Pent-Up Demand Boosts Rates in Atypical January

 In many ways, January was an atypical month for freight.The weather was exceptionally challenging in most of the country, and rates remained high, especially for vans. On the DAT Load Boards, load posts skyrocketed, partly due to weather-related cancellations and re-scheduling, but there was also just more freight available in January than in December. That’s unusual, too.

Different regions were affected in unique ways. The Upper Midwest has been hurt most by the weather so far this winter, even though the Northeast and Southeast have gotten more attention from the press.

Midwestern states had strong freight volume at the end of the fourth quarter, and it carried through into the New Year. Pressure was due in part to abundant fall crops — potatoes in Minnesota and North Dakota, and apples in Michigan — but manufacturers were also busy. Then severe cold and snow started up, interfering with truck operations, and the weather combined with freight volume to boost demand and rates to record levels in January. Rates are just starting to come down now, in early February.

Western regional powerhouses, on the other hand, did not achieve the usual seasonal highs. California freight has been slow, owing to the ongoing drought in the West and Southwest regions.

South Central and Southwestern markets, including southern Texas and border crossings at Nogales, AZ are jumping into the mix.with agricultural products from Mexico.

Southeastern markets, all the way down to Florida, got hit by severe cold that curtailed harvests, except for the southernmost areas. Construction also froze (literally) across the Southeast in January, but that activity is expected to resume and strengthen as the weather improves.

Northeastern industrial and agricultural markets, as well as East Coast ports, were gaining strength later in the fourth quarter of 2013, and should surge again as soon as it warms up. Energy is a big part of the story, as increased production of oil and natural gas offers attractive costs to the manufacturing sector. Hydraulic fracturing, or “fracking” led to a boom in North Dakota, but it is also contributing to the economy in Pennsylvania and neighboring states.

Busy times are ahead for transportation and logistics companies. If the weather calms down this month, it could be the last chance for shippers and brokers to find receptive carriers who are willing to engage new business until after the peak season. If you’re a carrier, reserve some capacity instead of locking it all in at current contract rates, and be sure to reward your best drivers so they will stay with you. You will need them soon.

March is expected to usher in a surge of freight volume, due to construction traffic and a generally positive climate in the manufacturing sector.Expect energy to play a role, too. Pipeline construction will continue to spur growth in the mid-section of the U.S., from North Dakota to Texas. Neighboring states will also benefit from higher demand. The economic expansion is likely to continue in the middle of the country, less so than on either coast. Imports are declining in importance to the economy, and exports are growing.