b4breeding

Maths was never my strong suit. Thanks to Helen Smith, my maths teacher who took extra classes after school, I squeezed through School Certificate maths with 54%.  And then I had to do a statistics course at university when I majored in geography. It was torture.

But at least I know the difference between “average” and “median”. Which is useful, because they can tell quite different stories about prices at the yearling sales, both overall and for individual vendors.

PGG Wrightson (who run the sales) uses averages to monitor how the sales went. It is a useful tracking tool over time, and it does indicate if there is a strong trend in one direction or another. However we know that if 5 horses sell for $10,000 and 1 sells for $100,000, the average for the 6 is $25,000. Does that really reflect what happened? If those results are for one vendor, it is a useful indicator that overall they have well covered their costs per horse and probably made a small but welcome profit, thanks to one outstanding sale. But across a day of sales or three days of sales, I am not convinced that averages mean that much.

Before I get on to “medians” here are some quotes from PGG Wrightson about the averages for this year’s sales:

(Day 1 Christchurch) A strong middle market on the first day of the two-day New Zealand Premier Sale in Christchurch yesterday (Tuesday) saw the average price lift from $22,186 in 2013 to $25,191 in 2014. Canterbury rep for PGG Wrightson, Bruce Barlass put the 14 per cent rise in prices down to a strong Canterbury and Southland presence, as well as the healthy state of dairy farming in the South Island.

(Day 2 Christchurch) The average was also well up, rising 10% to $24,536, which came down to the large number of lots which sold within the $30-$90K bracket.
“There wasn’t as many $100,000 plus yearlings as there has been in years gone by, but the middle to top market was very strong,” said PGG Wrightson’s Rachel Deegan.

Good observations, but it is interesting how the “middle market” has now been defined as around $30-40,000, which is above the average.

I understand that the Australasian Classic at Karaka had an average of $31,577 this year.

Now let’s look at what medians can tell us. The median is the middle of a range of numbers – basically the point where there are an equal number above and below it. So in terms of yearling sales, it gives a more accurate indication of how many vendors achieved a price higher or lower than that for their horse. In all cases it covers only horses sold at the auctions, not those passed in.

Add in the fact that just to cover costs a yearling probably needs to achieve $15,000 (if you have gone to a moderately priced sire and are doing the raising and preparation yourself) or over $20,000 (if you have gone to an expensive sire and are being charged for raising and preparation).  These are ballpark figures, but they give a steer on what a vendor needs as a realistic return on investment.

The median at the Australasian Classic (Karaka) sale this year was $26,000. In other words, an equal number of horses sold for less than that, and more than that.

For the total Premier (Christchurch) sale the median was $16,000. That indicates that about 126 horses sold for less and 126 horses sold for more. That’s a lot of horses not making it to break-even.

So medians paint quite a different picture compared to averages.

Father Frank, Christchurch Lot 223, a lovely Real Desire colt sold for only $12,500 – appropriately to Frank and Ann Cooney.

I’ll dig a little deeper, using $15,000 bands – of the almost 100 lots sold by auction at Karaka, 31 were $15,000 or less, 29 were between $16,000 and $30,000, and another 18 were between $31,000 and $45,000.  That’s about 60% of horses selling for less than $31,000, and 78% for less than $46,000. About 30% probably hardly covered costs and certainly wouldn’t have made a decent return on investment and risk.

Same story in Christchurch. 126 lots sold for less than $15,000. That’s about 50% of the lots that were sold by auction on the day. Another 87 sold between $16,000 and $30,000. That’s just over 80% of lots selling for less than $30,000.

So you can start to see why vendors were feeling a bit mixed about the results by the end of it. So much depended on whether you had enough good results or one really excellent one to average out your overall return.

Or looking at it from the other side of the business, it was a buyer’s market. Yes, there was good competition for the top end horses. But you could sense the effort required to get bidding beyond $10,000, and again to shift it over $20,000. Once over $30,000, the bigger bidders came in – and that is why many buyers with smaller pockets felt they could not get a decent look-in at the better quality, more commercially bred horses. On the other hand, they had a wealth of opportunity to pick up some very well raised attractive individuals at quite cheap prices, if they had done their homework.

The lower end prices were not necessarily a reflection on the individual product.

Often it was just a case of type, family and sire. It is such a conservative buying market. I’ll look at that in more detail next time.

Once again, these figures don’t include the passed in lots that were later sold (and quite of few of them were in the higher range). But the sheer volume of <$15,000 lots in unlikely to alter very much at all.