Posts Tagged ‘Breeders bonus’

No, I am not promoting a milk-based formula for horses, although I do know that milk proteins are a key part of some popular supplement feeds.

This blog is looking at our industry as a whole and trying to find where breeders sit in terms of the industry’s returns.

To get some comparison, I have looked to the giant in NZ that is the benchmark of how to make things rural turn into things that deliver global success, and also how it handles bad times and its relationship with its suppliers, the dairy farmers.

innercowheroFonterra, one of the world’s biggest dairy product companies.

Now, I don’t agree with everything that Fonterra does. This is not about acting like them – but there might be some things that our own small and vulnerable (but resiliant) industry can learn from. I am very aware that analogies fall flat on their faces when taken to extremes, so this is more a look at “how does their industry manage this issue?” rather than a detailed comparison.

Recently I heard that Fonterra had made a record breaking profit. At the same time its Milk Price for farmers (i.e. the price it will pay for the milk that dairy farmers produce) has dropped to a level which is simply not profitable for most farmers, and is forecast to stay there for a couple of years more. Ironically, the two things are interlinked – stay with me, it does relate to horse racing – because the overall profit for Fonterra was driven by lower raw milk prices, which in turn allowed much better profit margins on items that use milk but are not “just milk” – e.g. cheese and yogurt – and which have a high “value added” factor and a growing market.

So that is how Fonterra can be having a record profit year while many dairy farmers in New Zealand have their backs to the wall.

The basic product - milk

The basic product – milk

The driver for this situation is not Fonterra’s greed as a monopoly, but worldwide trends. In a nutshell, there is an over supply of milk globally based on previous encouraging good signs (“get into dairy, it is white gold”) and a slower demand in large key markets like China and Russian based on their own economic situations. However while the global demand for basic milk products has gone down, there is still good demand for cheeses and yogurts and other dairy-based products.

It is also important to know that Fonterra is a farmers’ cooperative, so some of the profit made can be distributed back to farmers via a less direct route than the basic “farm gate” milk price. And that is the situation at the moment where Fonterra is releasing a good dividend at a time that will bring some help to cash flows over the difficult winter period when many cows basically go off production.

The longer term implications for most NZ dairy farmers depends on how resilient they are. And that is a mix of factors like debt burden, size, flexibility (ability to move partially to dry stock farming in the short term,  for example), and market niche. The farmers most likely to suffer are those that have highly capitalised their production to intensify outputs and reap the rewards of the very high “farm gate” milk prices we have had for a number of years. So newly set up farmers in Southland, for example, are probably mortgaged to their eyeballs and also reliant on expensive irrigation to maintain the intensive farming methods they have set up. Many of these farms may well go broke if bank support flags. Whereas in the Waikato, which is a more traditional dairy farming area, experienced farmers with larger farms, lower debt ratio and less pressure to farm intensively or with some dry stock alternatives, are likely to get through the hard times.

Now I am no dairy farming expert, only a listener of analysis thanks to our excellent national and rural farming media coverage which I catch online or listening on my radio on the way to and from work – tip o’ the hat to Radio NZ National.

This is a “helicopter view” actually more like a Boeing 747 view as the Auckland to Christchurch plan flies over the Waikato where I live in New Zealand.

But it puts a different perspective on our industry which sometimes we lack when we are literally at the grass roots level.

What can we learn from this?

First thing that strikes me is that the producers – those producing milking cows/milk – are recognised absolutely as key stakeholders (financially and structurally) in the industry. Their role in producing and managing a dairy herd (from which basic and value-added products come) is recognised in a range of ways, not just the “farm gate” price for milk. As shareholders of Fonterra, they get dividends and that is what is helping them now. They are not just stakeholders, they are shareholders.

In the harness racing industry, breeders are not recognised as key stakeholders in the same way. When profits from the racing industry are ploughed back to stakeholders it is usually in the form of payouts to clubs and into stakes. While this is a welcome move for the industry overall, it is not shared by breeders unless they are also successful owners or trainers. Many are, many are not. There is nothing going back directly as a “dividend” to breeders.

Value-added products

Value-added products

If mares and foals are the equivalent of dairy cows and milk, then the equivalent of cheese and yogurt is our own “value added products” – race horses. So many would say it is only fair that those who add the value (owners, trainers and drivers) get the rewards of higher stakes. However this doesn’t recognise that what breeders produce takes a while to mature – or as our Mainland cheese advert says, “Good things take time.” In one sense a foal is raw material, but what has been put into it and the mare, plus the experience of pedigree matching, and then the added resource of the weaning, handling, good feeding while growing and sometimes preparation for the sales is not just cosmetic. These things, if done well, optimise a foal’s potential to be the best it can be.

When we raise the concept of “breeders bonuses” or a performance-based percentage of stakes paid to breeders, the response is usually about the cost – “Where will the money come from?”

The Fonterra factory at Hautapu, just down a road or two from where I live.

The Fonterra factory at Hautapu, just down a road or two from where I live. specialises in high-value products including cheese, casein, whey protein concentrate, hydrolysate, lactoferrin, milk protein concentrate and lactose – bound for the domestic market, as well as international markets in Asia, Europe and the USA.

The Fonterra example shows that when you look at an industry in a more integrated way (particularly vertically integrated), the producers of your basic product will be better looked after and/or given better signals that help them predict the future and make choices which align with the industry’s direction and their own “business”. Fonterra gives clear signals via its forecast Milk Price – and estimate that is regularly adjusted of where the Milk Price is heading. The Milk Price is a price calculated on all the product as if sold as the basic product to the world commodity market i.e. basic market value. The sale of value-added products then make up the rest of the income. Profit is used for capital investment, maintenance, R&D and other costs  – but also allows a dividend to be paid back to shareholders (farmers). In some cases, including now, an early or additional dividend can be paid to help farmers through difficult cash flows. This is not a subsidy or a guaranteed safety net. They are still vulnerable to global ebbs and flows, changing interest rates and the consequences of their own decisions. Or indeed a stuff up by Fonterra.

So for our harness racing industry, there is a strong case to be made for a model that at the very least returns a dividend (as bonuses, credits or percentage of stakes) to breeders. And at the far extreme, a model that totally restructures and integrates our industry to provide contracted (but forecastable and adjustable) prices for foals, plus additional returns as a dividend potentially based on performance of a foal as a racehorse (i.e. when value is added to the product).

The devil would be in the detail, but it is a scenario I will have a look at in more detail in a future blog.

OLYMPUS DIGITAL CAMERAI believe there is a lot of confusion about the harness racing industry’s consumers versus the industry’s stakeholders. For the dairy industry, it’s those who drink milk or eat cheese, versus farmers with dairy cattle. In our case it’s punters versus breeders /owners /trainers. We need to structure our services to meet consumers’ needs because our success depends on their interest in our product. But we also need to structure our industry to meet stakeholder needs because our success depends on their ability to produce a good product. It’s a balance companies big and small struggle with, but I think there is a lot we can learn from those who do it well.

In future I will do a similar comparison with the wine industry, which we can also learn from.

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A year ago I blogged about this, so I won’t repeat myself, but instead ask that you read that blog here.

It refers also to a survey on bonuses that was done by NZSBA, but in my view the options provided were not well described and only one really focused on the ongoing needs of breeders of all horses to have an opportunity of sharing in the success of what they have bred. I know it was just a “toe in the water”, but sometimes that means you are only experiencing the warm shallows rather than the temperature when you really dive into the water.


Delighted breeder receives a bonus!


So tomorrow at the North Island Breeders Forum I hope we can discuss what is happening to make significant progress on this score.

Personally I would advocate for developing a discussion paper which investigates the pros and cons of several different options, all of which put a return to breeders (rather than future owners) at the top of the priorities.

I’d like to see the principles I listed in my recent blog incorporated.

People with access to more data are in a better position to assess aspects like predicted numbers and percentages of winners, financial sustainability, etc. And one important criteria I haven’t mentioned so far is that a scheme needs to be national (if not Australasian) rather than deals done with specific clubs, racecourses, types of breeders, or studs.

Then circulate that paper widely, get discussion going, hold specific forums on it, test it out in modelling using the current statistics. Talk to other players who would need to buy-in to each option, e.g. commercial “sponsors” for my previous blog about the “hot points” system.

Set up a representative group that helps with the consultation process and assesses the feedback, and then does further work on a couple of preferred options.

There are people who are passionate and informed about this issue who should be included in the development of options – rather than seen as “sniping from the sidelines”. Be inclusive, be adventurous. Ask for volunteers as well as appointing people who have strong skills needed for this sort of analysis.

If the process takes 12 months but is a good one, then that’s fine by me.

Back to the option of win bonus payments to the original breeder

There are many ways the detail of this can be tweaked, and these need to be thought through carefully:

  • if you registered a mare, you gain discounts for registering her foals. The registration of a mare would be transferable to a new owner.
  • if it was an ongoing bonus for each win, would you make it an annual smaller payment for a registered foal, so breeders have the option to continue or opt out if the horse was not developing well?
  • or would you make it a significant one-off payment for a foal or yearling, and get a one-off bigger bonus payment for the first win only?
  • how would you administer the system in terms of keeping the payment details of breeders up to date? (that is where some kind of annual registration, whether it involves payment or not, becomes useful.)
  • should the bonus be based on percentage of winning stakes or percentage of total stakes, and what sort of percentage? Or should it be a fixed bonus amount for a win, regardless of the level of the stakes or the status of the win? Which option would reward the most breeders and be the fairest?
  • how can the costs of the scheme be shared around, so it is self-sustaining but not an additional burden falling on the party it is meant to assist?
  • what message/s would we want send to breeders?  What are we trying to encourage?

These are the sorts of issues that a half hour workshop at tomorrow’s forum will hardly be able to touch upon.

Which is why I would like to see instead a discussion about the process of moving this forward strongly – a plan for investigation, discussion paper, consultation/feedback, assessment, recommendations, and decision-making – and a process that is inclusive and engaging rather than behind the scenes.


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I don’t have the access to databases or time to develop detailed scenarios, I’m just trying to make a contribution in evenings and weekends after my day job and helping look after my horses like all of us. So what I can paint is a picture of an option or two that might be worth following up. It’s not perfect but I am trying to stimulate debate and open up ideas for discussion.

I’m keen to look at positive futures for breeders. I’m putting my hand up for that. Are you?

Come on, we need to get some momentum to support our NZ Standardbred Association by coming up with really interesting ideas for them to take forward, and taking a real interest in what they are doing.

See you on Sunday at the forum at Alexandra Park = yes!! (Although I can find no reference on the NZSBA website to this forum or the agenda – frustrating as I would love to link to the details but what I’ve got by email I’m sharing at the end of this blog – I am sure you could turn up if not a member already but wanting to join.)

Horse breeder rewards

How can we reward standardbred breeders fairly? Over time, and on performance.

Option 1

This idea is a Breeders Credits Reward system along the lines of many commercial schemes operating at the moment outside our own industry which try to attract loyalty. For me, as a customer, one of the best is the Westpac Hot Points programme, but for others it might be a retail loyalty card, or perhaps Air NZ Airpoints. The wider principle is the same, it allows you to build up credits against your expenditure and cash them in for a range of products and services from a variety of suppliers.

The obvious difference is that our harness breeders scheme would be based on credits accumulated through earnings – wins and or placings for each horse bred (and nominated for the scheme) by a breeder. Whether that is on numbers of wins or stakes earned, I’m not sure, but my gut feeling in terms of industry development and growing new breeders/runners is to reward on number of wins (and perhaps placings although that dilutes the reward) rather the rewards based on stakes earnings. Why? Because a tiny number of big stakes races often add huge earnings to so few race horses, and therefore the breeders are not recognised for their role in providing good winners in the daily racing across the board. That’s what keeps the industry going. Spread the rewards, grow the pool!

This sort of breeders scheme is going to need some financial input from breeders to set up the pool. So I suggest an entry payment  of some sort (but what should be debated e.g. is whether that is annually renewing fee or one off, and whether it is per horse, per mare, annual or all up etc.) The Breeders Crown system has set some good precedents. But the main thing is to keep it easy for breeders to get into, not a high cost/high risk subsidising payment for someone else who will get the rewards downstream.

The advantage of this type of system is that is that it can leverage off a wide range of sponsors for “vouchers” which the credits can buy, and that will open up some good sponsorship deals. For example, your NZ Harness Racing Breeders Credits might help pay for a service fee you otherwise couldn’t afford; or you could spend it at a feed store on a particular type of feed sacks; or with an equine dentist for so many hours of work; or an equine shop; or equine transport credits etc. So it does give opportunities for deals to be struck with industry participants – and that might even be the TAB offering cash conversion to your TAB account. But whatever, it is a reward that goes back to the breeder and empowers them to use it is the way the suits their circumstances. That’s the real advantage of this option!

Another real advantage is that credits could be transferable to another owner if the breeder made that choice. Harder to administer, but it might provide a good selling point for mares and progeny if they are paid up and have got credits in the bank.

A key would be that credits would not be able to be “cashed up”.

Next time I cover off Option 2.

– Bee

North Island Breeders’ Forum

Sunday 8th March – Alexandra ParkNZSBA in association with the North Island Breeders’ are pleased to confirm that the North Island Breeders’ Forum will be taking place on
Sunday 8th March at Alexandra Park,  9am – 1pm.
We have received a good response from breeders and have an interesting timetable – with plenty of time for you to have your say. If you haven’t registered already, please reply to this email and confirm your attendance. Forum Timetable9am                   Morning Tea/Mix and Mingle
9.30am              John Mooney to open and presentation by NZSBA;
10am                 Dominique Dowding and Kevin Smith, Alexandra Park;
10.30am            Edward Rennell, Harness Racing New Zealand;
11am                 Workshop – focused on solutions for industry issues and new ideas;
11.30am            Breeding/Industry panel to answer your questions.If you have any comments/questions that you would like to raise anonymously, please feel free to complete this form and we will ask the question on your behalf. If you are not going to attend the meeting and would like specific feedback on your question, please fill in your contact details.This will be a great opportunity for breeders to voice their opinions and collaborate for the betterment of the industry.

Kind regards


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We talk about breeder’s bonuses or options to give more back to breeders, but there is no structure to the discussion.

We’ve had an online survey (toe in the water) and brief moments at forums, but I don’t see a real effort to engage with breeders in an open discussion on some of the options that are being used world-wide or might be local programmes that work here.

Foal reflecting

Reflecting on breeders’ rewards and recognition options

When I go up to Auckland this Sunday for the Breeders Forum, I hope we get some specific feedback into what our representatives are aiming for and what the alternatives might be for our consideration. One-off achievements with specific clubs or sponsors are brilliant, but they don’t give a cohesive response to the NZ breeder’s problem.

We need an industry-wide solution.

I want some options that build on what we know (globally), that asks questions, and provides robust opportunities to discuss answers.

So to put some ideas into the circle….

Here’s my thoughts, following on from the last few blogs I posted on this topic:

The principles need to be:

  • There needs to be some effort to look into the actual costs (variable between locations) of breeding and raising a horse, so we all have a sense of range of costs that a “raw material” producer could expect to outlay in this industry. Hidden costs are just submerging this issue in a sort of invisible breeder’s donation/hobby account. For example, gaining younger newcomers to the industry may be increasingly dependent on them having access to land, which is a huge ask in today’s real estate market. Their scenario is quite different from the older farmer with 500 acres and a hobby interest.
  • Any reward must be based on outcome (performance) to avoid skewing the breeding market to a poor quality product just to increase foals on the ground.
  • Programmes that have addressed a similar need for other players in the industry can often be a good, affordable, sustainable and fair “role model” if they work well.
  • Those who benefit need to make a contribution e.g buy in to a programme; but also need to see how that benefits them.
  • The return to breeders needs to be meaningful but viewed as a bonus rather than compensation of costs.
  • We need to associate this with an accurate database of breeders, and thanks to HRNZ’s incredible system that should not be a major issue, but it does need to be workable and also within a system such as the Sires Stakes administration unit which can provide the formalising of a scheme.
  • There are commercial incentive and reward options outside our industry which might also be worth looking at as a template, including the successful “Westpac Hot Points” scheme based on gaining expenditure credits, but this could be modified to performance credits.
  • Any rewards/recognition programme needs to have the ability to “tweak” to give signals to breeders about favoured long term directions. I don’t mean short-term things like “Breed to this sire this year and get more bonuses” but rather helping to offset trends away from breeding fillies, or encouraging a wider spread of sires. Yes, that is controversial because people like to say that the market takes care of those things. But the “market” doesn’t exist in any pure sense and certainly not with any long term development bias (compared to short term financial gain). So let’s get real.
  • If possible, given the Australasian market we have, it needs to work around the fact that many New Zealand horses bred perform in Australia not here, and these are some of the breeders who are currently losing out on the success of the horse.
  • Finally the scheme needs to be inclusive (but voluntary to avoid any of the issues we have had previously with imposed schemes). So no-one is excluded, and it is not just an additional bonus for those who already succeed at the top end. For this reason I favour a system based on number of wins (for example) rather than stake-money earned by a horse.

OK, those are my principles.

You can probably see the direction I am going in, but I will explain a bit more next time.


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In my last blog I raised the issue of getting a fair return for breeders – the people who take high risks to produce their product (a racehorse) which goes on to be an integral part of the wider industry product (a race on which betting can take place).

What is a fair slice of the pie for breeders of successful racehorses?

What is a fair slice of the pie for breeders of successful racehorses?

Other major players in the production line charge for their time and expenses – a recognition of the resources that go into a performing horse regardless of whether it wins or comes last. For example, drivers have a set fee for each drive no matter where the horse gets in the field, currently at $75 +gst I think. And trainers have their daily rate for training charged to owners, plus other costs like gear and track fees, vitamins, worming, transporting etc which are also reimbursed. Then on top of that, both trainers and drivers receive a bonus each time the horse performs well in a race. This bonus is a part incentive and part reward. The trainer receives 10% of the stake money payable to the owner, and the driver 5%.  That’s all good and I have no argument with it.

All I ask is that a small percentage is also tagged for the person who started it all in the first place – the breeder. Currently, their need for a return on investment is recognised only once, when (and if) a sale takes place to the first owner. Or possibly over a long time as the mare builds a reputation – although having good siblings is no guarantee that a particular yearling will sell for a reasonable price. Often, the return to the breeder will hardly cover costs. If the horse goes on to be successful, there is no bonus for the breeder.

How can breeders get a fairer slice of the pie?

It is tempting to say, as some do, that increasing the overall stakes will give a bigger return to breeders because so many breeders are also owners.

I have two main objections to that:

  1. It makes the breeder role invisible once again, just when we are starting to get some traction into the specific needs and interests of breeders in their own right. It takes away a clear separation between different roles. Many trainers are also owners in a horse, so why not merge them into common “owners” group as well and take away the trainer bonus? And what about the drivers who are also trainers and part owners, like Mark and Natalie – maybe they want to give up their drivers and trainers percentage bonuses in exchange for bigger owner returns? I doubt it…
  2. It ignores the fact that many breeders may be owners of horses not by design but by necessity because an young untried young horse is damn hard to sell. For many smaller breeders, an early sale is unlikely to cover their most basic service fee and raising costs. Breeders often end up carrying their foals for another year or so until they get to a point where they are able to be trialled for racing – and then sold, if lucky. In the past, carrying that cost was easier as there was more access to cheaper land. That is no longer the case.

What is an alternative?

We all contribute to the end result.

We all contribute to the end result.

A breeders bonus, but

  • one that rewards the original breeders of racehorses rather than those who buy a mare.
  • one that is tagged to performance.
  • one that is partly self-funding and partly a fair payment by the industry to those who produce the raw material of our industry success stories.
  • one that can be tweaked as necessary to encourage desirable breeding trends.

Next blog, I look at how it could work.






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Eureka! (which is actually a settlement not far from here…)

The New Zealand Standardbred Breeders Association deserve a loud round of applause, followed by a clinking of glasses, after the announcement of the new breeders bonus scheme for the Metropolitan Trotting Club.

In a nutshell

The scheme which starts on 1st January 2014, is open to any member of the NZSBA who breeds the winner of a totalisator race at an NZMTC meeting, held at Addington Raceway. They will be eligible for a $500 bonus payment.

So the parameters are clearly stated, and they spread the bonus concept beyond a few elite races or series which require breeders to make eligibility payments.

This is more for the breeders of “ordinary but good” horses who win at the week to week race meetings but may not succeed at the Breeders Crown or Sales Series Final.

Hats off and thrown in the air for the NZMTC for coming to the party on the breeders bonus concept.  This, combined with its recent announcement of stakes increases, puts the club up there with Auckland in terms of leadership when the industry most needs it.

I would dearly love to see a similar scheme in Auckland, or even locally here in Cambridge.

While many breeders aim to sell what they breed, there is a greater number who end up owning and racing what they breed. These sorts of bonuses are ideal for those who breed/own/race and will now have an added incentive to get a horse to the Met.

For those like me who breed to sell, it is lovely to get some reward later if a horse goes on to race well and win. $500 can cover a few bills and a bag or two of carrots for the mare!

I hope the scheme will also result in more people joining the NZSBA – it’s our voice as breeders and deserves our support.



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