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Predicting 2019 Trucking Spot Rates

Our experts weigh in on what you can expect for the rest of the year.

Last month, FreightWaves, the first organization to develop a futures market based on U.S. trucking spot rates, took four models forecasting trucking spot rates for the rest of the year, and compared them against each other to predict pricing for the second half of 2019. 

Based on historical and future data provided by various freight indexes, FreightWaves provided a comprehensive analysis of all the factors affecting spot rates. 

The analysis is so comprehensive, in fact, that it may be a little dense for those of you who don’t necessarily follow the futures market but just want to know how much you’re going to pay to get your product from Point A to Point B. 

Our experts wanted to analyze the analysis (that’s right) and give you an overview of which conclusions we think are the most important, what we believe the market is likely to do over the next six months (and why) and add our own insights into trucking rates in 2019. First, here are our takeaways of what we considered most important to note from the FreightWaves article:

  • “Positive movement depends on…even more capacity to leave the market as well as new truck orders to stay depressed for the remainder of 2019.”
  • “The market looks flat into the third quarter with a seasonal bounce again at year’s end.” (Tom Mallon, FreightWaves Vice President of Financial & Freight Futures Markets)
  • “Expect to see the supply side supportive of rates, especially with the recent sharp decline in new truck orders.” (Ravi Shanker, Morgan Stanley Analyst)
  • “June contracts are priced at $1.59 per mile, implying a significant bump up from [May] spot rates at $1.41/mile. That’s consistent with the traditional volume and price run-up seen most years in May and June.”
  • “At this point, the market expects a return to the relatively normal price conditions preceding the capacity-constrained environment of 2017-8.”

Since the piece was published, we haven’t seen any indication that these conclusions are off-base. “We saw a holiday at the end of May followed by DOT week. DOT week was not reported to be as big of an event this year as in years past, but it still had an impact on capacity. Spot rates then went up in June, which is normal,” says Justin Hathaway, Carrier Manager. 

But is “normal” actually…normal? Not recently. We think it’s most important to note is that while 2019 looks pretty steady, it’s coming on the heels of a 2018 that was decidedly unsteady. There’s pressure on spot rates to hold strong as the shipping industry as a whole normalizes after very strong rate growth (6.7% annually) in 2018 and a quick tumble downward at the beginning of 2019. 

Because the market couldn’t support the growth of 2018 and diesel fuel supplies tightened due to production cuts, spot rates bottomed out at the beginning of this year, as did the price of diesel. These factors, among others, have led to an extremely volatile recent history.

“After the downhill slide of the last six months, both carriers and brokers are positioning themselves to maintain their current volumes while getting aggressive to secure new business,” says John Kuhlmann, Director of Agribusiness. “From a pricing perspective, we have seen rates bottom out in several markets, but given the current business landscape, there will be pockets where they may climb back up with seasonality, etc.”

Overall, though, “we speculate that Q3 will be flat, but the market will support modest price increases through the end of the year,” Kuhlmann says. “We are not expecting any major market shake-ups before the holiday shipping season starts.”

“My gut tells me spot quote prices will continue to rise in certain regions, but won’t approach where the market was in the first half of 2018,” says Joe McDonald, Business Development. “Ultimately, I see pricing being flat to higher in areas than early 2019, and more in line with pre-2017-2018’s higher pricing.”

According to the Wells Fargo 2Q 2019 North American Truck Transportation Sector Update, these current levels of volume and pricing suggest that the U.S. economy is still growing, just not at the rate it was, and that it may have reached its short-term expansion limit. Of course, nobody can predict the future with complete accuracy. So what are the factors most likely to influence the moderate pricing increases we anticipate for the rest of 2019 and into 2020?

  • Economy and trade policy: “Moving to 2020, I believe that load volumes largely depend on the health of the US economy (and confidence in the US economy),” says McDonald. “Trade policy is definitely a deterrent to higher load volumes, so I’d expect load volumes to remain flat.”
  • Tariff rates: “Pending tariff rates for USMCA, we should see rates uptick slightly as we move into Q3 and Q4 if seasonal volumes remain consistent,” Kuhlmann says. “If volumes shift up drastically, we can expect intense volatility from both pricing and capacity.”
  • Driver availability: According to American Trucking Association estimates, the trucking sector had a driver shortage of 50,000 at the end of 2017. It predicts a longer-term driver shortage of 175,000 by 2026. New driver availability remains an issue and area of significant concern.

Truck capacity and demand: “As always, two major variables are truck capacity and demand/volume,” says Hathaway.

Here at Agforce, we don’t claim to be able to influence trucking spot rates or the futures market. We do, however, guarantee complete honesty and transparency into how and why we set our prices. Our customers are our partners and our friends, and that’s something we owe to them. We will continue watching the market so we have the best, most up-to-date information possible to pass along to you.

Questions? Reach out! Call us at 877.367.2324 or email us at inquiry@agforcets.com. Our experts would love to provide the answers.