It ain’t over until it’s over: A peek into the after-auction negotiations

In many instances, the result once the final whistle blows is only part of the story. It is the intrigue and negotiations after the event however, which prove more instructive than the final score. The past few weeks has seen the post-auction activity for AuctionsPlus commercial livestock sales reach historically high levels, especially for the sheep and lamb market, as the back-and-forth between vendors expectations and buyers’ willingness lifts clearance rates in the days following the sale.

In the sheep and lamb market, the first week of November 2021 registered a very low initial clearance rate at the close of the two commercial national sales for Tuesday 2nd November. The overall clearance rate was 41%, which was well below the previous weeks and lower compared to the same week in 2020 (73%) and 2019 (65%). However, in the two days following the closing of the auction, an additional 18% of the sale was transacted – or just shy of 28,500 head.

Across both sheep and lamb categories for the first week of November, there was a vast difference in clearance rates at the closing of the respective auctions. For the very scarce numbers of SIL Merino ewes and SIL shedding breeding ewes, the clearance rate was 100% at the close of sale, with results easily blowing past vendors reserve levels. In contrast, the 9,060 head of Merino ewe lambs offered only hit a 6% clearance rate at the conclusion of Tuesday sales – with a clear standoff between vendors expectations and buyers’ willingness for the value of this category. In the following two days, this rate only increased to 10% - with vendors either unwilling to reduce their reserve to meet the buyers…or buyers unwilling to lift their offers to entice vendors. Take your pick.

Looking through some of the other main categories for last Tuesday’s sale, the 49,571 head of crossbred lambs registered an immediate clearance rate of 41%, which then jumped to 62% by Thursday. Similarly, Merino wether lambs (18,070 head) moved from 50% to 67% and first cross ewe lambs (13,264 head) 28% to 51%. While the very tight supply of SIL and SM lines registered higher immediate clearance rates, the NSM lines matched the lamb market trend, with NSM Merino ewe hoggets (14,038 head) jumping from 35% to 54%, and NSM Merino ewes bouncing from 63%, to 75%.

So, what does the fluctuating clearance rates and action in the post-auction market over the following two days tell us about the current state of the lamb and sheep markets? Firstly, sheep and lamb buyers appear to be far more prices driven, which would be expected given the seasonality that can influence the market during this time of year. Across several of the larger categories, buyers appear to have set clear price limits and appear unwilling to yield – potentially a sign of the seasonal confidence for the increased lamb supplies expected to appear in the coming weeks. Contrast this to the current cattle market – where the fear of missing out appears to be a greater motivator than the price paid, resulting in higher immediate clearance rates.

For the national commercial cattle sales held on Friday, the 20,010 head registered another week of very competitive clearance rates, averaging 80% at the immediate closing of sales. Indeed, research into buyers’ intentions in recent months have shown that many are entering the market with essentially no upper limit, effectively operating with a “just get them at any cost” approach.

For last week’s sales, immediate clearance rates of more than 90% were registered for around one-third of the categories reported, with another one-third of the categories exceeding 80%. In contrast to sheep and lambs however, cattle deals done in the following two days were very limited, with many sellers holding their ground on “unsold stock”, confident that the excellent season will provide the on-farm flexibility to hold the stock until buyers “step up”. While this could be a precarious stance to take for the vendors, the results from the market over the past six months should give them plenty of confidence to secure a sale at their perceived value – all as their cattle remain unruffled in paddocks gaining weight.

So what conclusions, if any, can be made from last week’s online clearance rates of 153,820 head of sheep and lambs and 20,010 head of cattle. Firstly, sheep and lamb buyers appear to be much more price-sensitive in the first week of November – which makes complete sense given the tighter timeframe for trading decisions in the lamb market. Secondly, sheep and lamb vendors are happy to reduce initial reserves to conclude a sale – again highlighting the seasonal influence upon sales decision and desire to cash in on a strong market.

Finally, the main characteristic of buyers in the cattle markets continues to be “just get them at any cost”, with vendors holding their ground post sale. Indeed, the lack of post-auction deals potentially signals that those holding market ready cattle are confident they have the upper hand against desperate buyers heading into the summer months.

NOTE: Stock that have no bids or pass in at auction, may be reoffered into a subsequent auction.
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