Truckload Market Update: May 14, 2020

Joe Rademacher

Joe Rademacher, Director Carrier Sales & Operations, Coyote LogisticsThough we are still well below normal shipping activity during this time of year, the last two weeks are showing signs of improvement. Volumes are slowly increasing, leading us to believe there is more demand in the marketplace.

6 Things for Logistics Professionals to Know This Month:

  1. Positive truckload data is signalling an upswing in shipper demand.
  2. Memorial Day is coming up — expect some volatility.
  3. Produce season shipping continues to increase. 
  4. As businesses open up, restocking inventory remains a concern.
  5. Class 8 truck orders hit a record low in April.  
  6. The CDC issued carrier-specific guidance. 

Let's dive deeper into each topic.


 

1. Signs of an Upswing: 2 Weeks of Positive Truckload Data

For the past two weeks, we've seen several indicators that the market is turning around. Shipper demand is still muted and spot rates are not as strong as usual, but after seeing some signs of life, it appears we have lifted off the bottom.

Though we could regress pending an increase in the infection curve, we'll take all the positive news we can get. Let's look at a few of our internal data points. 

For a more detailed look at our forecast, register for the Q2 Coyote Curve® live panel on Thursday, May 21st at 10:00 a.m. CDT. 

 

For the week of May 3rd:

  • Our average cost per mile (rate to carriers) increased for the first time in 6 weeks
  • Monday (May 4) volumes were up 5% week-over-week
  • Total load volume increased 9% over the trailing 2 weeks

 

For the week of May 10th:

  • Tuesday (May 12) total load volume increased 20% week-over-week
  • Open load volume has increased each day this week, 11% from Monday to Tuesday, and 4% Tuesday to Wednesday.

 

We define "open loads" as confirmed shipments that we have in our network, but are not yet assigned to a carrier. Generally speaking, more open loads mean more spot freight and a tighter truckload market.

Open load volume typically declines from Monday to Wednesday, as we pre-book carriers on shipments — we only see it increase sequentially a few times per year. This is an indicator that the demand to move freight is increasing. 

Consumer sentiment is also increasing. According to the most recent Consumer Brands Association survey68% of Americans are optimistic about the next six months and the United States’ ability to find a treatment or vaccine, reopen the economy and resume normal activities.

 

2. Memorial Day Is Less Than 2 Weeks Away

With Memorial Day (Monday, May 25) right around the corner, it is “go-time” for shippers to move inventory around their networks to get products in stores.

In most years: 

  • We start to see an uptick in the market about two weeks out
  • The Tuesday following Memorial Day is one of the highest volume days of the year
  • The Wednesday following Memorial Day is one of the tightest capacity days of the year, with many carriers booked on loads from the day prior

Though we may not experience a surge to the degree of most years, expect demand to likely be stronger and spot capacity to be tighter compared to the past 5 weeks.

This will be especially true for refrigerated carriers as well as produce regions (FL, GA, TX, CA).

For more information on how summertime impacts the supply chain, read our summer shipping guide 

 

3. Produce Season Continues to Grow

Every week, more produce freight is entering the market, taking up a bigger share of available carrier capacity.

Expect demand to continue ramping up in southern states, especially with the holiday, end-of-month and re-opening of states all coming up in the next few weeks.

The refrigerated market is in more demand vs. dry van — this trend will likely continue. 

Demand has also started moving north. The weather continues to warm up, and we are seeing more produce spot requests coming from farther north (Georgia) and not exclusively out of Texas, Florida and California. 

Produce-related volatility will continue moving north to Alabama, South Carolina and North Carolina in the coming weeks.

For refrigerated tips to help you this summer, read advice from a temperature-control expert.

 

4. Businesses Are Opening: Can They Resupply? 

Restaurants and other "non-essential" businesses are opening back up. We will likely see shippers that were struggling the past few months surge as they try to replenish inventory. 

Businesses that start to phase people back into a physical workspace will still have to contend with managing the spread of the COVID-19 virus.

This means a need for social distancing and other procedures that will hamper efficiency, the need for personal protective equipment (PPE) and sanitizer, and the threat of an outbreak, like we've seen in a few meat processing facilities. 

According to a recent UPS survey, 86% percent of businesses reported some aspect of supply chain disruption, driven by the inability to replenish inventories and supplies (70%) and the closure of manufacturing partners (66%).

This will continue to drive volatility throughout all industries, creating a bumpy ride over the next several months. 

To help address some of the long-term and short-term challenges, the Consumer Brands Association recently launched the Critical Infrastructure Supply Chain Council (CISCC), a coordinated effort of more than 35 trade associations. 

They are also pushing to create an Office of Supply Chain at the White House and form the Supply Chain Caucus in Congress.

Now more than ever before, the importance of the shipping industry is front-and-center. 

 

5. Truck Orders Plummet, Setting Up the Next Leg of the Cycle

After a slow 2019, carriers came into 2020 with high hopes of a recovering market and potential fleet expansions. Like everything else, those plans have changed. 

FTR Transportation Intelligence reported 4,000 Class 8 Truck orders in April, which is the lowest order total in the modern era (1996), 44% below March and 73% below April of last year. 

This data point clearly indicates the financial duress that carriers are facing as they try to conserve cash. It also sets up the next inflationary leg of the market cycle.

Let's look at this trend over time. The chart below tracks Class 8 truck orders (gray bars) with the Coyote Curve® index (green line, proxy for spot rates) and the Cass Linehaul Index (blue line, proxy for contract rates).

Year-over-year decreases in truck orders signal a decline in capacity, creating an environment for an inflationary spot market. 

 

 

You can read more about truckload market dynamics, how we build confidence in the Coyote Curve model, or tune in to the Q2 live webinar to get the most recent update. 

 

6. The CDC Issues Guidance for Carriers

We can't say it enough: we know and appreciate how important drivers are to our country, especially right now. They are risking their safety so we can access the essential products we need to stay alive.

The Center for Disease Control (CDC) recently issued best practices, specifically for long-haul truck drivers and business owners, to help keep carriers safe. 

Their list is much more comprehensive, but here are a few social distancing best practices to implement at facilities.

If you are a shipper or carrier, do your best to help each other observe these during pick ups and deliveries:

  • Limit time spent outside of the truck cab during fueling, loading and unloading, and at rest and truck stops.
  • Use paperless, electronic invoicing for fueling, deliveries, and other tasks, when available.
  • Contact facilities in advance to make an appointment for unloading cargo. Be aware that some facilities may not grant access to restrooms, and plan as best you can.
  • Use radio/phone to talk with dock managers or other drivers, if possible.
  • Pack food, water, and supplies to limit the number of stops.
  • Avoid shaking hands.

 

Need Help with Anything?

We are here to support you. You can get an instant freight quote or talk to a Coyote specialist, 24/7. 

Look for another market update in June and in the meantime, read more of our coronavirus resources to help your business keep moving forward.

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