Mick Goss
If you read our piece on the Emperors Palace Select Yearling Sale last Sunday, this is episode two. That there is a need for a second report is a symptom of the dilemma consignors face in the battle for sales ground supremacy between their “spiritual” home, the Thoroughbred Breeders Association (TBA) and Cape Thoroughbred Sales (CTS).
— Mick Goss / Summerhill CEO

The current state of play is this: when they first entered the fray five years ago, CTS threw down a revolutionary gauntlet at an organisation which, it has to be said, was in something of a slumber, operating on the fossilized remnants of one of the last farmer’s co-operatives still in existence. The raison d’etre for CTS’ existence was that a co-operative model had no place in the hurly-burly of the modern commercial world, and that something radical had to be done to bring South African thoroughbred sales into the real world, kicking and wailing if necessary.

The TBA was jolted into action, upping their game as only a world class competitor would demand of them, yet some of the old maladies persisted, topsy-turvy credit policies, slow collections and no guarantee of payment to vendors, all of which visited the pockets of the genuine farmer breeders hardest of all. Nonetheless driven, as much by their fear that the CTS “boys” might be occupying too many spaces in the industry as they were by loyalty to their own organisation, a core of members were as determined to see the TBA survive as the opposition were to make theirs the dominant sales brand in the land.

Meanwhile, the truth is that for as long as the battle rages, breeders are suffering, with the one entity cannibalizing on the other’s market, and vice versa, at the broader expense of those who can afford it least. To understand this, it should be remembered that South Africa is the only country in the world where every billionaire owner (with the exception of Sabine Plattner) is a full-blown commercial breeder, capable of buying what they want and spending what they like not only on their farms and facilities, their staff and their marketing, but obviously on their genetics. Moreover, they can afford to carry the cost for as long as their hearts are tolerant, of the funding of their operations, as well as the collection of their commercial proceeds. And who can criticize them? After all, since its foundation more than 300 years ago, racing has been about one rich man beating another.

Most of these things however, are beyond the pockets of traditional racehorse producers, whose only resort in the end is the marketplace. That means in order to survive, the farmer-breeder needs every force of the market in his favour in order to get the best result, and that among other things demands the concentration of the spending power of all the players in a single marketplace in a country of this size. Imagine the synergies: the TBA owns a world-class sales complex; CTS has mastered inner-city sales as no other company in the world has done; both command staunch supporters on the buying bench; CTS’ organisational capacities have proven themselves against the best in the world; and critically, CTS pay vendors at 30 days without qualification.

While competition is undoubtedly healthy, the South African sales environment cannot afford two leviathans running our sales: it’s as simple as that, and for the health of the breeding industry going forward, we simply have to find a single solution, not only for ourselves, but to spare our international customers the “crossfire” they’re subjected to not only from the heat of the competition between the two entities, but on the salesgrounds in their interaction with breeders and other buyers. There is discomfort among our foreign guests, and we should remind ourselves that they don’t have to shop here.

To put all of this into perspective, and without muddying the water beyond the confines of last week, imagine a single sale where the R44.3 million buyers hurled at the Emperors Palace Select Yearling Sale on Saturday evening was brought to account in the same place and time as the “Nationals”, where R89 million accounted for almost four times the number of entries. Combined, the buying power of both benches would’ve dramatically changed the face of both outcomes, heightening competition for the best of both catalogues, and deepening the market significantly.

While it doesn’t take a master’s degree to understand the economic logic of this market, those that have been around sales for long enough will tell you that more money simply creates more money, and that while the price of horses is not “everything” at  a horse sale, when it comes to survival, it’s the only thing. The middle market is where farmer-breeders make their livelihoods, it’s the sole determinant between “life and death”. When the middle market is weak, the attrition among breeders is at its height. To illustrate this, the TBA’s annual report reveals that in 1996 there were 1076 registered breeders, while in 2014, this number had fallen to 408; in 1994 there were 262 stallions in service, last year just 93 were registered: the same pattern prevails in the broodmare population. That said, we all realise that when the pendulum swings, those with the stock will cash-in big time, but these numbers speak of an over-correction to the degree that racing operators should be concerned about falling fields in years to come. While current economic forces have also played a role here, it doesn’t help to be shooting ourselves in the foot by running segregated sales. It’s time for individuals to put their differences aside, and in the national interest, to find a solution.

With that off my chest, let me turn to the National Yearling Sale itself. On the face of it and given the state of the world, it was a fair performance. Yet, measured against the thoroughbred market places in Europe, the UK, America and Australia, it was below par. The aggregate showed a marginal decline, though the average was up 10% and the median slightly improved by 5.8%. Remembering that this is the National Sale and it’s the place at which breeders should be reaping their best returns, you have to look at these numbers in the cold light of day and the ever-increasing costs which lie beyond the control of breeders themselves: administered increases in wages, electricity, fuel and rates, as well as a world shortage in the one commodity horses simply have to have in their diet, oats. Margins are tighter than ever, and if we can’t bring all the forces of fortune together long-term, the hole will get deeper.

The median is of course, where the real market is, averages are influenced by the big horses at the top, and here we witnessed two yearlings making more than four million, including a new record at R4.75 million, the result of an extravagant gesture of gratitude on the part of Mike Rattray to Peter Graaff, the new owner of his former stud farm, Lammerskraal. Good on you, “Ratters”.

There were several other highlights, the obvious one the performance of the “big four” stallions, Dynasty, Var, Captain Al and Silvano, which is where most of the “billionaire” stud farms shop for their services. It’s a fact of economic life that in tough times, people tend to fall back on the tried-and-tested, more so in the local racing environment than in any other business I know. Given this country’s history and the spirit of adventure and entrepreneurship that has characterized our business environs, we’re strangely reticent when it comes to a plunge on an obvious prospect by a freshman stallion: yes, the Europeans and the Americans also display a bias for the likes of Galileo, Dubawi, Dansili, Tapit and Distorted Humor, the Aussies will favour Fastnet Rock and Redoute’s Choice, but when a good looking youngster from the first crop of a high class racehorse enters the ring in those realms, the number of catalogues waving to acquire him will not be that disparate from those that proclaim the arrival of the “proven” one. We forget that Jet Master, Western Winter, Dynasty, Captain Al and Var all had first crops, and that those that saw the gap, were the winners.

The game-changer, of course, is the export market, and after a few hours with Prof. Ian Sanne, who is the mastermind behind our strategies at present, I’m more encouraged now than at any time since we first sat down with Trade Minister, Alec Irwin, to form the first (and highly successful) Trade Council. At last we have both the political will and the scientific momentum to make this a reality, so God help us. Please!

I don’t pretend to know what the numbers of our colleagues looked like, but one other encouraging thing about both sales from a Summerhill perspective, was the number of inspections our horses enjoyed. It’s a while since we saw so many potential customers through our yard, a hint at last that perhaps there was temptation in the minds of a new band of disciples that some salvation, lay in the value offered by a fresh assembly of outstanding racehorses new to the sultan’s life at stud. Hardly a horseman passed “A” Block by without summoning the Visionaires, few failed to admire the debutant Golden Swords, and a good sprinkling called for the “Brave Tins”. Now if they just run like they look….!