the equine industry.

Stowe and colleague Bob Coleman, PhD, PAS, Dip. ACAN, associate professor and equine extension specialist in UK's Department of Animal and Food Sciences, are launching a research project estimating the impacts from COVID-19 in Kentucky, specifically focusing on breeding, sales, competitions and boarding and training facilities. They will be distributing a series of surveys beginning this fall and expect to be able to share results in 2021.

Britain’s Animal Health Trust To Close; Equine Research Affected

Britain's Animal Health Trust (AHT) is set to shutter its doors forever. A nonprofit organization dedicated to veterinary and scientific research, the AHT has undertaken extensive disease surveillance work around the world. The Trust has virus and bacteria isolates that date back 50 years and it holds DNA samples for every registered Thoroughbred in Britain. The Trust has also completed cutting-edge research on equine sarcoid treatment and the use of HDR brachytherapy to address equine cancer.

The AHT board of trustees reported that they were unable to secure funding to make the organization viable long term and that additional announcements would be forthcoming. The AHT was established by Dr. Reginald Wooldridge in 1942 and has offered veterinary services to cats, dogs and horses since its inception. The staff included scientists, veterinarians, nurses and support staff.

The board began indicating in March that the organization was facing financial struggles and began exploring reorganization options, including closing its small animal and equine practices.

Though financial donations were offered, the board noted that it needed longer-term, substantial funding options to remain functioning. They reported that they would feel dishonest if they accepted the donations and were still forced to close.

Read the AHT full statement here.