CC BY
14
1 "J "J (c)
Monika G^bka , Jacek Lojek , Michal Romanowski , Anna Lojek
1 Faculty of Economics, Warsaw University of Life Sciences, Warsaw, Poland 2Faculty of Animal Sciences, Warsaw University of Life Sciences, Warsaw, Poland
3 Strzegom Stud Farm
ECONOMIC EFFECTS OF RACEHORSE STABLES MANAGEMENT IN THE ZELAZOWO TRAINING CENTRE
Abstract
Economic effects of managing racehorse stables outside race track, in the Zelazowo training centre situated in dolnoslqskie region, which includes buildings of one offarms offormer Strzegom State Stud Farm, in the period from November 2005 to December 2006 were investigated. Costs analysis of keeping horses in stables as well as income earned by them from race prizes showed a lack of profitability of this kind of activity. Also, costs of infrastructure as well as horse transportation from the stable to race tracks in Warsaw proved to be significant. This factor increased the loss in relation to one horse by 2917 PLN.
Key words: thoroughbreds, race tracks, racehorse stable, costs
Introduction
Before the Second World War preparation of horses to races had taken place exclusively in private stables or training centres functioning at parent stables. After the Second World War, national stables were organized, and trainers become employees of a national enterprise. Particular stable workers were assigned to trainers by the force of the employer's decision. In the period before the economic transformation of 1989 also Thoroughbreds and Pure Bred Arabian Horses breeding was actually monopolized by the nation and offspring of horses from national stables was going each year to nationalized racing stables on race tracks.
Economic transformation of 1989 resulted in the fact that, in the so far nationally monopolized sector of Thoroughbreds and Pure Bred Horses breeding sector, private breeders and owners of race horses started to play a more and more important role. The described changes were happening relatively quickly. The general organization of Thoroughbreds and Pure Bred Horses training in Poland was changing slower. Its characteristic feature was grouping horses for the hole-year training and period of races on the race track in Warsaw (almost in the centre of the city, about 700 horses of both breeding are grouped). In Western Europe race horses training is generally organized in such a way that horses prepared for racing in various training centres come to the track only for a shorter or longer lasting race meeting, and then they come back to their training stables. As a result of system changes also a fundamental change of the system of racing stables as well location of training centres took place. Since 1993 racing stables have been privatized and trainers have undertaken their own business activity (public trainers) or they sometimes got employed in private stables (private trainers). Also, the number of
© Monika G^bka, Jacek Lojek, Michal Romanowski, Anna Lojek,2009
332
training centres was enlarged - apart from the previous ones in Warsaw, Sopot and Wroclaw, new private centres were being set up.
It needs to be remembered that a significant factor conditioning the will to have a racing stable are possible profits from racing prizes. In the past, the average seasonal earnings in relation to one horse did not cover in full the costs connected with keeping horses. Taking into consideration the small pool of prizes which racing stables can compete for in Poland, an important factor of their activity on the market can be lowering the costs of horses training and keeping. Still, it is not easy when it comes to racing horses which require significant expenditures. One of the ways of such an acting of the owner of the horses may be moving the training from the race track to training centres which are being created in the area, outside the track. One of the biggest training centres of this kind which prepares horses for races is the training centre in Zelazowo which is a part of Strzegom Stud Farm (for about 70 horses).
Task, the aim of the article
The aim of the work was analysis of economic effects of managing horse racing stables outside the race track, in the training centre in Zelazowo. The research was to show what factors and to what extent shaped the racing horse keeping costs structure as well as in what part one can expect the return of borne expenses from racing prizes.
Material and methods
The paper presents the results of activity of a racehorse stable in Zelazowo belonging to the Polish Investment Corporation (Polska Korporacja Inwestycyjna S.A.). Branch in Zelazowo conducted its activity from November 2005 to December 2006. Stable in Zelazowo was situated 57 km westwards from Wroclaw and 4.5 km south-west from Strzegom. It occupied buildings from one of farms of former Strzegom State Stud Farm set up as the National Farmstead in 1953. The building in Zelazowo was old and small. However, no modernization works, apart from the current, necessary renovations in order to keep 31 boxes ready to take horses, were carried out in Zelazowo. The building in Zelazowo served also a machine base for the 500-hectare farm. Such a state was kept until November 2005 when for the needs of the newly founded stable new buildings were adapted. It was obviously necessary to renovate and modernize so as an uninterrupted activity of the race stable could be maintained. Together with following boxes being put to use the number of horses kept in the Zelazowo stable was increasing to reaching the number of 55 horses in December 2006. It needs to be emphasised that not all farm buildings were used to conduct activities dealing with race horse training since the building was still being used as a machine base for farming activities which was not taken into consideration in the conducted analysis since it was not subject to management in the organization structure.
Usable infrastructure for the horses training consisted of:
333
- training track with a natural ground (sand) in an ellipse-like shape with the perimeter of 2000 metres situated 150 metres from stable buildings on one of the fields which belonged to the farm;
- 12 paddocks situated around farm buildings with grass ground.
Training of the horses took place also on the nearby green areas, fields and forest tracks as well as on wastelands situated on the hill sides.
Costs connected with managing racehorse stables in Zelazowo in the period from November 2005 to December 2006 (costs of keeping race horses trained in the stable) were divided into the following categories:
• costs of bedding,
• costs of bulky feed (hay),
• costs of concentrate (oats),
• costs of supplementary feed,
• costs of prophylaxis and veterinary services
• costs of shoeing,
• costs of employees' remuneration,
• costs of infrastructure - buildings of the stable in Zelazowo were owned by an entity conducting business activity therefore, as a result, depreciation of buildings was calculated for this stable and not costs of boxes rental.
Costs of keeping horses are gross costs.
Income from wins from the races won by horses trained in the stable in Zelazowo on the Warsaw race track during the period from November 2005 to December 2006 are net values, that means they were decreased by the following factors:
- fees for registering the horses for races,
- remuneration for horse riders in the races,
- 5% prize gross for horse riders in the races,
- 10 % prize gross for the horse trainer.
Rate of costs borne on average monthly keeping of a race horse in relation to average monthly prizes won by a horse in the races was calculated.
Data concerning costs of keeping a racing stable in Zelazowo as well as income from racing prizes were gather by using the questionnaire method and on the basis of accounting records of PKI SA.
Analysis of gathered information was conducted by means of the comparative method.
Results of researches
The average number of trained horses in the examined period in particular months in the stable in Zelazowo shows a visible developing tendency for this training centre (table 1). At the same time it needs to be noticed that by eliminating horses which do not prognosticate a good racing career (for example through sale or lease), at the same time changeable costs are decreased, which in case of the lack of good racing results would have a negative influence on economic results. Still, on the
334
other hand a constant sale of horses has a negative influence on the ratio of using available places in the training centre stables. Even though it is not a problem in the stable rented on racing tracks (the fee is charged only for the boxes which are really occupied), then in the training centre in Zelazowo boxes not occupied by horses generated loss. Theoretically, one could consider the ways of using free spaces in the stable (for example taking horses for training in Zelazowo), still, due to the fact that the sale schedule of unnecessary horses cannot be planned and due to the necessity to take a certain number of own, young horses born in the following year in autumn of each year, there is not possibility to keep in training horses of other entities. High average cost of bedding for a horse per month in Zelazowo was connected with the way of keeping the bedding in boxes (table 1). Getting rid of manure was taking place each day, so as the horses could be kept on a dry and clean ground all the time. It results in a higher use of straw than in training stables on the race tracks where the bedding is changed less often, which consequently raises the cost of the bedding. However, the costs of purchasing bulky feed were relatively low (hay) which can be explained by the location of the stable in the countryside, where both the price as well as transportation costs were lower than in case of purchases on the track in Warsaw. As can be seen in table 1, the division of the level of costs of concentrate (oats) was analogical as in the case of bulky feed. This situation was caused by the same factors as in the case of hay. What is visible is the high cost of supplementary feeds and additives which is the specificity of keeping and training of young, hardworking and still dynamically developing Thoroughbreds.
Picture 1. Costs structure in the racing stable in Zelazowo
Lojek et al. (1993) made a cost calculation of keeping Thoroughbreds in the racing training in PTWK in Warsaw in the price conditions of 1991. Analyzing the structure of gross maintenance costs the authors have found out that remunerations, together with surcharges of about 31% of the costs, and the costs of feed and bedding 8.9%.
335
Share of feeds in the total direct costs was about 40 - 50%. In Thoroughbred stables analyzed by Jasiczek (2000) costs of feeds turned out to be lower and were 36% and 22.8% of expenditures, where in the first case the value of the used feed constituted the highest element of increased costs. In both of the stables, the majority of feeds came from own production, just like in the training centre in Zelazowo.
Despite lower costs of shoeing in the stable in Zelazowo than in racing stables on racing tracks, theses costs were high (table 1). The result of such a situation was the necessity to shoe a bigger number of horses for four legs due to the hard and stony surface of the big area of the land on which the training in Zelazowo took place. On the racing track the sandy surface enabled to shoe young horses as well as horses which were not in advanced training only for their front legs.
Analysing data concerning costs connected with infrastructure (table 1) it needs to be remembered that boxes in the stable in Zelazowo, were not charged with rental fees which would be necessary in case in keeping horses on the racing track since the stable would be kept in one's own buildings. Still, there were costs connected property depreciation, current repairs as well as costs of using and deprecation of machines necessary to keep the whole infrastructure.
Relatively low costs connected with treatments and veterinary prophylaxis (table 1) can be explained by the fact that the horses requiring treatment due to various diseases or injuries were sent to the stable on the racing track in Warsaw, where the availability of services, due to the location of veterinary clinic was bigger than in Zelazowo. Time schedule of costs connected with veterinary treatments was connected with the randomness of horses' injuries which they suffer during the training, the vaccination schedule (2 times a year) and horses' deworming (3 times a year).
High costs of remuneration seen in the stable in Zelazowo (table 1), despite its location in the countryside seem to be contrary to the rule of lower remuneration for the same works in low-urbanized areas. Still, in case of racing horses training, there is the need to employ qualified stable workers as well as riders who received higher remuneration for their work than the unemployed or persons not having experience in working with Thoroughbreds. However, due to specificity of the racing riders and stable personnel's work as well as the small amount of persons willing to work in racing stables and the fact that in the examined period there was still few training centres located outside the Sluzewiec racing track in Warsaw, the majority of workforce was focused around the track in Warsaw. Recruiting employees for stables situated in other parts of Poland was therefore possible only thanks to offering better employment conditions, which influenced however, the increase of remuneration costs.
Costs of employees' remuneration were the highest item in the total costs structure of the examined stable and they constituted about a half of all costs connected with running the race stable in Zelazowo. The second group of costs were costs connected with maintaining the stable infrastructure (Picture 1).
Lack of income from racing prizes in a significant part of the examined period of the race stable in Zelazowo (tab. 2) can be explained by organizational changes
336
taking place in the race track in Warsaw as well as climate conditions. Geographical location of our country as well as the lack of infrastructure enabling to carry out horse racing in winter are the main reasons to establish, as the typical season of races, the period between April and November. The remaining part of the year, due to the lack of income from racing prizes has to be financed from reserves created during the very season or from other sources of financing. The period from November 2005 to December 2006 encompasses one, quite untypical racing season of 2006 when due to the lack of a new organizer of races (the previous one STWK Sluzewiec State Treasury Company was declared bankrupt) did not start as usually at the turn of April and May, but as late as in August. Due to the short period of time which was left till the winter season the racing schedule included a shortened racing list as well as an appropriately decreased pool of financial awards. Year 2006 was especially difficult for the owners of racehorses due the slight repayment of the maintenance costs from the race prizes. Despite such a difficult situation a drop of the number of horses registered for another racing season did not take place which proves that an exceptionally unfavourable economic situation of 2006 did not significantly harm the owners of the horses. The explanation of such a state of affairs can be found most of all in the general acceptance of the environment of the lack of profitability of keeping race horses and the need to finance means shortage from other sources as well as in the enormous numbness of the race horses breeding system in which decisions on decreasing the number of covered mares will be visible only after 2.5 years.
Table 2.
Financial result of racehorse stables in Zelazowo in PLN
Month Income from racing prizes Total costs Total loss
November 05 0,00 11 434,96 -11 434,96
December 05 0,00 14 527,81 -14 527,81
January 06 0,00 21 838,32 -21 838,32
February 06 0,00 23 436,65 -23 436,65
March 06 0,00 28 121,23 -28 121,23
April 06 0,00 25 175,28 -25 175,28
May 06 0,00 26 372,06 -26 372,06
June 06 0,00 26 345,59 -26 345,59
July 06 0,00 33 914,81 -33 914,81
August 06 3 474,20 34 758,57 -31 284,38
September 06 7 232,83 28 994,56 -21 761,73
October 06 77 362,77 25 937,00 51 425,77
November 06 3 753,82 33 501,73 -29 747,91
December 06 3 043,89 43 673,61 -40 629,72
TOTAL (PLN) 94 867,51 378 032,19 -283 164,69
Average (PLN/month) 6 776,25 11 434,96 -20 226,05
Average(PLN/horse) 4054,17 16155,22 -12101,05
Source: own study on the basis of PKI SA accounting records.
337
Therefore, in case of the discussed season of 2006 owners were left in a no-way-out situation since they had already had a specific number of horses ready to be trained whose value, in case of changing their destination due to age and breed would constitute about 20% of breeding costs. Therefore, they had to agree with such conditions of season organization and expect new solutions in the following years.
Table 1.
Costs of managing a riding sta ble in Zelazowo in 2005-2006 (in PLN)
Month Average number of horses Costs of bedding Costs of hay Costs of concentrate Costs of supplementa y feeds and additives Costs of shoeing Costs of infrastructui e and transport Veterinary costs Costs of remuneratioi Total costs
November 05 12,0 551,25 562,32 477,12 1 214,18 920,00 2 679,54 404,54 4 626,00 11 434,96
December 05 12,0 551,25 562,32 477,12 1 179,02 1 130,00 2 889,15 628,95 7 110,00 14 527,81
January 06 12,0 551,25 639,00 596,40 1 169,77 1 055,00 3 145,65 902,24 13 779,02 21 838,32
February 06 12,0 551,25 639,00 596,40 1 161,05 1 080,00 3 043,37 1 515,58 14 850,00 23 436,65
March 06 25,0 1 148,44 1 331,25 1 242,50 2 473,84 2 250,00 3 951,18 628,95 15 095,07 28 121,23
April 06 25,0 1 148,44 1 331,25 1 242,50 2 498,26 2 040,00 4 139,60 547,84 12 227,40 25 175,28
May 06 25,0 1 148,44 1 331,25 1 242,50 2 485,35 2 330,00 4 873,34 1 761,58 11 199,60 26 372,06
June 06 25,0 1 148,44 1 331,25 1 242,50 2 563,37 1 980,00 5 053,44 570,59 12 456,00 26 345,59
July 06 25,0 1 148,44 1 331,25 1 242,50 2 547,98 2 340,00 4 903,06 4 176,38 16 225,20 33 914,81
August 06 25,0 1 148,44 1 331,25 1 242,50 2 488,84 2 100,00 5 893,67 2 437,05 18 116,82 34 758,57
September 06 25,0 1 148,44 1 331,25 1 242,50 2 530,20 1 870,00 6 273,91 1 344,72 13 253,54 28 994,56
October 06 25,0 1 148,44 1 331,25 1 242,50 2 488,20 2 640,00 4 846,29 1 635,23 10 605,10 25 937,00
November 06 25,0 1 148,44 1 331,25 1 242,50 2 438,36 2 200,00 5 603,82 6 411,94 13 125,42 33 501,73
December 06 55,0 2 526,56 2 928,75 2 733,50 5 346,33 3 460,00 10 969,20 1 669,27 14 040,00 43 673,61
TOTAL (PLN) x 15 067,50 17 312,64 16 063,04 32 584,76 27 395,00 68 265,22 24 634,87 176 709,17 378 032,19
AVERAGE (PLN/month) 23,4 1 076,25 1 236,62 1 147,36 2327,48 1956,79 4 876,09 1 759,63 12 622,08 11 434,96
AVERAGE (PLN/horse) x 643,91 739,86 686,46 1392,51 1170,73 2917,32 1052,77 7551,67 16155,22
Source: own study on the basis of PKI SA accounting records.
Data included in table 4 concerning the financial result of the racing stables in Zelazowo prove that there is no economic justification for conducting this kind of activity. In the examined period only once (October 2006) a positive economic result in a monthly settlement period was achieved which proves a stable unprofitability of managing a racing stable in Zelazowo in this period of time. Without external sources of support its functioning would have been impossible. The results of conducted analyses were in accordance with research results of Chrzanowski et al. (2003) who on the basis of analysis of the costs of keeping and training of the horses in two stables on the Warsaw track in the season in 1999 found out that in one of the stables as many as 72.9% and in the second one 82.4% of the horses won on the track prizes lower than the costs of keeping. Jasiczek (2000) examining whether breeding of
338
Thoroughbreds is profitable in Poland as well we whether it is possible to carry it out without subsidies from the Biologic Progress Found (Fundusz Post^pu Biologicznego) also found out the unfavourable final financial effect of the activity of both of the analysed stables concluding that from the economic point of view horse breeding of Thoroughbreds is unprofitable and in Poland has to be subsidized.
On the basis of data included in table 4 a rate of costs borne on race horses keeping in the examined stables in relation to prizes won by the horses in races was calculated. This rate for the stable in Zelazowo was 4.63. Therefore, it was found out that the profitability level in the examined stable would have been reached if racing prizes in the Warsaw race track had been increased by 463%. Conclusions
1. Incomes from awards in Zelazowo stable amounted to, calculated for one horse, the equivalence of 4054,17 PLN per month, and total costs amounted to 16155,22 PLN per month.
2. Analysis of costs of managing horses in Zelazowo racing stables as well as income coming from racing prizes shows lack of profitability of conducting such a kind of activity. Average loss per horse was 12101,05 PLN.
3. In the costs structure the biggest item (46%) was employees' remuneration. Due to high professional requirements required from racing stables employees as well as the lack of the possibility of work mechanization in such stables, their decreasing is difficult.
4. A significant charge of the activity of the stable in Zelazowo, situated far from the racing track in Warsaw was the need to transport horses taking part in the races, which was increasing the loss in relation to one horse. Therefore, it seemed justified to look into economic possibilities of managing racing stables located in the track in Warsaw.
5. In order to cover costs of keeping racing horses in the racing stables in Zelazowo it would be necessary to increase gained racing prizes by 463% in the Warsaw race track.
Reference
1. BRZESKI E., ZAJ4C J., 1993 - Oplacalnosc hodowli zarodowej koni roznych ras w wybranych stadninach Polski Poludniowej. Zesz. Nauk. AR Krakow, 283
2. CHRZANOWSKI SZ., LOJEK A., ADAMCZYK M., 2003 - Analiza kosztow utrzymania i treningu koni na torze wyscigowym w Warszawie na przykladzie dwoch stajni wyscigowych. Zesz. Nauk. Przegl^du Hodowlanego, 68 (5), PTZ, Warszawa.
3. FORNEY M. W., 1990 - How much does racehorse cost? Owning a Thoroughbred. California Thoroughbred Breeders Foundation.
4. JANISZEWSKA J., SPEICHERT-KARKOSZ M., 1989 - Porownanie oplacalnosci chowu koni gor^co- i zimnokrwistych w stadninach wojewodztwa szczecinskiego. Zesz. Nauk. AR Szczec. Zootech., 137 (25)
339
5. JASICZEK G., 2000 - Analiza kosztow utrzymania koni pelnej krwi angielskiej na przykladzie dwoch stadnin koni sp. z oo. Zesz. Nauk. Przegl^du Hodowlanego, 50, PTZ, Warszawa.
6. LOJEK J., CHRZANOWSKI SZ., STASIOWSKI A., BUSZ J., 1993 -Analiza kosztow utrzymania konia pelnej krwi angielskiej i czystej krwi arabskiej w treningu wyscigowym na PTWK w Warszawie. Zesz. Nauk. Przegl^du Hodowlanego, 10, PTZ, Warszawa.
Summary
The paper presents the results of activity of a racehorse stable in Zelazowo belonging to the Polish Investment Corporation (Polska Korporacja Inwestycyjna S.A.). Branch in Zelazowo conducted its activity from November 2005 to December 2006. The number of trained horses amounted to the average of 23. Incomes from awards amounted to, calculated for one horse, the equivalence of 4054,17 PLN per month, total costs amounted to 16155,22 PLN per month. The activity gave a monthly loss of 12101,05PLNper horse. The results indicate the incomes from racing awards covered the costs of horse selection and appraisal in 59,3%. What contributed to the result was lower incomes from won competitions and high costs of activity, in particular the costs of remunerations of employees constituting 46% of costs connected to running of a racing stable and costs of the transport and maintaining of the stable infrastructure (18% of total costs).
Cmammx nadiumna do peda^ii 16.09.2009
340
