Clearance rates are an important performance indicator for auctions, providing an almost immediate insight into market sentiment for both vendors and buyers. A unique feature of the AuctionsPlus platform and reporting is the publication of commercial livestock clearance rates each week, as the multiple transaction points can tell a much deeper story about the market than just the final selling price.
Additionally, the introduction of the “Buy Now” feature in late 2018 by AuctionsPlus provided further control for vendors, enabling them to set a fixed price for a listing. The feature allows buyers to capitalize on market conditions and put an open value against their expectations – at a time suited to them, instead of waiting for weekly commercial sales to commence. Since its inception, the use of the Buy Now feature has grown significantly on the platform, accounting for 3% of all sheep and lamb sales in the first quarter of 2022, up from only 0.3% in 2018 (Figure 1). The considerable rise in uptake of the Buy Now feature in both listings and sales is indicative of current easing market, as well as the willingness for vendors to move stock on prior to auction at a value they deem acceptable.
While the majority of commercial sheep and lamb listings each week are offered in the “traditional” format, with the vendor setting a reserve price prior to the commencement of the auction, the number of “Buy Now” transactions is set to increase moving forward, as vendors optimize the flexibility of the platform.
Following the immediate conclusion of auctions on the platform, clearance rates provide an indication into the overall market sentiment and performance for the week. The number of sales and resultant clearance rates highlight the supply and demand balance of the market. Close observation in the hours and days following a sale will see clearance rates increase, indicative of disparities between buyer and seller price expectations. Post-auctions negotiations in recent months have revealed the greatest insights into the current online market. Large changes in clearance rates following the close of an auction provide a strong indication that seller reserve is initially too high, or demand is not buoyant enough to support the anticipated price point. Subsequently, lowered price post auctions, to lock in a deal, give a fairer indication of the actual market.
The first quarter of 2022 saw a historically strong lamb market soften, while demand remained buoyant for buyers looking to purchase quality stock at a reasonable price. Taking a closer look into clearance rates for the first quarter of 2022, the combined auction clearance rate at the immediate close of the auction held on Tuesday afternoons sat below 50% - the lowest clearance rate since the first quarter of 2019 (when the drought was really starting to grip the eastern states). Contrasting this however, 2022 has seen a much stronger final clearance rate in the days following auctions compared to 2019, as buyers are more willing to negotiate post sale given the better seasonal conditions. Another insight from the differing clearance rates reveals the difference in markets between the two periods - with 2019 being a buyers’ market (for those that could) while the current sheep and lamb market, albeit with prices and demand softening still has benefits for sellers.
Since 2019, the percentage of post-sale negotiations has averaged 16% and 18%, respectively for the lamb and sheep commercial sales. While the same three-year period has seen a massive change in seasons and overall sentiment, the continuation and necessity for post-sale negotiations each week highlights the unwavering standoff between buyers and sellers – especially into early 2022.
This week’s clearance rates clearly demonstrate the influence of post auction negotiations. As at the close of sale on Tuesday, April 12th, Merino wethers lambs only registered a 6% clearance rate for the 6,611 head offered. By 4pm, the following day, some 24hrs later, this had jumped to 38%. Similarly, the 48% clearance rate for SIL Merino ewes increased 62% over the same time period.