FreightWaves’ SONAR platform allows you to quickly view graphical series of data, many of which weren’t previously available to professionals trading the marketplace. More importantly, it allows you to view those data series compared to other data series (some proprietary, others not) and then apply the type of sophisticated technical indicators to the data series that are normally reserved for Wall Street. Patterns in the data don’t just sit there quietly as numbers; they literally jump off the screen at you. What are a few of those ‘jumping off the screen’ at us right now?
Two of the indicators that are jumping off the screen right now are the OTVI and OTRI Indices. They are showing us what we would normally expect while taking many others by surprise. That is, unless you understand what is happening with the use of ELD’s by small carriers, especially in the dry van segment.
We have been carefully tracking the Outbound Tender Volume Index (OTVI) and the Outbound Tender Reject Index (OTRI). When viewed on a relative basis via the SONAR charting function, it is easy to see the strength graphically displayed on a daily basis. In June, volumes electronically tendered peaked at levels greater than 10% higher than they reached at the end of the first quarter in March. This makes sense to anyone with more than a year of experience booking truckload freight. June and October are the two strongest freight months of the year; September and March are the two second strongest months of the year. What doesn’t seem to fit is the level to which the OTRI surged in June. Certainly, it was higher than the levels it had fallen off to in April and May, but it never quite reached the levels attained in March. If the number of loads tendered (OTVI) were greater than 10% in June, markedly higher than the greater than 4% surge in March, then why did the loads rejected (OTRI) peak at greater than 10% in March but only barely break 5% in June. More loads being tendered, but fewer loads being rejected. Why?
Were there more trucks on the road? From publicly available data on the nation’s largest fleets, we know the number of trucks they were dispatching didn’t grow materially. A few of the nation’s largest fleets, including Knight (NYSE: KNX), actually saw the number of trucks they were dispatching fall. Combing through the databases available to us that characterize the small and medium size fleets produces a similar answer. We are unable to find any credible evidence that suggests any material additions to the number of trucks on the road. The reason is obvious and age old. Qualified drivers for over the road truckload continue to be in short supply, at least at the current rate of pay. If the number of loads being tendered is up at a percentage in June that is effectively twice as large as March, why isn’t the rate at which loads are rejected as high or higher? Even more thought-provoking, with loads tendered again in the positive range in September, why haven’t the number of loads rejected gone back up? It has rebounded slightly from the down 30% levels achieved in August, but is still more than 25% below where it was in early March of this year.
For further insight, we turned to the DAT Dry Van Weekly Barometer, which measures the level to which demand exceeds capacity (or visa versa) in the marketplace. It relies on the largest database in the marketplace and reflects the number of loads searched for versus the number of loads offered (as a proxy for demand) balanced against the number of trucks searched for versus the number of trucks offered as available (as a proxy for capacity). It gives a similar picture, in that loads are still exceeding capacity by a large margin. A score of 50 reflects a marketplace in which the number of loads and trucks are in balance. The barometer is at 57, which isn’t as high as the 59 achieved in March or the almost 65 peak achieved in June, but demand still far exceeds capacity in the dry van truckload marketplace.
We continue to assert that the small to medium size trucking fleet, that adopted ELDs (Electronic Logging Devices) in December 2017 and struggled to effectively use them at the beginning of the year, has begun to maximize utilization within the rules through a combination of techniques: increased drop and hook, more diligent shipper and receiver selection, and careful preplanning of the individual driver’s schedule before they are d-
- Donald Broughton, Chief Market Strategist