8 minute read
Financial pressures
Some yearling sales this autumn did well yet others were very difficult, writes Jocelyn de Moubay. He argues that the issues are more involved than mere market correction – recent inflationary pressures have had a significant influence, and the rise in leading stallion fees over the last seven years has hit on profitability.
However, many commercial breeders in France have still done very well recently, and it is not just because of premiums
THERE WERE MOMENTS during the European yearling sales season when it may have felt as if the good times were still rolling, there were individuals who made seven-figure sums at Arqana, Goffs and Tattersalls,
However, this year, all involved realised that something has changed since the pre-Covid years of plenty.
At the Tattersalls October Book 1 Sale, 391 yearlings were sold for a total of 95.4 million guineas, down by 25 per cent from 2022’s record sale.
After the event we were told that this fall was only to be expected, the 2022 sale had been an exceptional one and it was normal the market should return to an earlier level. This would have been a more convincing argument if it had been put forward by anybody before the sale started, although at the same time it is obviously true that the $18 million spent by Richard Knight at the 2022 sales had a significant effect on the overall market.
The fall in the aggregate at what has long been Europe’s most expensive yearling sale did, of course, mean that by the end of the season the overallmarket was down, even if, in dollar terms, the total decline in aggregate was only five per cent as the strong sales at Goffs and Arqana made up for some of the loss of turnover in Newmarket.
The aggregate at October Book 1 and 2 combined was down by 14 per cent on 2022’s record year.
Turnover at Arqana’s major yearling sales and the Goffs Orby sale both rose by about eight per cent.
Godolphin and the Coolmore partnership were once again the major buyers spending around $45 million together and, as has also been the case for many years, accounting for between 10-15 per cent of the market at Europe’s best yearling sales.
Wathnan Racing was a new buyer of yearlings and allowed its agent Richard Brown and Blandford Bloodstock to become the leading buyer in terms of numbers and the third-biggest in terms of money spent.
Blandford has many other clients, but Wathnan has been a major new investor in yearlings as well as in horses-in-training. Another newcomer at the very top of the market was Nurlan Bizakov’s Sumbe, the buyer of a 1.1 million guineas Lope De Vega colt from Ballylinch Stud at October 1 and in total ten yearlings for $4.6 million.
Middle Eastern buyers play an important role in the market for select yearlings in Europe and, aside from Godolphin and Wathnan, several other buyers were active at the top of the market hailing from Dubai, Qatar, Bahrain and Saudi Arabia.
The group also included Shadwell, which spent more than it had done in the years since the death of Sheikh Hamdan, including purchasing a 1.6 million guinea Frankel filly from Watership Down.
Two other buyers who made their mark in 2023 were Jean-Claude Rouget and the British-based Italian Frederico Barberini.
Rouget signed for 42 yearlings, mainly at Arqana but also at October Book 2. Given that he bought Ace Impact for €75,000 and Almanzor for €100,000 it is not surprising his owners should have confidence in him to select their yearlings.
Barberini originally made his name by buying cheap and successful yearlings for Italian clients, but these days he buys at every level of the market for influential owners such Steve Parkin and Gerard Augustin Normand among others.
Important international buyers included Mike Ryan and Klaravich Stables, loyal clients of the October Book 1 Sale and the Hong Kong Jockey Club, who spent around $4 million as it had in 2022.
Peter Brant’s White Birch Farm was active again, even if this year it bought mainly in partnership with Coolmore.
There is strong international demand for the best European yearlings and, despite the fall in aggregate at October Book 1, overall these sales combined returned a turnover of `4385 milliom, more of less the same as the £356 million thy had returned in 2019, the year before the pandemic.
Looking at the figures there will be many who believe this was a necessary correction after a year in which one pf the biggest buyers failed to complete his purchases and that the outlook for the future remains strong.
The problem is that this "corrective" view fails to account of the inflationary period we have lived through and, in particular the rise in the cost of the best stallions, for those commercial breeders who do not own them.
From 2010 to 2018 the aggregate at Tattersalls October Book 1 increased every year in real terms and in only eight years the total went from 55 million guineas to 120 million guineas in 2023 sterling, a rise of 120 per cent.
Yet from 2018 to 2023 the aggregate in real terms went from 120 million guineas to 95.4 million, a fall of around 20 per cent.
The same trend is there if you look at October Book 1 and 2 together, from 2019 to 2023 the aggregate fell by 19 per cent in real terms and the average by 27 per cent.
The aggregate at the 2023 October Book 1 was 95.4 million guineas, which in real terms is similar to the 93.7 million guineas returned in 2015.
THE big difference, for those producing the yearlings for sale is the change in stud fees during this period.
Aside from Galileo, whose fee was private, the other leading sires by average price at the 2015 October Book 1 were Dubawi, Invincible Spirit, Oasis Dream and Shamardal, who stood at £85,000, £56,000, £91,000 and £43,000 in 2013 (in sterling prices of 2023).
Move forward to 2021 when the yearlings at this year’s October Book 1 were conceived and the leading sires by average were Dubawi, Frankel, Kingman and Lope De Vega standing at £250,000, £175,000, £150,000 and £105,000 respectively.
For commercial breeders trying to sell at the top of the market the costs are just not the same.
Although there were, of course, still some very profitable sales, the margins have been greatly reduced as the prices at market have not kept pace with general inflation, let alone with rise in the nomination fees of the most popular sires.
In France, the market is on a different trend altogether.
Between 2010 and 2019 the aggregate at the Arqana August Sale rose by 45 per cent in real terms, so a significant increase but not the same as the rise of the October Book 1 in the period.
Since 2019 the trend has been different, too, but this time a positive one for the French market with aggregate at the August and October Sales combined rising by 10 per cent in real terms and the average by 17 per cent between 2019 and 2023.
Looking back over the whole period from 2010 to 2023, the aggregate at the October Book 1 has risen by 72 per cent in real terms, and at Arqana’s August Sale by 66 per cent, with the growth coming before 2019 for October 1 and since 2021 for Arqana August.
The French market is perhaps more competitive due to the strong domestic demand, but the main difference is in the stallion market.
The French stallion market is more competitive as the major stallion farms in Britain and Ireland are not directly present, but above all the successful French sires of this period, Wootton Bassett, Siyouni and Le Havre were all syndicated and so the huge profits they generated were widely shared by many of France’s commercial breeders.
In Britain and Ireland the yearling market has not kept pace with general inflation and the rise in the fees of the best stallions, and few of these are syndicated making the margins for those aiming to breed to sell at the top of the market tighter still.
