Recession reins in horse breeding business

KILL, Ireland: Two weeks after the collapse of Lehman Brothers Holdings Inc, Irish racehorse auctioneer Goffs held its annual Million Sale. It turned out to be the last.

"It wasn't a great day to be trying to sell something like a racehorse," Chief Executive Officer Henry Beeby said in a telephone interview from Goffs in Kill, west of Dublin. "Race horses are a luxury item paid for with disposable income."

The number of Irish horses sold has dropped by 65 percent during the past two years and stud fees sank "dramatically," the Irish Thoroughbred Breeders' Association said in a Nov 4 report. Retiring champion racehorse Sea the Stars, last week named Horse of the Year at the Cartier Racing Awards, will earn about a quarter less for every mare he impregnates than he would have done at the peak, according to his trainer.

As economies worldwide limp out of recession, the horse breeding industry in Ireland may take three years to recover from the financial crisis, according to Julie Lynch, stallion nominations manager at the Irish National Stud.

The horseracing and breeding industry is worth more than 1.1 billion euros ($1.6 billion) a year to the economy, with Ireland producing 42 percent of all thoroughbred foals in Europe, according to the breeders' association.

Irish gross domestic product is forecast by the government to shrink 7.5 percent this year after the decline of the property market, which helped fuel wealth over the past decade.

"A huge amount of our clients would have been people who got in on the Celtic Tiger boom," said Lynch. "People in IT and property developers" were among the buyers, she said.

Bad timing

Sea the Stars last month became the first horse to win the 2000 Guineas, English Derby and Prix de L'Arc de Triomphe in one season. Each so-called cover, or mare, he puts in foal will cost the owners 85,000 euros, compared with between 100,000 and 120,000 euros had he retired earlier, trainer John Oxx said.

"It's not the best time to be retiring the best horse in the world to stud," said Oxx.

The Goffs Million Sale started in 2005 and horses bought at the auction were entitled to compete for a top prize of 1 million euros at the following year's Million Race, held to coincide with the auction.

Sales at the September 2008 auction following Lehman's filing for bankruptcy plunged 40 percent to 32.4 million euros from a record a year earlier, while the average price of a horse declined by more than a third to 72,652 euros.

Goffs, whose Million event boasted sponsorship by luxury goods firm Hermes International SCA, had a loss of 3.1 million euros for the year to March 31.

Not 'prudent'

Goffs, partly owned by the Aga Khan, has dropped the race because such "marketing incentives are no longer prudent", Chairman Eimear Mulhern said in the company's annual report.

The event, second in size to the Irish Derby with more than 10,000 spectators, included a 20,000 euro prize for the "most stylish lady." The sale of horses will continue under a different name, Goffs said.

Irish thoroughbred sales totaled 112 million euros in 2002 and peaked at 191 million euros in 2006, before almost halving to 99.5 million euros in 2008, County Kildare-based Irish Thoroughbred Marketing said on its Web site.

The Irish National Stud, like other breeders, has responded to the economy by cutting fees by as much as 50 percent to attract clients, Lynch said in an interview at the 850-acre stud in Tully, 50 km west of Dublin.

The seven stallions housed at the stud's stables include Invincible Spirit, with a $60 million value and whose fee per cover has dropped to 45,000 euros from 75,000 euros at the peak.

'Crme de la crme'

Though the elite market has been affected, the lower end has felt the biggest impact, according to Lynch.

Sea the Stars "should still fare quite well", Oxx said. "It's the middle to the lower end that's most affected in a recession. There's always a market for the crme de la crme."

Breeders from across Ireland bring their horses to sales held by Goffs, which was founded in 1866. The company holds eight horse breeding sales a year at its complex in Kill, and also holds sales at Kempton Racecourse, near London, and Dundalk Racecourse in Ireland.

"Historically the bloodstock industry rises and falls with the economy," said Beeby, who became CEO of Goffs in 2007 when it merged with Doncaster Bloodstock Sales. "Things fell dramatically last year."

Bloomberg News

(China Daily 11/23/2009 page11)