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.”
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.