Posts Tagged “coronavirus”
By Mark Montague
March 19, 2020
As I write this, spot market rates and demand are peaking, hitting numbers reminiscent of good times during 2018. Of course, it’s primarily due to Coronavirus induced buying as consumers shift from restaurants and entertainment to in home consumption of food & necessities. While current patterns look familiar, with the Southeast region leading the way, I thought I’d look a little deeper.
The Southeast region has been cited by DAT and others as the strongest current region. A glance at Hot Market Maps confirms this – here’s what’s unusual: It’s not Atlanta as the leading market, it’s Memphis. Indeed, Memphis sits as the crossroads of several regions including the South Central (Dallas, Houston), Southeast (Atlanta, Charlotte), and Midwest (Chicago, Columbus). When distribution centers in those markets run tight on supplies, they turn to Memphis. It’s also the hub of Fedex and a lot of urgent freight gets routed through Memphis.
Memphis had load-to-truck ratios hitting 8.2 on 3/10 and again on 3/16, these are almost unheard-of ratios for van freight. Meanwhile Los Angeles crested at 4.1 on 3/13 as Asian imports return to the West Coast. Atlanta did hit 5.3 on 3/13 but Dallas was only at 3.3. For context, I consider 2.5 load posts per truck to be a “balanced” van market. Long study of ratios says that’s the normal amount of ‘inflation’ in posting numbers.
Switching to regional freight matrix, which has one day rates in addition to 7-day and 15-day look-ups, I found that 7-day rates are generally higher than 15-day rates, but one day rates (Monday, 3/16) were somewhat lower, except on freight from the Southeast region to South Georgia-Florida, which rose from $2.65/mile on average to $2.71/mile. This matrix compiles all trips of at least 150 miles into its averages.
So, sooner or later most everyone will be stocked up and wanting to cut contact with fellow humans i.e. social distancing. Monday’s and Tuesday’s numbers suggest there will be ongoing craziness this week but that the peak may have already arrived, watch for ratios starting to go lower. [Update: 3/18 looks like van peaked, with numbers falling off sharply the next week.] The impact on freight rates will likely be mixed as FEMA and other emergency supplies will continue to move. Volumes are important but urgent freight also demands higher prices. Then there is the risk factor for older drivers, the majority of the workforce. If supply of truck decreases commensurate with supply of loads, then rates could stay elevated.
As far as the Coronavirus impact on the freight marketplace – I can’t remember another time in recent history like this, as I wasn’t around in 1918. I’ve just been in the industry since 1981. Back in 1973, specifically 12/19/1973, Johnny Carson made a joke during his monologue about there being a nationwide toilet paper shortage – this sparked a panic and we did have a shortage of the tissue for about a week! That’s the power of the media.
Call for Infrastructure Bill
At some point, freight volumes will drop sharply, a recession is coming unless we get a strong economic stimulus bill [Ed. – We got a Stimulus bill but 2Q numbers will still be horrendous]. This is where the trucking industry, backbone of commerce needs to have a united voice. We need an infrastructure bill to replace outdated highways and deteriorating bridges and other critical needs at ports.
Both parties have made initiatives in the past year on the topic of infrastructure. The big hold-up appears to be how to fund the bill and what ratio the Federal government is willing to pay. Back in the Eisenhower years, the interstate highway system got built with 90-10 money, i.e. the Federal government funded 90% of the cost and the states just 10%. President Trump proposed a mostly private sector $1.5 trillion dollar plan in the spring of 2019, that had the Federal share at just 20%. The Democrats countered early this year with an 80-20 plan, but stalled on how to finance the package.
Previously, discussions of a Federal tax hike on the price of motor fuels has been a non-starter. We haven’t had a tax increase since 1993, but it’s time to find a funding mechanism and get a spending bill in place for the back half of 2020. We are going to need it to pull out of the economic hit we are certain to take in the 2nd quarter. If you take down time during the current crisis, take time to write your Congress folks as I’m sure we all understand the critical importance of strong infrastructure to keep commerce flowing.
Please stay safe out there. A big “Thank You” to truckers continuing to haul goods, despite increased health risks. Elsewhere I’ve commented on the need for market discipline and each trucker needs to carefully consider the offer versus waiting for the right load. They will be out there and DAT tools can help you find them.
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Mark Montague, worked for DAT Solutions from 2009-2019, advising on the design of the RateView pricing tool. Prior to joining DAT, Mark worked in transportation and logistics, twice holding the position of General Manager of trucking operations. He earned an MBA in transportation management in 1981 from Indiana University.