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Karaka 2011 Sales Series - the Ups and Downs

Karaka 2011 Sales Series - the ups and downs The New Zealand Bloodstock sales series concluded recently highlighted the reliance of offshore buyers at the premier end of the sale, and the declining state of the domestic thoroughbred racing industry at the festival end. While the top end held up well, the middle to bottom end haemorrhaged badly leaving a number of breeders quite bewildered. According to a statement released by New Zealand Bloodstock, across the seven days of selling, 1050 yearlings were sold for a combined turnover of $88,094,250 (down 6% from $93,567,400 in 2010 with 80 more horses sold). Turnover at the 2010 Sales Series was New Zealand Bloodstock's second highest on record, increasing by $20 million - a massive 25% - on the previous year. The result this year therefore continues a healthy upward trend of an 18% increase from 2009, notwithstanding the extraordinary spike last year. The Premier Sale produced its second-highest ever turnover where 375 lots sold for $65,574,000 agonisingly close to last year's $65,723,500. Remarkably the median of $140,000 exceeds last year's figure to become New Zealand B's second highest on record, indicating the middle market strength that was evident at Premier.The final Sale average was $174,864, down just 4% on last year's $181,557. The clearance rate also strengthened to 79.45% for the two days, just shy of last year's 80%.After three days of selling in the Select session, 418 of the 627 catalogued lots were sold for $19,107,000, representing an average of $45,711. In a great show of strength from the middle market the final median is just shy of last year's $40,000 at $39,000, with a final clearance rate of 73%.Last year's Select Sale results showed a dramatic increase on the previous year, with a 35% increase in turnover, 40% increase in average and 33% increase in median.After 492 catalogued Festival lots, 253 were sold for $3,054,250 (compared with $4,916,400 for 429 sold last year), representing an average of $12,072 (down from $14,943) and a median of $8,500 (down from $10,000). The clearance rate was 62% down from 71% in 2010 and 81% in 2009.According to a statement released by New Zealand Bloodstock, Co-Managing Director Andrew Seabrook identifies the distinction between the local and international buying strength as the most significant influence on this year's Sale. "It seems a combination of success by the New Zealand horses and a favourable exchange rate lured a lot of Australians to Karaka this year and we're very grateful for their participation. "We made a point this year of exposing the success from our Select Sale to the Australian market, and one of the highlights was seeing a number of Australians stay on for that session. "It is worrying however to see the overall New Zealand spend down over $11 million this year which had an obvious effect on clearance rates at our Select and Festival Sales. Fortunately the force of the Australian buying strength went some way towards making up for a weakness from our local buyers helping us to post extremely pleasing results." Unfortunately for a number of vendors the results were far from pleasing when the costs involved are considered. The biggest concern throughout the week was the subdued activity from the local New Zealand buyers. With international buyers dominating the Premier Sale, many local buyers targeted the Select and Festival Sales without sufficient firepower to absorb the quantity of horses on offer. "It was simply a matter of too many horses and not enough buyers and a weak domestic market is to blame. We had nice colts with clean x-rays and the potential buyers didn't even bother looking at the x-rays, which was a strong indication that there was no market," according to Brian O'Shea of Poplar Lodge a vendor in both the Select and Festival Series and an NZTBA Waikato branch member. "There is no easy answer to address this but we will be watching closely over the next six months for some progress domestically before we consider mating mares this coming spring. At the moment the fields are full but in two or three years time that may be a different case as no one wants to commit to another horse now to race for a mere $5000 and if the rumours are true that will be down to $4,000.

"Racing for $6,000 was not profitable so $5,000 certainly isn't so if it goes back even further there will be no horses in work. The local trainers who usually buy around 10 horses to make up the numbers in their stable just weren't committing, they only purchased two or three over the entire series. Where are they going to get their two-year-olds next season, and their three-year-olds the year after that? They are finding it too hard to get owners to commit. "We have too many races here to for the small betting population we have, product as the TAB refer to it. In Hong Kong they have around 14 races a week for the population to bet on, here some days we have around 14 an hour. A limited population just cannot afford to bet on that many races, and that's why turnovers are down. "No one likes to sound negative, but this industry is bleeding and until some one starts printing the truth about it it's never going to be able to improve," he said. O'Shea is not alone in his views. Fellow vendors and Waikato branch members Vicki and Wayne Pike of Longlands Stud in Cambridge who had four yearlings in Premier and one colt in Select are also concerned about the state of domestic racing. "My major concern is that the sales results are a direct reflection of our racing industry," Vicki Pike told the NZTBA. "The New Zealand buyers were not in action at the premier sales, usually they kick off the bidding proceedings before the Aussies come in and the New Zealanders were not there and the Aussies were able to get bargain prices with a 25% discount due to the dollar value. "The usual buyers of a good K1 filly for around $100-150,000 just weren't around and fillies failed to sell for their true value. While there is nothing to race for in New Zealand local buyers are not going to buy horses. "Where does that leave the industry, where is the next generation of owners, trainers, jockeys, and breeders going to come from? "We see owners who are struggling to continue to race horses and who are saying we can't do this anymore. Young trainers are struggling to find owners and are looking offshore for stables and opportunities, and who can blame them when there is no promise of a sound future here for them. "We are among the small breeders who in the past have been successful, with 10-12 mares going to stud each year we are the people who pay the service fees, if we start pulling the pin, foal numbers will be down even more and the studs will start to see their cash flow slow down. "In the past year we have given away two K1 fillies that we didn't think could win more than one race and we put down a two-year-old filly. We have seven yearlings, five two-year-olds and three three-year-olds and we are lucky we can take them through and possibly turn them over later on. But really it is a downward spiral. "We have come home from the sales and selected mares we are going to continue with and the ones we are going to sell. "Miss Saigon is one of our foundation families, we are breeding from the fifth generation of that family, and it has been amazingly good to us, with Rangirandoo being the latest star, but we couldn't get a bid on the O'Reilly filly out of Miss Saigon at K1. We had three horses with no bids, including her and a half sister to Veronica Franco," she said. The fact that there is no market for fillies saw at least two vendors Windsor Park Stud and Dormello Stud withdraw all their fillies from the Festival Sale. Bearing in mind that the ratio of fillies to colts in the select sale was two colts to every filly there were some rather nicely bred fillies catalogued for Festival. "The Select and Festival sessions were hard work, due to the lack of a domestic market at the moment. We decided half way through the Select session to withdraw our festival fillies and take them to next level," according to Michael Moran of Windsor Park Stud On the other hand Murray Gregory of Dormello Stud said they made the decision after the Ready to Run Sales not too even bother giving their Duelled fillies that were in the Festival a yearling prep. "We decided to withdraw our Duelled fillies after the Ready to Run sales in November, there was no demand for them there so we made a decision not to bother giving the fillies a yearling preparation but keep them and syndicate them and race them. We are in a position where we have options and don't have to sell them as yearlings. "Our Select sale colts met with our expectations but we took home two nice Savabeel fillies. The state of the New Zealand market is not good there were not many buyers looking for fillies, and it all comes back to stake money. You cannot win enough stake money to cover your training costs, the costs of vets, transport, and the costs associated with racing. "There has been an increase in the number of fillies and mares races programmed and there is handicap allowances etc it's just that the stake money is not sufficient to warrant the training fees going into them. At least if you get a good colt or gelding you can sell it on and recover the costs. "I did notice the clearance rate is right down with over a third of the horses not getting sold in Festival and that is heart breaking for breeders, a lot of those horses will now be given away to the sport horse market or taken home and shot. "Graeme has decided that we are going to give the breeding game away and all the Dormello breeding stock will go up for dispersal at the May sale. We will have around 150 lots and they will be sold on an unreserved basis. Rogerson Stables will go back to being yearling buyers and syndicators of racehorses," he concluded. Hallmark Stud is traditionally amongst the leading vendors in the Select and Festival sales, although this year with various relatives of Katie Lee and Banchee to sell they had a good Premier Sale as well. "As a rule we don't take fillies to the festival sale, we take a certain type of colt, and this year we had all the right horses but people were paying a lot less for them, said Hallmark's Mark Baker the studmaster's representative on the NZTBA. "Quite simply it was a good sale for the Aussies with the dollar value and fortunately they decided to stay on and were strong in Select. The current weakness in the domestic racing scene reflected the lack of local buyers and they were sorely missed as there was no demand for some really nice horses. "The fact that the sales were down $11 million on a local spend is enormous and quite a worry. The kiwis were missing and the pin hookers were missing. "The scary thing is I think we are stuck in this rut and there will be no recovery until stake money increases. There has to be blood on the carpet after these sale results, and there needs to be a major overhaul. Breeders will have to be very careful about their matings this year and take a good look at the quality and performance of their mares and a really hard look at their foals on the ground. "There are no easy answers, the demographics of the country have changed and racing has more competition but the industry is bleeding and not showing any signs of healing." The leading vendor in both Select and Festival this year and last year was Haunui Farm, against the trend their two top priced yearlings in Select were fillies. "Fundamentally we were lucky because they were by a stallion that captured the imagination of the buyers," said Haunui's general manager Mark Chitty, an NZTBA Councillor. "The results produced by Iffraaj (GB) exceeded our expectations, however they were nice horses. He produced a type of horse that the Australians like and he produced horses to type, and we were very lucky. "It was very difficult to sell in Select and Festival, we knew going into the sales that the New Zealand spend was going to be less and less, and generally we had to adjust our reserves to suit the sale. "20 million spend down to nine million is a reflection of the people's interest in the being involved in racing a horse in New Zealand. Will that halve again next year? We knew at the parades leading into the sales that the local trainers had no buying orders, and unfortunately some breeders and trainers are going to go broke. It may be the beginning of the end for some. "There is no doubt about the fact that we can breed a good horse in this country but the strength of the breeding industry does rely on a strong business model in the racing industry and we don't have that at the present time. "The Festival was a lot softer and the money we got for some of those horses was less than we hoped. They were a lot harder to sell. In general though I thought a lot of the Festival horses were under prepared and there were a lot more vendors selling in Festival, in all there were 119 vendors compared to 72 in Select. "I appreciate that with the cost of feed and wages for agistment farms its hard to make any money by preparing yearlings, but by the same token the lesser pedigreed horses don't have a place at the sales," he concluded. However what constitutes a lesser pedigreed horse? A quick look at the sires index of the Festival Sales illustrates that at least 10 of the sires represented were commanding a stud fee in excess of $10,000 at the time the yearlings were conceived. Surely a breeder spending that amount of money would only do so on a mare that could justify it. Consider the loss for the vendor with the Postponed filly, who sold for $2,000, on the back of a $20,000 stud fee paid in 2008, coupled with the cost of upkeep for a year prior to a yearling preparation. Taranaki branch member Heather Crofskey had five fillies foaled in 2009 and offered three at the sales, under Taranaki Lodge that were consigned with Seaton Park. Heather has been in the industry for about eight years, she started with a racehorse that became a broodmare and it grew to the five broodmares she now owns. She and her husband have their own property in Taranaki where their horses reside, so at least this keeps her agistment costs to a reasonable level. Heather maintains if she had to pay commercial agistment costs all year she wouldn't be breeding horses at all, and fortunately for her she only had to pay yearling preparation costs for the final six weeks prior to the sales. "I had three fillies entered from the five I had bred, I withdrew one and passed the other two as they failed to attract a bid. There is no market for fillies," she said. "So what do we do for damage control? I have shot one filly, one will be left to grow out and the other two I am hoping to syndicate into stables in Australia. Fortunately I have contacts with stables over there and we can take them off shore. "This season I paid $11,000 in vet fees to get my five mares in foal. Now I have to decide which mares I carry on with and which ones I cull. My breeding interest costs me at least $70,000 a year, and in the past I have managed to receive a fair return, but with five fillies in my situation - I am wiped out! I sent mares to Ekraar ($15,000), Tavistock ($12,500), Thewayouare ($10,000), Falkirk ($7,500) and Lucky Unicorn ($6,000). "The yearling sales are not an option for me anymore. They don't serve the likes of me, each year we get downgraded. We need a market to sell or to race, I don't want to be told to upgrade my mares, and I don't want to upgrade them. So now, should I scan my mares and look to see if they are carrying fillies, and abort them if they are? It has to be considered? "There is a huge void between breeding and racing and there shouldn't be, they should be working together and helping the industry go forward. What happens in the racing industry is aligned to what I do as a breeder. "Unless you get customer satisfaction from the studs you won't go back, they need to be meeting the needs of their clients as well. They should be very worried about the next breeding season. "There are so many despondent people out there and not just in the festival sale, right across the three sales. The sales were really a disaster for many. The top end held up really well and who could complain about that. The buyers' bench at the bottom end was non existent. "Where do we go from here, at this rate we will see about 1000 horses going through the mixed sale and the result will see dozens of horses going off to the hounds," she concluded. Each year the NZTBA have a marquee at the Karaka Sales, giving its members an opportunity to meet and discuss their involvement in the industry. Chief Executive, Michael Martin was in attendance for the duration of the sales and in that time he received a lot of feed back from both New Zealand and Australian members. "The strength of the Australian buyers in particular held up the top end of the sale and members with yearlings attractive to an off shore market had a successful sale.However members with fillies, or yearlings in the Festival Sale suffered from the lack of local buyers and it was nearly impossible to recover production and selling costs.The declining state of the domestic racing industry over recent years continues to be a real problem for our members. If this decline continues, many breeders will be reluctant to maintain their breeding endeavours at previous levels, which will of course add to a further contraction in all aspects of the local industry."

- Michelle Saba


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