The on-line auction concept is new for many, so here are some guidelines to help you better understand how Farmtrade.comAg winners are determined when the auction closes. If the seller has indicated he will only sell in full lots (meaning "all or none"), the highest price offered wins. If two offers are equivalent, then the earliest offer wins. When the seller has indicated he will accept less than full lot bids, the following rules apply:

1. When there are bids for quantities less than offered by the seller, the highest priced bid always wins the quantity they bid upon.
2. When there are bids for the same price but for different quantities - bids for larger quantities win out over bids for lesser quantities.
3. When there are bids at the same price and for equal quantities - bids from bidders who placed their initial bid earlier win over equal bids placed later.

Just remember this priority: price, volume, time. Although many bidders like to wait until the end of an auction to bid, earlier bids can and do win. So, bid early and bid often to get the deal you want!

Bid/Ask Spread

Buyers can bid prices less than the seller's "asking price" (formerly the "minimum bid price"). The seller is under no obligation to sell below his asking price, but the bid will be recorded and displayed so that the seller can see what buyers are willing to pay. If the seller chooses, he can reduce his asking price to meet a lower bid price. At that point, both parties are committed; a seller cannot raise his asking price, and a buyer cannot withdraw or reduce a bid.

"Clearing Price in Auctions"

The price at which product is sold for all winning bidders in a particular auction will be determined by the "clearing price" at the end of each auction. The "clearing price" is the price of the lowest winning bid (the lowest winning bid that is greater than or equal to the last asking price). The quantity of product will be awarded in priority based on higher bid prices (as described above), but the price paid will be the same for all winning bidders.

Example One: Product Does Not Sell Out at Initial Asking Price

Pallets for Sale: 5 Initial Asking Price: $100.00 per gallon   Bidder Pallets Bid Price A 2 $100.00 B 2 $99.00 C 3 $98.50

The seller can choose from the following options:

1. The seller can leave his asking price at $100.00/gallon. At this price, he will sell two pallets of product at $100/gallon to Bidder A (assuming that no further activity occurs before the auction closes). Bidders B and C would not win any product.

2. The seller can lower his asking price. If the seller lowers his asking price to $99.00/gallon and no other bids are placed, he will sell four pallets of product. The "clearing price" of the auction would be $99.00/gallon. Bidder A would receive two pallets at $99.00/gallon because he has the highest bid. Bidder B has the next highest bid and would also receive two pallets at $99.00/gallon. Because C's bid is below the asking price, he is not a winner in this auction.

   The seller could also lower his asking price to $98.50/gallon in the example above and would sell five pallets of product (assuming again that no other bids are placed). The "clearing price" of the auction would be $98.50/gallon, and Bidders A, B, and C would all purchase product at $98.50/gallon. Bidder A would receive two pallets becuase he has the highest bid. Bidder B has the next highest bid and would also receive two pallets. Bidder C would only receive one pallet because only five pallets are for sale, and Bidders A and B placed higher bids.

Example Two: Product Sells Out at or Above Initial Asking Price

Pallets for Sale: 5 Initial Asking Price: $100.00 per gallon   Bidder Pallets Bid Price A 2 $100.00 B 2 $99.00 C 3 $100.10 D 3 $100.25

In this case, the seller takes no action, and he sells all five pallets at the clearing price of $100.10/gallon. Bidder D wins three pallets and Bidder C wins two pallets.