Market Insights: Back to School and Back to Higher Prices for Fuel

Welcome to our latest installment of Market Insights, where we delve into the dynamic world of transportation. From the up-and-down fluctuation of rates to current freight trends, we've gathered valuable insights for businesses striving to navigate the complexities of today's interconnected logistics landscape.

August Notables:

• Van, reefer, and flatbed rates continue to decline
• Van and reefer spot market volumes see small gains while total shipping volumes decrease
• Contract replacement rates are still falling compared to prior contracts but are leveling out
• Diesel prices are on the rise

A Look at Rates

Dry Van

The dry van market typically sees a flat season this time of year until mid-October. Current volumes are sitting around 2% below pre-pandemic averages. Dry van spot rates have now dropped another $0.12/mile since July 4th. This puts dry van rates at just $0.04/mile higher than in 2019.

Van rates have dropped more than expected from the 4th of July peak, causing DAT's forecasting models to diverge and have a lot of disagreement. The Ratecast model (green) is trying to show a recovery, which is seasonally normal. We usually start to see more dry van freight this time of year due to the start of school and retailers preparing for the holiday season. DAT's short-term model (red) is following the current trend of dropping rates, causing the model disagreement. We will likely see slight downward pressure in prices over the next month and don’t expect them to increase until at least October.

Reefer

We saw a small increase in reefer rates early in August due to the rise in produce volumes. This increase quickly returned to normal, remaining flat over the last month and about 2% higher than pre-pandemic volumes. Only two produce regions reported a shortage of trucks: Delaware/Maryland and Indiana, according to the USDA. Both are minor produce markets, showing that most of the country has available capacity.

Certain regions are expected to experience higher demand capacity. These regions include Mississippi, Kansas, Nebraska, and Missouri due to a small rise in meat production. Additionally, Wisconsin, Illinois, and Minnesota might see increased demand as potatoes are currently in season. Like dry van, reefer rates have had a continuous drop since July 4th and are now $0.34/mile lower than this time last year and $0.07/mile higher than in 2019.

We see more agreement in DAT's reefer forecast compared to dry van. The Ratecast (green) line predicts a stronger recovery due to seasonal norms, while the short-term (red) indicates slight downward pressure on rates. Seasonally we start to see reefer volumes increase slightly as we move into September, which should help push rates upward. We believe we will experience some upward pressure but expect that reefer rates will remain fairly flat over the next month except in specific areas like the meat patch.

Flatbed

Flatbed volumes are still at their lowest level in the last eight years for this time of year. Spot volumes are down another 30% over just the previous month. Load posts on DAT are 61% lower than this time last year, bringing DAT's load-to-truck ratio down below five loads for every truck. The only other time it got this depressed over the previous seven years was during the peak of the pandemic in 2020.

Flatbed volumes remain low in most of the country; however, we are still seeing strength in the Pacific Northwest (Oregon/Washington), Southeast (Mississippi, Arkansas, Louisiana, and eastern Texas), and the east Midwest (Michigan, Indiana, and Ohio). We expect the Pacific Northwest and the Southeast to remain the tightest, and we should see the eastern Midwest start to cool back down to previous levels over the next month. Flatbed spot rates have dropped $0.25/mile since their peak in May. Rates are down $0.39/mile compared to last year but still $0.06/mile higher than in 2019.

Unfortunately, the forecast for flatbed freight remains weak. There is very little pressure in the market right now and no signs that it will tighten up any time soon.

Imports

According to the Bureau of Economics, US imports decreased nationally by 1% month-over-month, about $3.1 billion in July, the lowest since November 2021. One of the main reasons is the rise in interest rates. Imports of goods decreased by $2.9 billion, led by fewer purchases of computers, industrial equipment and supplies, and materials, including finished metals and crude oil. Imports are expected to remain lower than they have been due to higher interest rates and decreasing demand.

Rail

The Association of American Railroads (AAR) reported a decrease of 5.2% in rail traffic compared to last year. US railroads reported cumulative volumes for carloads up 0.5% from this time last year, while intermodal units are down 10.2% for last year. Over the previous month, we have seen a slight increase in loads moved over the rail, but the long-term outlook remains relatively flat and depressed from last year.

Fuel

Diesel prices have increased by around $0.57/gallon over the last month. This is still down an average of $0.53/gallon compared to this time last year. Diesel forecasts now expect increases in the short term, while long-term forecasts predict diesel prices to drop next year.

Unlock Your Potential

In a world where change is the only constant, keeping informed is the key to staying ahead, and the insights we've shared in this installment of Market Insights are just the tip of the iceberg. To equip yourself with the knowledge you need to drive innovation, streamline operations, and achieve new levels of success, visit our blog. Start your journey toward a brighter, more informed future in transportation with just a click!