September Freight May Exceed August Levels

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With most of September in the rearview and Q4 soon upon us, here are a few short takes on the current market trends:

I was cautiously optimistic about September freight volume going into the month, and then we had a surge in freight availability and rates early in the month. Since that point, trucking conditions seem to be relatively stable. We may still see another surge of freight before the third quarter ends next week, and that would definitely lift September volume above expectations.

Tuesday is a tough day to close the quarter. Most long hauls tend to start on Monday mornings, so Tuesday is dominated by back hauls, and the longest outbound trips are still in progress. A portion of the available capacity is tied up on Tuesdays, which could drive rates up for a day or two, at least in the major outbound markets. I will be able to tell you more about that next week.

Fuel prices are declining steadily, which tends to have a dampening effect on market rates. Gasoline dropped 5.5 cents in the latest national averages, and diesel dropped 2.3 cents to the lowest point in recent history. Diesel fuel is now 17.2 cents less than one year ago. One-time rate agreements typically are quoted as “all-in” so the fuel surcharge is not broken out. When fuel prices slip, the surcharge drops and the total rate may decline accordingly. Lower fuel prices also lead to increased leverage for US manufacturing against foreign competition.

Truck freight tonnage set a record in August, with a 4.5% increase compared to August 2013, according to the American Trucking Associations For-Hire Truck Freight Tonnage Index (see graph above). Year-to-date, however, the ATA numbers are up by 3.1% on the seasonally adjusted index and 2.6% on the not-seasonally adjusted version. For the same period of January through August, spot market freight availability as measured by load posts was up by more than 55% year over year, which indicates that a larger proportion of shippers are seeking capacity on the spot market. Typically, this is accomplished with help from freight brokers and 3PLs. Another measure is RateView transactions, which are up 12.2% Y-O-Y for the same account base.

Freight is especially plentiful in the Upper Midwest and Pacific Northwest, where the fall harvest continues to keep reefers busy. Vans are benefiting as well. Rates are elevated for both trailer types in Green Bay (apples, cabbages and dairy products); Omaha (meat); Twin Falls, ID (potatoes); Aurora, CO (more potatoes); Albuquerque (still more potatoes, as well as onions). Farther west, apples are rolling out of the Oregon markets of Portland and Pendleton. Coastal California is also producing a strong harvest of tree fruit as well as late summer vegetables, relatively unaffected by the drought that plagues other parts of the Golden State.

Mexico’s increase in auto and auto parts production ties directly into the U.S. supply chain at El Paso, TX, and Laredo, TX, and drives U.S. trucking and intermodal growth. Rail traffic surged in the week of 9/15-9/19. Carloads were up 4.9% WOW versus 3.5% YOY. Intermodal improved, up 6.4% WOW versus 5.7% YOY. Together, with recent spot market freight trends, this shows that industrial production (IP) is strong, which is a better measure of the freight economy than GDP, which includes services.

Flatbed continues to roll along, with rates near their June peak. Flatbed loads are plentiful in all corners of the U.S. with only softness in south Florida, west Texas, and a few remote markets.

Van freight mirrors reefer freight with the Upper Midwest and Pacific Northwest, and parts of the East showing strength, including Baltimore, Buffalo, and Pittsburgh. Elsewhere, in the Sunbelt, Atlanta and Dallas are relatively quiet. Los Angeles has been soft but is starting to build volumes, as is Stockton. This creates a national picture that is mixed, yet still on track to beat August numbers.

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