John Messara with Redoute’s Choice at Arrowfield Stud
by Brian de Lore
Published 8th July 2022
At the end of July, it will be four years since the Messara Review dropped into the hands of the then Minister of Racing, Winston Peters; a review that stressed the urgency of implementing 17 recommendations that required Kiwis to put their self-interest aside, unite, show some courage and embrace change for the revival of the whole Industry.
It didn’t happen. Like that flightless Kiwi-bird trying to relive its ancestry and get airborne again, it didn’t take off. You just knew it wouldn’t the moment the Minister called for submissions for everyone to offer their two-bobs worth.
The powers adopted several straightforward recommendations – the introduction of the Betting Information User Charges, Point of Consumption Tax, repeal of the Excise Duty, and the assignment of the Intellectual Property. However, those positives ultimately overshadowed by an industry still anchored by its failure to recognise the value in outsourcing/joint-venturing the commercial activities of the TAB.
That’s not to say the TAB thing won’t still happen. Forces are at work now, with the relevant parties warming to the idea. The belief that one day racing in New Zealand would have no choice but to get out of its bubble and think internationally is materialising – a high degree of cooperation between the boards of the TAB and NZTR has become a reality.
I digress; speculation on the future of the TAB NZ didn’t motivate this blog, but more particularly, the driving force behind a continuance of rising yearling and breeding stock values in Australia in the four years since John Messara wrote his review.
Brothers in arms: the XAO and Inglis Easter Yearlings
Australian prizemoney incentivises investment in bloodstock, but it can’t be the only factor because the return to owners in 2018 in NSW came out at 48 percent against all costs, and the figure probably hasn’t risen too far above that despite annual prizemoney hikes. When John Messara did his review, he calculated that owners in New Zealand received, on average, only 22 percent back against training costs, and four years hence it would be surprising if that figure hadn’t gone under 20.
I contacted John Messara to find out what he believed drove the bull market in bloodstock prices, and he replied with a compelling summary and a graph to back it up.
He said: “While prizemoney certainly plays a significant role in the sustainability of our Industry, returns to owners from that source, even in the better jurisdictions such as Australia, would at best cover 50 percent of training costs.
“So, this metric makes it a pretty poor investment and cannot explain the inflation in yearling prices over the last 20 years, as demonstrated in the graph below. Further, prizemoney has not been as generous in other open international jurisdictions as in Australia, yet bloodstock values in other places have also risen.
“So what is it?” asked John rhetorically. “Clearly, from the graph, we can see that the price of bloodstock has mirrored the movements in the economy-stock market, all of which makes sense, as in these buoyant times investors have had increased discretionary income to spend on hobbies.”
It’s second nature for John Messara to investigate stock market fluctuations against thoroughbred industry values. He started working life as an accountant in the early 1970s and then ran his own stockbroking firm before establishing the very successful Arrowfield Stud.”
‘What other factors come to mind to influence bloodstock values,’ I asked John?
He responded: “While some of us invest in horses as a business, it is fundamentally a hobby for most, and participation therein is at its highest in buoyant economic times. Again, that’s not the full answer! Many more prominent players like to pit their selection skills against others in finding a superior athlete. In our industry, that’s picking a stakes winner!”
Pattern threatened worldwide
In determining the quality of the thoroughbred as a reference for valuation, evidence is emerging that the Pattern is under threat in several jurisdictions worldwide. Bill Finley writing in the American edition of TDN late in June, asked the question: “Do we really need so many stakes races?”
The article complained, “They could only scrape together a field of four for Saturday’s G.II Mother Goose S. at Belmont Park, run two weeks after they had a field of four in the G.I Acorn S. Saturday’s third race at Belmont fared no better. Only four went in the Wild Applause S.”
Finley further said: “In 2007, there were 474 graded stakes and 107 Grade I’s. This year, there will be 449 graded races and 101 Grade I’s. Over a 15-year period, the number of graded stakes has declined by 5.3% and the number of Grade I races has fallen by just 5.6%. The numbers haven’t come close to what has happened with the foal crop over that same period of time. The registered foal crop in 2007 was 34,358. In 2022, it will be about 17,000. That’s a decline of more than 50%”.
“That means that the American Graded Stakes Committee hasn’t done its job. The decline in the number of graded stakes should at least somewhat resemble the decline in the foal crop. That hasn’t happened. The graded stakes committee needs to show the sport some tough love and start taking a hacksaw to the list of graded stakes.”
JM: the Pattern must be protected
New Zealand also has a problem with the Pattern, but it appears the USA has a bigger one. John Messara has always advocated the protection of the Pattern in maintaining the integrity of the catalogue, which rewards excellence and determines values.
John says: “Stakes wins bring financial rewards and international recognition within the Industry. Thus, the Stakes program or Pattern plays a vital role in maintaining enthusiasm and demand amongst thoroughbred players and underpinning the residual value of the stock. Black type or stakes races established under guidelines from the IFHA are recognized internationally and form the basis of cataloguing standards, in turn supporting the fluency of the bloodstock market.
“The Stakes program underpins the development of ‘families’ in thoroughbred breeding and provides the pathways for planning racing campaigns and benchmarking our equine athletes.
JM: the Pattern – the bricks and mortar of the industry
“At the highest level, group one races are intended to ensure the best horses, jockeys, and trainers are pitted against each other to benefit the fan base and determine ultimate levels of athletic excellence. That‘s why I describe prizemoney and the Pattern as the bricks and mortar of the Industry.
“Like any other sport, horse racing must continue to be a meritocracy with the best athletes gaining the best rewards; the established internationally recognised standard for this is “black type.” However, to continue to play that role, the black type’s efficacy and integrity must be beyond reproach, and to that end, there is a job to do in reviewing our stakes program in Australia.
“The levers that drive our Industry are clear – prizemoney, the Pattern, and a fair, orderly, and enjoyable participation environment that rewards the best. Achieving and maintaining this takes a holistic approach from our industry administrators,” concluded John Messara.
However, rising inflation and the perilous state of economies worldwide throw a potential spanner in the works. Readers having viewed John Messara’s graph, which closely aligns prizemoney to Australia’s share market would ask what happens if or when the post-pandemic recession arrives, as many economists predict?
Australian prizemoney on the rise again
For the coming season, NSW will increase prizemoney by $29 million to $336 million. The minimum Saturday metropolitan stake rises from $130,000 to $150,000 – first-place going up from $61,250 to $76,500. Victoria has signalled a $26.2 million increase rising to $314 million across all levels for the season. Saturday in Melbourne goes from $130,000 to $150,000, with first-place rising from $71,250 to $82,500.
When the stock market crash came in 1987, Karaka had a record sale in 1988, and the Industry didn’t feel the full effect until later in the year when the Bart Cummings ‘fire sale’ took place in Sydney. Other recessions have also had a delayed impact on bloodstock.
The Bill Finley argument that the USA’s foal crop numbers should reflect a similar decline in their graded race classification doesn’t identify quality. The foal numbers in Australia have declined marginally, but the quality of their bloodstock during that period has gone to an elevated benchmark over any previous era.
We can vouch for that, anecdotally, watching many of the best fillies and mares leave for Australia annually due to New Zealand’s inability to afford to retain them.
Brian de Lore
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