HALCYON DAYS

President Jacob Zuma holds up South Africa’s new 50 rand note
bearing Nelson Mandela’s image…
(Photo : 2 Oceans Vibe)

“Be fearful when others are greedy,
and be greedy when others are fearfull.”
Warren Buffett

Mick Goss
Summerhill Stud CEOThe 2011 edition of the South African Racing Fact Book has just been published, a labour of love by former Gold Circle chairman, John Bescoby. You don’t have to be a racing aficionado to know that it’s an invaluable piece of work, especially if you’re interested in the economics of the game.

Among the many famous things the world’s greatest investor, Warren Buffett, has said in his 82 years on the best time to be involved in the market is : “Be fearful when others are greedy, and be greedy when others are fearfull,” or words to that effect. If you’re into breeding racehorses, pages 36 and 37 of the Fact Book are a revelation. The tide has gone out on the number of registered breeders, and especially on the number of mares returned (i.e. those reflected as having been bred in the records of the National Horse Racing Authority). Assuming these statistics are reliable, as we’ve been predicting, the broodmare population shrank by some 500 head in 2011 (not quite the 25% the pundits have been professing, but a sizeable number nonetheless). On the basis of a worldwide average of 60% live foals to mares in active service, the total number of foals we may anticipate from the 2012 crop will be of the order of 2800. We all know what happened last time there were less than 3000 foals on the ground.

Breeders had never had it quite so good before, and those who had stock cashed in with both hands, as the demand for racehorses outstripped supply. The number of colourholders has held its own despite the times we live in, unless you are a doomsday prophet, the signs for a bull market in 2014, are up there in technicolor. South African racing has traditionally demanded something approaching 3500 foals a year to sustain its fields, and if that is the fundamental number, the 2012 foal crop will leave us close to a 700 head (or 20%) short of the mark. Imports are becoming increasingly expensive to acquire, not only because the domestic markets in the countries favoured by South Africans (Australia in particular) have already begun their recovery, but also because of Rand weakness (though who knows, now that we have Nelson Mandela’s image on our banknotes, what kind of effect that could have on the Rand)?

All of this has to be seen in the context of our history as a racehorse-producing nation. In the boom years of the 80s and early 90s, there were more than 7000 broodmares in use in South Africa. The foal crop was up there in the vicinity of 5000, and breeders were still making money. The racing operators were enjoying a bit of a bull run, and the prize money to cost ratio was the third best in the world. A maiden victory would keep a horse for 9-10 months, and with a bit of place money, you could break even on livery.

Last week, we penned a piece on the new prosperity of our operators, and we included a speculative line on what that might do to prize money going forward. It seems as if there might be a serendipitous convergence between the shortage of horses in production, and the upward momentum in prize money. You don’t need a doctorate to understand the possibilities.

THE TWO YEAR OLD SALE : A DIFFERENT SPIN

(Image : Marcelo Gerpe/TBA)

EMPERORS PALACE
NATIONAL TWO YEAR OLD SALE
12 - 14 August 2011

Mick Goss
Summerhill CEOAll sorts of reasons have been proffered for the 19% drop in aggregate for the National Two Year Old Sale, and a corresponding drop in average. The principal explanation seems to point to overproduction being the biggest culprit, and there is truth in that.

However, closer scrutiny of the stock on offer tells a different story. By extension, overproduction means more horses, and by the nature of things, that should point to as many good specimens as there are in any normal sample, and just as many bad ones, though we know the bigger the sample, the longer the tale.

However, the real sting in the tail, is the decimation in the quality of the entries which occurred as a result of the new Cape Premier Yearling Sale which attracted more than 300, (roughly half of which might otherwise been re-routed to the National Yearling Sale or the Cape Regional Sale), as well as the oversubscription of 600 lots for the National Yearling Sale, which is supposed to be our premier showcase. Rather than drop the numbers in the National Sale by as many National Sales calibre horses as the Cape Premier Sale had taken out of its entry (+-150), it was decided by Bloodstock South Africa (BSA), as something of a political appeasement to its members, to extend the entry. It turned out that while this may have been a matter of political necessity, it manifested itself as something of a folly, so hopefully it won’t be repeated next year.

The net result was that the National Two Year Old Sale saw a much depleted entry, with many of its “stars” having already been through the ring at other venues, and this was born out by conversations we had in the days leading up to it, in the Emperors Palace dining room with trainers, bloodstockers, pressmen, horse fanciers and call-them-what-you-like. Pretty much all of them said there might have been 50-odd horses worth looking at, and by some estimates, as few as 30-40-odd.

If you examine the results, you’ll find that at least that many and more made R100,000 plus, and that’s not a bad result in the gloomiest economy we’ve known in more than 32 years in this business.

Yes, there has been overproduction, and that’s a world-wide phenomenon born out of the fact that between the United Kingdom and Ireland alone, the broodmare numbers have dropped from 18,000-odd to 12,000-odd, a trend which Europe has followed, and one which is more than evident in the United States. The sublime to the ridiculous.

The world it seems, is cutting back, and so is South Africa, so it’s all the more gratifying to know that on a comparison with August 15th 2010, the Summerhill Sires are still booking ahead of the numbers we had registered then. That’s a compliment to the horses themselves, as well as a tribute to the foresight of those who know the virtue of taking the road less travelled. Inevitably, assuming the world is in fair shape by 2014 (when the resultant progeny will come up for sale as yearlings,) there should at least be something of an equilibrium in the market. If history is anything of a teacher, the pendulum will have swung in favour of producers once again, and if the noises we’re hearing from the Near and Far East are anything to go by, breeding worldwide will not have the horses to supply the Chinese, the Koreans, the Abu Dhabians and the Qatarians.

For more information please visit :
www.summerhill.co.za

AMERICA’S RACEHORSE PRODUCTION ABOUT-TURN

“…with our figures this season pretty much matching those of last year, almost to the mare.”
(Photo : Summerhill Stud)

THOROUGHBRED BREEDING TRENDS

Times like these often see people descend into “retreat” mode, intimidated by the doomsayers and the never-ending stream of “experts”, ready to proclaim financial Armageddon. It’s little surprise then, that the greatest businesses in the world were born out of these circumstances, because they’ve seen the retreat and in it, they’ve seen opportunity.

What’s happened in the northern hemisphere though, in terms of racehorse production, has been in need of retreat for at least five years now. With a situation of hopeless overproduction in the number of foals on the ground each year, it’s no surprise to see significant changes in all but one American breeding jurisdiction.

The Jockey Club of America has reported that 2,409 stallions covered 45,317 mares in North America during 2009, according to the Report of Mares Bred statistics received through October 13. The number of stallions declined 8.9 percent from the 2,643 reported at this time last year. The number of mares bred fell 13.5 percent from 52,410 reported at this time in 2008. Giant’s Causeway (Storm Cat) and Medaglia d’Oro (El Prado) led all stallions with 194 mares bred in 2009.

Candy Ride (Ride the Rails) (182), Lion Heart (Tale of the Cat) (180), and Corinthian (Pulpit) (171) round out the top five. The only region to realize increases was Pennsylvania. The percentage of mares bred soared 29.6 percent in the Keystone State; stallions were up nine percent as well. “Our mid-August projection of 30,000 registered foals in North America for 2010 was based on initial RMB returns, and these latest statistics reinforce that estimate,” said Matt Iuliano, The Jockey Club’s vice president of registration services. Iuliano added that the largest decline in breeding occurred at the top of the market, where the number of stallions covering 100 or more mares declined for the fourth consecutive year from 113 in 2008 to 85 this year. The Jockey Club expects to receive more RMBs for the 2009 breeding season.

The one state that has reversed the trend, and has bred almost 30% more mares, is Pennsylvania, buoyed by the attractive returns accruing from their state-bred premium programme.

While our own statistics are a little more tardy in coming through, it will be interesting to see the degree to which our population of mares has been crimped by the recession. That said, our circumstances at Summerhill might be a little skewed because of the strength of the stallion line-up, with our figures this season pretty much matching those of last year, almost to the mare.

TOP 10 STATES AND PROVINCES BY NUMBER OF MARES
REPORTED BRED IN ‘09 THROUGH OCTOBER 13

Region	‘08 Stallions	‘09 Stallions	% Change	‘08 Mares Bred	‘09 Mares Bred	% Change
Kentucky	318	307	-3.5	21,317	19,059	-10.6
Florida	202	155	-23.3	5,316	4,041	-24.0
Louisiana	230	216	-6.1	3,515	3,048	-13.3
California	233	201	-13.7	3,817	2,946	-22.8
Pennsylvania	89	97	+9.0	1,237	1,603	+29.6
New York	85	70	-17.6	1,839	1,561	-15.1
Texas	191	174	-8.9	1,722	1,411	-18.1
Ontario	77	72	-6.5	1,272	1,260	-.09
New Mexico	128	124	-3.1	1,546	1,222	-16.1
Oklahoma	126	113	-10.3	1,335	1,222	-8.5