Nationally, FreightWaves data scientists are seeing a normalizing freight market, still coming off its January peak with low volatility in spot rates and relatively low turndown levels. Freight volumes are steady, but there haven’t been any disruptive spikes beyond what capacity has been able to handle. Carriers are now working an inflated contract market and meeting their service requirements instead of abandoning those loads for the spot market. We know that the supply/capacity side of the freight market has not dramatically changed since the end of 2017, when reductions in truck productivity from the ELD mandate were priced in. The unknown here is how the demand/freight side of the equation will hold up: the macroeconomic data is decidedly mixed.
Carriers that have shifted capacity onto the spot market might regret not taking higher contract rates in future quarters. The good news is that shippers are stilling placing a premium on quality carriers–the ‘flight to quality’. We also expect 3PL margins to increase for brokers that have locked-in rates, as the spread between contract and spot widens.
Seasonally-inflected sectors of the freight market less exposed to macroeconomic forces are showing movement. Spot rates for temperature controlled trucks moving from California’s major agriculture regions to Western population centers have strengthened over the past week as more crops begin their harvests. The strawberry harvest this year, for instance, has been particularly strong and is well ahead of 2017’s schedule, which was hampered by heavy rainfalls early in the year.
First we’ll look at DAT’s reefer spot rates coming out of the San Francisco market, which includes the Salinas Valley. This region has experienced the most upward movement in spot rates of the three valleys (Salinas, Central, and Imperial) we consider in this article. The seven day moving average from SF to Salt Lake City is at $2.97 per mile, up from $2.57 in March and $2.68 in February. Reefers from San Francisco to Dallas are getting $2.19 per mile over the past 7 days, up from $1.98 in March and $1.93 in February. On the SF to Seattle lane, reefers got $2.75 per mile over the past seven days, up from $2.48/mile in March and $2.62 in February.
FreightWaves’ proprietary Tender Rejection Index (TRI) also shows the San Francisco market rolling over into healthy headhaul after a softening second half of March. The above chart normalizes inbound and outbound turndowns against average conditions for the San Francisco market. In the past week we’ve seen inbound turndowns (red) fall sharply to cross back under outbound turndowns (blue), suggesting that inbound loads are more attractive and that we’re starting to see more loads per truck outbound, consistent with a strengthening spot rate climate.
DAT reefer spot rates coming out of the Fresno market, which we take as a proxy for the Central Valley agricultural region, have posted weaker growth over the past seven days but are still positive over March and February. Reefers from Fresno to Denver are pulling $2.56 per mile, slightly up from $2.54 in March and back at February’s $2.56 price. Reefers from Fresno to Salt Lake City are also asking $2.56, but that lane has firmed up more substantially, up from $2.49 in March and $2.47 in February. Reefers headed north from Fresno to Seattle are getting an average of $2.73 per mile over the past seven days, up from $2.61 in March and $2.60 in February.
FreightWaves’ normalized TRIs for Fresno show a freight market near equilibrium. Inbound and outbound turndowns are converging and the TRI spread is climbing back to 0. Outbound turndowns climbed rapidly in the past week, and just in the past few days, inbound turndowns have fallen as trucks move into the market to cover loads. The market is still underwater, with inbound turndowns leading outbounds, which explains some of the anemic spot movement we’re seeing: there isn’t yet enough of a load-to-truck imbalance coming out of Fresno to attract trucks into the market.
We use DAT reefer spot rates coming out of the Ontario market as a proxy for agricultural production in the Imperial Valley, a region straddling the Salton Sea and irrigated by the Colorado River that produces in excess of $1B worth of crops annually. Reefer spot rates from Ontario to Las Vegas were at $3.92 per mile over the past seven days, up from $3.72 in March and $3.83 in February. Reefers from Ontario to Seattle brought $2.89 per mile over the past seven days, up from $2.65 in March and $2.58 in February. DAT quoted reefer rates from Ontario to Denver at $2.88 over the past seven days, up from $2.74 in March and $2.82 in February.
FreightWaves’ normalized TRIs for Ontario show inbound and outbound turndowns falling nearly in sync, which at first glance, does not seem to agree with a slowly strengthening spot market. But inbound and turndowns are not actually falling in lockstep: look at the turndown spread graph in green. The turndown spread shows outbound turndown percentage minus inbound turndown percentage. The TRI spread for Ontario moved significantly upward toward zero, meaning that inbound turndowns actually are falling relative to outbound turndowns; the outbound freight market is gaining steam and carriers are slowly becoming more willing to accept loads into the region.
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