For the transportation sector, load rates for freight were on the downward spiral from 2018 to 2019. However, there is more to the story than just rates and prices. Consider which hauls are performing at their best and which ones to avoid if you are working in freight brokering. Ultimately you want to balance out those high rate hauls with freight that will ensure you are able to keep your drivers rolling and your ROI up. Start by looking closely at the freight rate market for 2018 and 2019. Determine where you want to go with your trucking or brokerage services in 2020 with an around the corner forecast for the top three haul types, which are dry van, reefer, and flatbed.
Freight Rates for 2018 to 2019
Overall freight rates have been on the uphill climb since 2015, but the recent rate news indicates that the rates are once again taking a nosedive. However, this may be temporary and also seasonal. Currently, the trucking industry is not having to deal with hurricanes or major flooding that can jeopardize freight rates. So what is happening?
Take a look at the DAT Super-Database for the latest trends to see more. Dry van freight, flatbed hauls, and reefer hauls from September 2018 to September 2019 were on the decline for almost all of the haul types. Here is a rundown of the rates for the three most common haul types:
- Flatbed load-to-truck -30.0 percent
- Flatbed spot rates -14.1 percent
- Reefer load-to-truck -24.2 percent
- Reefer spot rates -13.9 percent
- Van load-to-truck -24.2 percent
- Van spot rates -14.0 percent
In addition, the spot load market also saw an interesting balance:
- Spot load posts -12.4 percent
- Spot truck posts +14.9 percent
The Owner-Operator Independent Drivers Association (OOIDA) states that freight rates rose over the course of 2018 compared to the previous year. However, from the perspective of owner operators and independent contractors who run in their own authority. Note these drivers may often provide a less biased viewpoint thanks to their independence in the workplace.
OOIDA reports drivers who are members of the organization stated rates decreased by 45 percent in 2018. The company also reports that 51 percent of drivers operating under their own authority believed rates were on the decline. Sixty-seven percent of truck drivers in 2018 were also in what they considered to be a worse position for negotiating rates. This is not good news for SMB owners, fleet owners, and other owner-operators who are working to manage their firms on a smaller scale. The higher rates for these smaller companies can have a more devastating effect in terms of economic loss.
Reasons for Decline in Haul Rates
The long-distance truckload freight market has seen a decline over the course of the last year. According to Freight Waves in March 2019, the decline was the largest in four years for that sector of the trucking industry. There are a number of reasons why the drop had occurred then.
In the Journal of Commerce, David Parker, the CEO of Covenant Transport, addressed the rate market for early 2018. According to Parker, “The truckload freight environment has been weaker this year from late January through mid-March. We attribute the softer demand to factors such as late-2018 inventory growth in advance of the perceived impact of tariffs, the effects of the partial government shutdown on spending, and extended periods of inclement weather that impacted the timing of shipping seasonal goods.”
Other reasons why the load rates market has seen a drop in freight rates in the past few years has been due to nature. The JOC reports Midwest flooding was another reason. Due to the flooding, states including the high-volume agricultural states of Iowa and Nebraska. Roads that are able to handle the weight of heavy trucks are often inaccessible due to flooding.
In addition, the flooding damages crops and reduces freight haul opportunities for shippers. Shipping customers and freight haulers are more likely to see a spike in rates due to these conditions as fewer drivers and loads are available. Fuel prices also tend to rise rapidly as a result of natural disasters, which also creates distress in the freight rates market. Fuel, being one of the largest expenses for any trucking company, is always at the top of the list of expenses to try to mediate for this very reason.
Future Freight Rates for Market
According to Overdrive, the freight load rates for 2019 have risen for most hauls. The national average for spot rates for September 2019 is:
- $1.84 per mile for dry van freight loads
- $2.17 per mile for reefer loads
- $2.19 per mile for flatbed loads
Freight rates increased by 3 cents for dry van and reefer loads but decreased by 1 cent for flatbed freight. The markets seeing the most gains going forward into 2020 are Seattle, WA especially Seattle to Los Angeles, CA, as well as McAllen, TX to Chicago, IL and Atlanta, GA. The freight market in Houston, TX is also a well-paying route with freight volumes up by 20 percent. Charlotte, NC also saw serious gains with a 19 percent increase in freight rates.
These cities, as reported by the Overdrive, are also improved from the hurricanes that hit both in recent seasons, which is good news for the industry. Note that these rates are for the truckload market and large trucking companies operating at the enterprise level.
How to Manage in the Freight Rate Market
If you want to excel in getting the best rates for your business, let Summar Financial assist you. We will help fund your growth and help you scale up in the ground shipping market with our invoice factoring services. Let us factor your freight driver invoices to ensure they have expedient access to the funds they need to get their loads to their destination.