Higher average value over reserves signals strong competition

Clearance rates and average prices from AuctionsPlus commercial cattle sales are quick indicators for market trends. However, they don’t always tell the entire story of the auction process, especially when it comes to the balance between vendors expectations and buyers’ willingness. ‘Value over reserve’ is the difference between the vendors reserve price and the final sale price.

AuctionsPlus commercial cattle data has been reviewed to understand the relationship between final sale prices and the value over reserve. Figure 1 shows that in 2019, the average sale price of every lot of commercial cattle sold on AuctionsPlus was $896/head - with the average value over reserve at $51/head. Widespread and severe drought conditions through 2019 had led to significant destocking and low competition from buyers.

In stark contrast, both in terms of seasonal conditions and demand, average prices so far in 2022 have hit $2,500/head – with the final sale price $190/head above the average reserve price.

Comparing 2022 to 2021, average sale prices have increased $370/head, while the average value over reserve has slipped $5/head. With a slightly lower clearance rate in 2022, but sustained high prices, there continues to be very clear signals that buyers are getting increasingly selective in their purchasing heading into the middle of 2022. This contrasts with 2021, when producers were willing to purchase almost anything to put back into wet and lush paddocks.