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NZRB's Supply Chain Wastage Report presented to AGM

Around 50 members were in attendance at the Annual General Meeting of the NZTBA in Auckland recently specifically to hear the report delivered by the CEO of the New Zealand Racing Board Graeme Hansen, on the thoroughbred breeding figures and the domestic racing requirements for the future.

Graeme Hansen, CEO,
New Zealand Racing Board
With all the talk of synthetic tracks and increased racing to satisfy the needs of the commingling agreement with Tabcorp in Australia, the question has often been asked as to where the supply of product will come from? For at least the past five years the NZTBA has been issuing strong warnings that the foals numbers were declining and action was needed in this area.
In November last year the Racing Board commissioned a study to cover all three codes and commencing with the thoroughbreds to look at the supply chain of horses.

The Board commissioned financial analyst Greg McCarthy – also an owner/breeder- of Sutton McCarthy Ltd, a company which provides strategic, financial, and treasury advice to corporates, SOEs, multinationals, and other clients. Mr McCarthy worked in conjunction with NZTR and was on hand at the AGM, to assist in the delivery of the data. Click here to view the Power Point presentation.

The presentation entitled "Supply Chain Wastage" put forward the various scenarios of under-supply, along with possible means of countering the downside.
"Supply Chain Wastage" is a "catch all" phrase for the numbers of horses bred for racing that fail to race or participate to their full potential.

Statistics show that between 2002 and 2006 the foal crop declined from 5,191 to 4,119. Two thirds of this decline can be attributed to fewer mares being mated for varying reasons but mainly the lack of suitable economic return, while the remaining third reflects that breeders have ceased breeding their mares after December 1 – thus shortening the breeding season also for economic reasons. To date any increase in imports has been offset by increased exports.

As well between 1998 and 2006 the number of registered mares reduced from 9,546 to 8,251. The percentage of mares being left empty has not changed significantly and breeders have not retained a pool of empty mares that can quickly be reactivated.

The table on Slide 4 of the Power Point presentation illustrates what typically happens in the supply chain and how we end up with an average of only 44% of the horses bred going to a trainer, and the remaining 56% failing to reach their full potential.

Assuming that we are now going to be dealing with a reduced foal crop the figures for 4000 foals alter the equation markedly and there will be approximately 430 starters less from the 2006 foal crop onwards.

The bottom line of this reduction is a serious shortfall in race horse numbers and this is already evident in the current crop of two and three-year-olds. This in turn has a major impact on our betting revenue. It is a proven fact that a reduction in field size from 12 to eight carries with it an associated decrease in betting revenue of 33%.

The graph on Slide 5 represents the numbers that are racing from 5000 foals and how often they race:


In turn 430 less starters per season over the next four years will require an increase in starts per horse per season from the current level of 5.6 to 7.4. That carries with it a required increase in lifetimes starts per horses from 13.8 to 18.5 which even taking into consideration the positive impact of a 40%increase in returns to owners over the past two years is a pretty tall order.

If we factor into the equation, that fuel, feed and labour costs have sky rocketed over the past six months that almost negates any increase received by owners in stake money. The report did not have data on how many breeders were in fact owners yet the breeders were still affected by the increased costs of fuel, feed and labour.

From the NZTBA's own data base it is known that approximately 80% of NZTBA members have one or more horses in training with a further 10% having more than one.

Hansen went on to present further statistics and projections all of which are in the full report posted on the NZTBA website. The presentation was full of data about the costs to the industry if we didn't increase the foal crop and/or the number of starters but gave no consideration to the actual cost of investment in producing the product and whether that is viable to breeders.

The report goes into detail outlining the possible initiatives that could be made available to encourage the increase in foal numbers.

These include Breeders' bonuses, foal, service fee and import rebates, breed to race incentives, race bonuses and many more and whether in fact they are achievable.

The statistics on bonuses for breeders do not illustrate them as being economically viable or very achievable. They conclude that broad based breeder or importer incentives are unlikely to cost effectively increase the size of the New Zealand foal crop, and simply put, that over the medium to long term an increase in supply is only sustainable if there is an increase in demand. Therefore incentives that stimulate demand are more likely to be successful albeit they take longer to work through the supply chain.

Which brings us to possible Owner incentives, which suggest that the answer lies in higher and targeted race stakes policies, and reduced costs to owners – similar to the policy already adopted by NZTR of free nominations and acceptances etc – and incentives to retain and race a horse in New Zealand, race rather than trial, and keep a horse in work longer, which should increase demand.

To this end the report calls on NZTR to review their ratings based handicapping to provide for horses to drop back in class, implement a national turf assessment program to improve standard of tracks and review their synthetic track strategy and revamp their meeting classifications, programming, race dates and barrier trials and offer trainer incentives.

Throughout the presentation Hansen was at pains to point out that as the report had been prepared in conjunction with NZTR that they would be the "caretakers" of the report and it would be up to them to consider it further.

The Racing Board's role he maintained was to canvas the report and open the subject up for discussion. In fact as one councillor quipped "Hansen's job is to set fires – it's left to someone else to put them out!"

The Executive of the NZTBA continues to lobby NZTR for the inclusion in their business plan for Breeders Bonuses and more specifically bonuses that can be paid in addition to stake money. They don't want to take money away from owners by diluting stake money and believe the NZRB should make a pool of funds available to cater for this. The Executive are confident that they are being heard at NZTR and look forward to making some vital progress in this area to combat the decline in foal numbers.

- Michelle Saba