Posts Tagged “contract rates”
BEAVERTON, OR — Spot truckload rates rose in December, and the gap between spot and contract van rates closed to its narrowest point since March 2022 when prices to move truckload freight were near all-time highs, said DAT Freight & Analytics, which operates the DAT One online freight marketplace and DAT iQ data analytics service.
A convergence of spot and contract rates would signal an end to the current cycle of falling prices for truckload services.
“At 39 cents, the spread between spot and contract van rates is still substantial but was down 7 cents compared to November,” said DAT Chief of Analytics Ken Adamo. “The price to move van freight under contract hit its lowest point in nearly three years. Entering 2024, shippers are in a strong position as they negotiate contract rates, and carriers on the spot market have some optimism that the market will turn.”
Freight volumes fell for all three equipment types
The DAT Truckload Volume Index (TVI) fell for all three equipment types compared to November:
- Van TVI: 221, 8.7% lower month over month
- Refrigerated TVI: 182, down 5.7%
- Flatbed TVI: 203, down 14.7%
The van and refrigerated (“reefer”) indexes were down nearly 2% year over year.
“Lower van freight volumes suggest that shippers drew from inventory ahead of the holidays,” said Adamo. “Disappointing freight volumes and less demand for over-the-road truckload services tempered the bump in spot rates.”
Spot rates increased for all three equipment types
Spot line-haul rates, which subtract an amount equal to an average fuel surcharge, increased for all three equipment types compared to November:
- Line-haul van rate: $1.65 per mile, up 7 cents
- Line-haul reefer rate: $1.98, up 4 cents
- Line-haul flatbed rate: $1.87, up 4 cents
Changes to DAT’s broker-to-carrier benchmark spot rates were mixed. The spot van rate averaged $2.10 per mile, up 3 cents compared to November. The reefer and flatbed rate dipped 2 cents to $2.47 and $2.41 a mile, respectively.
he contract van rate fell 4 cents to $2.49 per mile, the lowest since February 2021. The reefer rate was down 6 cents to $2.88 a mile, while the flatbed rate fell 3 cents to $3.14.
Load-to-truck ratios indicated a soft market for carriers
DAT’s national average load-to-truck ratios slumped, driven by the decline in freight volumes:
- Van ratio: 1.9, down from 2.1 in November and from 3.4 in December 2022
- Reefer ratio: 3.4, down from 4.4 in November and from 5.7 year over year
- Flatbed ratio: 5.1, down from 5.9 in November and from 9.8 year over year
Load-to-truck ratios measure the number of loads posted to the DAT One marketplace relative to the number of trucks. Changes in the ratio typically reflect the pricing environment for truckload services on the spot market.
About the DAT Truckload Volume Index
The DAT Truckload Volume Index reflects the change in the number of loads with a pickup date during that month; the actual index number is normalized each month to accommodate any new data sources without distortion. A baseline of 100 equals the number of loads moved in January 2015, as recorded in DAT RateView, a truckload pricing database and analysis tool with rates paid on an average of 3 million loads per month.
Spot truckload rates are negotiated for each load and paid to the carrier by a freight broker. National average spot rates are derived from payments to carriers by freight brokers, third-party logistics providers and other transportation buyers for hauls of 250 miles or more with a pickup date during the month reported. DAT’s rate analysis is based on $150 billion in annualized freight transactions.
Strong freight rates were the norm for refrigerated trucks last summer and the trend in September showed continued strength. Big demand for refrigerated trucks should continue into 2022, according to the latest analysis from DAT.
Spot and contract truckload rates hit new highs in September, DAT reported, as shippers dealt with historic surges of freight, constraints on equipment and drivers and an early start to the peak holiday shipping season.
“The dog days of summer for freight did not materialize this year, DAT Chief Scientist Chris Caplice said in a news release. “Instead, the combination of strong consumer demand, new and evolving supply chain bottlenecks and early proactive shipping for the holiday season kept demand for capacity at record highs.”
Caplice said DAT expects truckload pricing to remain elevated into the first quarter of 2022 and for a market correction to occur sometime in the first or second quarter.
“This ‘correction’ will likely not be a ‘freight recession’ marked by consecutive quarters of decreased volumes and overcapacity, but a return to typical growth rates as shippers and carriers across all modes adjust to changes in consumer behavior, product distribution patterns and the effects of COVID-19 on the global economy,” Caplice said in the release.
The DAT Truckload Volume Index was 229 in September, down 1% compared to August and the highest for any September on record, according to the news release. The Index is an aggregated measure of dry van, refrigerated (“reefer”) and flatbed loads moved by truckload carriers each month. A decline of 7% to 10% is more typical from August to September.
“Businesses are shipping early and, where possible, by truck in order to make sure they have inventory, but this means using the spot market or higher-priced carriers to cover their loads,” Ken Adamo, DAT Chief of Analytics, said in the release. “If you’re accustomed to having the right truck in the right place at the right price, you can have one or two of those things but probably not all three.”
The national average rate for van freight on the DAT One load board network increased 9 cents to $2.85 per mile (including a fuel surcharge), the fifth time the van rate has set a new monthly high this year, according to the release. By comparison, the rate averaged $2.37 a mile in September 2020.
At $3.25 per mile, the national average spot reefer rate was up 10 cents compared to August and was 68 cents higher year over year. The spot flatbed rate averaged $3.09 a mile, up 1 cent month over month, according to the release.
The number of loads posted to the DAT network fell 1.5% in September, according to the release, while truck posts decreased 4.5%. The national average van load-to-truck ratio was 6.3, meaning there were 6.3 loads for every van posted to the DAT network, down from 6.5 in August. The ratio was 5.4 in September 2020.
The reefer load-to-truck ratio dropped from 14.9 in August to 13.5, in line with seasonal declines in agricultural production. The flatbed ratio, DAT reported, climbed from 44.1 to 47.9, driven by single-family home construction, an increase in oil and gas activity and recovery efforts following Hurricane Ida.
DAT reported the national average contract van rate was $2.85 per mile, up 3 cents compared to August and equal to the national average spot van rate. The contract reefer rate was $2.97 per mile, also up 3 cents month over month, while the average contract flatbed rate was unchanged at $3.30 per mile.
The national average price of on-highway diesel rose 3 cents to $3.38 a gallon, increasing for the sixth straight month. The spot and contract rates reported here include a fuel surcharge, which was 36 cents per mile for van freight in September. That’s 17 cents more than it was in September 2020.
Records for both truck rates and shipping volumes were broken in the second quarter of 2018, according to a new report from the USDA.
The Agricultural Refrigerated Truck Quarterly, reviewed truck rates from April through June this year and provided an outlook for refrigerated trucks through the end of 2018.
“Indicators point to sustained high rates and tight capacity for the trucking industry, including the refrigerated truck market, through the end of 2018 and possibly beyond,” the report said.
In addition, the report said Hurricane Florence may have effects on the truck market in the months ahead, adding pressure to an already tight market.
“With demand for truck services projected to remain high, these combined factors could keep truck capacity scarce and rates high for the foreseeable future,” the report said.
Hauling the freight
Trucks continue to be the dominant carriers of freight, carrying 70.2 percent of domestic freight in 2017, according to the American Trucking Associations. Strong economic growth kept truckers rolling in the first half of the year, as real gross domestic product increased 4.2 percent in the second quarter of 2018, the USDA reported.
While the economy was heating up, unemployment reached a 10-year low of 3.8 percent in May.
Construction, manufacturing, or local driving positions through ride-sharing services offer competition to long-haul trucking positions.
Some trucking companies have increased drivers’ wages as a result.
Through the first half of 2018, ATA reported the freight tonnage hauled by trucks increased 7.9 percent,up from a 3.8 percent increase in 2017.
The report said DAT Solutions reported strong demand for trucking services caused truckload spot rates to reach a record high in June, topping a 15-month run of spot market rate increases. In the refrigerated truck market, DAT reported the national average spot market truck rate hit the highest point ever recorded, at $2.69 per mile in June, up $0.58 from June 2017, and $0.11 higher than the contract rate. While increases in contract rates typically lag four to six months, after a sustained increase in spot market rates, this year the lag has been only a few weeks.
Refrigerated truck market
Strong demand for trucks and large volumes has mostly affected truck rates for shipments of 500 to 2,500 miles, according to the USDA. The U.S. average refrigerated truck rate reached a record high in the second quarter, for shipments between 501 and 1,500 miles ($2.96 per mile), up 12 percent from the previous quarter ($2.64 per mile).
The U.S. average truck rate for shipments between 1,501 and 2,500 miles was still higher than usual at $2.45 per mile, but was 3 percent lower than the record high of $2.54 per mile, set in the first quarter of 2018. In contrast, average truck rates for shipments less than 500 miles, and over 2,500 miles, have remained within normal ranges.
Fruit and vegetable shipments
Reported U.S. truck shipments of fresh produce during the second quarter of 2018 were a record 9.65 million tons, 21 percent higher than the previous quarter, and 1 percent higher than the same quarter last year.
Shipments from Mexico were the highest in the second quarter, totaling 2.85 million tons and accounting for 30 pecent of the total reported shipments of fresh fruits and vegetables. Loadings from California totaled 2.24 million tons, accounting for 23 percent of the reported shipments. Movements from the Pacific Northwest totaled 1.55 million tons, representing 16 percent of the reported total.
The study noted until 10 years ago, California and Florida were the two biggest suppliers of fresh fruit and vegetables, during the second quarter. In recent years, both states have lost market share to the Pacific Northwest and Mexico, the USDA said.
The volume of shipments from Mexico through Texas reached a new high of 1.30 million tons during the second quarter of 2018, an increase of 8 pecent over the same period last year (1.21 million tons).
Five commodities accounted for 42 percent of the reported truck movements during the second quarter of 2018:
- Watermelons, seedless (11 percent);
- Potatoes (11 pecent);
- Apples (8 percent);
- Onions, dry (7 percent); and
- Strawberries (4 percent).