The financial rerating of world assets, and likely very low growth rates, if at all depending on individual countries, over the coming two to three years will have a significant impact on breeding and the number of horses available for racing.
In the second article about the impact of the world financial rerating – click here for the first "Time to reassess to move with the market" - the focus turns to the impact of lower yearling returns on future foal crops and consequently horses available to make up race fields.
While most of the figures are New Zealand based, they highlight similar concerns that all breeding and racing precincts in Australasia must address.
New Zealand racing is commencing a recovery in its racing and breeding sectors after years of neglect and decline, a decline such that four to five years of recovery in real terms was not going to be enough to restore the industry to good health, and more likely seven to ten years.
The 2008 world-wide financial rerating of assets will be a disturbing halt to the recovery after considerable good work has been placed into addressing the declining foal crop and commercial breeding chain.
The average race payment to 2008 is some 42% higher than what it was two years ago, but much work remains to be done, and undone, in the case of million dollar stakes when the vital mid-week races still offer $6,500 maidens.
Those mid-week race meeting are an integral part of co-mingling with STAB, and field sizes are very important to wagering with up to a third more wagering being conducted on 12 horse fields then eight horse fields. Co-mingling is a very profitable part of the New Zealand racing industry, as indeed it will be to every racing industry wherever the same arrangements can be made.
However, the New Zealand foal crop has declined over 20% between 2002 and 2006. Backing up the problem is that between 1998 and 2006 the number of registered mares declined 13.6%. Making it worse is that research suggests that there is not pool of empty mares that could be quickly activated through, say a national breeding scheme.
These fillies and mares have been lost to the industry due to uncommercial breeding returns. Further industry statistics highlight the problem; 30% of the foal crop is exported, 22% are never registered with trainers, and of the 44% who go into work with trainers, 57% of those horses retire in some way through injury or poor performance.
Of the horses that are not registered fillies make up 61%, but only 20% of those fillies make it to stud.
At the present reduction rates there will be 20% less starters by 2012.
Commercial breeding reality is that a Festival Sale yearling must gross $32,700 before commission to break even. The average of the Festival Sale has risen 30% from 2004 to 2008 to be $16,857. The medium has risen 33.3% over the same period to reach $12,000.
The figures for the Select Sale over the same period are; average up 49.2% to $59,709, medium up 45.8% to $48,000, with $43,000 required to break even, and for the Premier Sale the figures are; average up 43.8% to $199,265, medium up 51.7% to $150,000, with a medium Premier Sale yearling requiring $80,000 to break even and a superior Premier Sale yearling requiring $205,000 to break even.
(The averages for the Magic Millions Premier Sale and Wm Inglis Easter Sale over the same period are up 30% and 45.4% respectively.)
The yearling sale break even figures are courtesy of the NZTBA, and while individual circumstances may alter the assumptions, they accurately reflect the industry cost base, particularly for the city based breeder.
So the figures reflect that breeding at the lower level has been curtailed after the long decline in the racing industry real returns with no domestic racing industry to underpin the market. Regretfully the laudable increase in racing returns at the present level over the past four years will not be enough to underpin what will be coming in the next sale series.
The top end of the sale market takes care of itself, as any quality asset class does, but an inevitable downturn in the yearling market from present averages and medium levels will place even more pressure on the lower end of the market that supplies so much of the racing field makeup.
Once again this is not a New Zealand industry problem alone, but this is spread over every breeding and racing area in Australasia, as well as further afield.
The basic tenant of the breeding industry is that the racing industry must provide the commercial clout to continue to breed the raw product. Therefore, field sizes must be maintained for wagering, to maintain stakes, to maintain reasons for owners to return to buy the next yearling for their sport, which, hopefully, the rest of the economy is allowing them to participate in.
Work has been undertaken on various forms of bonus schemes for New Zealand to try and increase the numbers of fillies racing, and ultimately the numbers of mares being bred. The decision of NZTR to allow the present racing bonus scheme to be operated out of industry organisation control is coming home to roost very quickly, and must immediately be corrected, and then very bold moves are required just as quickly, before the next sale series commences.
Co-mingling is producing significant returns to the New Zealand industry and this is an area that is not yet fully leveraged in the market place through media and promotion. This presents an opportunity to takes funds previously not available to the industry, and to invest those funds back into the industry in a major way over the next five years.
If it good enough for sovereign countries to invest in their banking systems to ensure their survival, then it is most certainly good enough for racing industry bodies to invest in their basic infrastructure, urgently.
- Rob Burnet
In the second article about the impact of the world financial rerating – click here for the first "Time to reassess to move with the market" - the focus turns to the impact of lower yearling returns on future foal crops and consequently horses available to make up race fields.
While most of the figures are New Zealand based, they highlight similar concerns that all breeding and racing precincts in Australasia must address.
New Zealand racing is commencing a recovery in its racing and breeding sectors after years of neglect and decline, a decline such that four to five years of recovery in real terms was not going to be enough to restore the industry to good health, and more likely seven to ten years.
The 2008 world-wide financial rerating of assets will be a disturbing halt to the recovery after considerable good work has been placed into addressing the declining foal crop and commercial breeding chain.
The average race payment to 2008 is some 42% higher than what it was two years ago, but much work remains to be done, and undone, in the case of million dollar stakes when the vital mid-week races still offer $6,500 maidens.
Those mid-week race meeting are an integral part of co-mingling with STAB, and field sizes are very important to wagering with up to a third more wagering being conducted on 12 horse fields then eight horse fields. Co-mingling is a very profitable part of the New Zealand racing industry, as indeed it will be to every racing industry wherever the same arrangements can be made.
However, the New Zealand foal crop has declined over 20% between 2002 and 2006. Backing up the problem is that between 1998 and 2006 the number of registered mares declined 13.6%. Making it worse is that research suggests that there is not pool of empty mares that could be quickly activated through, say a national breeding scheme.
These fillies and mares have been lost to the industry due to uncommercial breeding returns. Further industry statistics highlight the problem; 30% of the foal crop is exported, 22% are never registered with trainers, and of the 44% who go into work with trainers, 57% of those horses retire in some way through injury or poor performance.
Of the horses that are not registered fillies make up 61%, but only 20% of those fillies make it to stud.
At the present reduction rates there will be 20% less starters by 2012.
Commercial breeding reality is that a Festival Sale yearling must gross $32,700 before commission to break even. The average of the Festival Sale has risen 30% from 2004 to 2008 to be $16,857. The medium has risen 33.3% over the same period to reach $12,000.
The figures for the Select Sale over the same period are; average up 49.2% to $59,709, medium up 45.8% to $48,000, with $43,000 required to break even, and for the Premier Sale the figures are; average up 43.8% to $199,265, medium up 51.7% to $150,000, with a medium Premier Sale yearling requiring $80,000 to break even and a superior Premier Sale yearling requiring $205,000 to break even.
(The averages for the Magic Millions Premier Sale and Wm Inglis Easter Sale over the same period are up 30% and 45.4% respectively.)
The yearling sale break even figures are courtesy of the NZTBA, and while individual circumstances may alter the assumptions, they accurately reflect the industry cost base, particularly for the city based breeder.
So the figures reflect that breeding at the lower level has been curtailed after the long decline in the racing industry real returns with no domestic racing industry to underpin the market. Regretfully the laudable increase in racing returns at the present level over the past four years will not be enough to underpin what will be coming in the next sale series.
The top end of the sale market takes care of itself, as any quality asset class does, but an inevitable downturn in the yearling market from present averages and medium levels will place even more pressure on the lower end of the market that supplies so much of the racing field makeup.
Once again this is not a New Zealand industry problem alone, but this is spread over every breeding and racing area in Australasia, as well as further afield.
The basic tenant of the breeding industry is that the racing industry must provide the commercial clout to continue to breed the raw product. Therefore, field sizes must be maintained for wagering, to maintain stakes, to maintain reasons for owners to return to buy the next yearling for their sport, which, hopefully, the rest of the economy is allowing them to participate in.
Work has been undertaken on various forms of bonus schemes for New Zealand to try and increase the numbers of fillies racing, and ultimately the numbers of mares being bred. The decision of NZTR to allow the present racing bonus scheme to be operated out of industry organisation control is coming home to roost very quickly, and must immediately be corrected, and then very bold moves are required just as quickly, before the next sale series commences.
Co-mingling is producing significant returns to the New Zealand industry and this is an area that is not yet fully leveraged in the market place through media and promotion. This presents an opportunity to takes funds previously not available to the industry, and to invest those funds back into the industry in a major way over the next five years.
If it good enough for sovereign countries to invest in their banking systems to ensure their survival, then it is most certainly good enough for racing industry bodies to invest in their basic infrastructure, urgently.
- Rob Burnet
