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Truck Drivers: Heroes on the Front Lines of the Fight Against COVID-19

Is your local grocery store out of toilet paper? You can blame your neighbors for hoarding it, not the supply chain for running low. Production facilities around America are still churning out product, and America’s truck drivers are driving full-time (and then some) to deliver the essentials from coast to coast … potentially risking their own health and certainly risking their own comfort in the process. 

There are about 3.5 million truck drivers working around the country in 2020, according to the American Trucking Association, and they haul more than two thirds of our total freight tonnage annually (that’s more than 10 billion tons) to stock your shelves and so much more. 

When things are good, most of us don’t really notice all they’re doing behind the scenes to keep our lives operating normally. But in a crisis, like the current COVID-19 pandemic, truckers have joined healthcare professionals as workers on the front line of the battle.

After one of the industry’s worst years on record, truckers are now in high demand to keep up with the rush on supplies. This unprecedented pandemic has thrown a wrench in any trucking outlook for 2020, no matter how expertly-predicted. 

Instead of the tough year we were prepared for, “the trucking industry could be key to keeping the economy afloat during the COVID-19 pandemic,” says one article

“Without truck drivers, the millions of Americans who have been urged to stay at home would be without food and other essential goods. Healthcare workers would be even lower on personal protection equipment than they already are. Cities around the countries would be without sanitary supplies that allow us the chance to stay healthy,” says Andy Tuley, Vice President of Business Development at Agforce. “They are truly some of the unsung heroes of this crisis.”

At a time when record numbers of Americans are filing for unemployment, truck drivers are experiencing increased demand on their time. In response to COVID-19, the Department of Transportation loosened restrictions on how long drivers can be on the road each day, in order to deliver their shipments more quickly. But what toll does that take on them? 

“Many truckers said they aren’t overly concerned about getting sick, although their jobs – which require touching shipments that could be contaminated, interacting with others, and going out in public at a time when many lawmakers are urging people to stay home – could put them at increased risk of contracting the virus,” according to a USA Today article

Precautions are in place to keep drivers from working while sick, and to keep them from passing sickness onto consumers. Pamela Polyak, president of Polyak Trucking told FOX6 News that her drivers are often being screened upon arrival at their destinations to check for symptoms.

Beyond direct health implications, “there are now fewer options for truckers to eat when they take a break,” says WSPA. “Restaurants have allowed for more drive-thru and delivery options, but there are still limited choices for those driving a semi-truck. Gas stations and grocery stores are convenient, but most shelves are empty.” TravelCenters of America closing their Driver Lounges, meaning fewer places for drivers to stop and rest. 

Still, the drivers keep on truckin’. 

Agforce has long recognized that truck drivers are the behind-the-scenes heroes allowing our business to thrive. As the COVID-19 crisis looms, it becomes more and more apparent that they are the heroes helping all of America to thrive, as well.

Freight Industry Update: Fourth Quarter 2018 & 2019 Market Outlook

The market still supports premium freight rates, based on tight capacity and high demand. Is this the new normal? How long will rates stay high? Let’s consider the current market and discuss possible shifts on the horizon as we round out fourth quarter and plan for 2019.

Freight Industry Right Now

As of October, freight industry executives still reported turning down record amounts of freight. However, the disparity between spot market rates and contract rates indicate we could see capacity and demand begin to balance. To understand what is happening currently, we also need to consider the national spot market rate though. Averages are a bit down in comparison to earlier in the year, but they are still up 20% annually. Experts do feel the market is stabilized for the remainder of fourth quarter and we could start to see some balance in capacity that extends into early 2019.

Note: Winter weather storms could impact capacity and rates, similar to Hurricanes Harvey and Irma, which caused a spike in spot market demand in 2017.

 

The Carrier Take on Freight Rates

Ask most carriers and they will tell you they have been on the short end of the stick when it comes to trucking rates for too long. Citing more than 10 years of profit margins around pennies on the dollar. They attribute the inability to reinvest in drivers and equipment to the lack of earnings. Many believe the higher rates are the new normal, and shippers should prepare their strategies with this in mind long term.

Some recent data points from DAT may not fully align with carrier thoughts. Van, flatbed and reefer average spot market rates were down in August. However, annually the average spot prices were still up per mile: van rates 35 cents; flatbed 46 cents; reefer 31 cents.

In a recent Logistics Management article, Mark Montague, DAT pricing analyst, reminds us that “demand peaks before rates peak, with rates tending to stay up, even as things start to cool off at times.”

Note: While there have been some dips, big picture spot market conditions support the rate increases we have seen for the last couple of years.

 

4th Quarter Rates

Present contract freight rates, fourth quarter 2018, were negotiated in late 2017 and early 2018, a time that was extremely favorable to carriers with capacity low and demand high. September 2018 found a wide disparity between the average spot rate and contract rates, with average spot rates favored by 23 cents per mile.

This could indicate an upcoming shift in the demand to capacity ratio. We may begin to see the freight industry balance for shippers. Tender turn-down by carriers have not been prevalent in recent weeks and there has been success in securing lanes for contract freight. If demand does indeed begin to indicate parity, spot market rates should only be a factor for one-off shipments and short-lived spikes in demand.

Note: Driver shortage still impacts rates due to the impact on capacity crunch, but the numbers are on the rise which could help to balance the market. The Bureau of Labor Statistics data shows driver numbers up by about 31,000.

 

2019 Freight Industry Outlook

The optimal state for the freight industry may very well be equality between supply and demand.
That balance seems like a thing of fairy tales. The winding path of the freight industry market is ongoing, impacted by carriers, shippers, consumers and the overall economy. It looks like 2019 will continue on the same curvy road. There are more than a few considerations as you prepare your strategy for the upcoming year:

  • Though trade wars are top of mind with the full impact uncertain, the strong economy looks as though it will hold.
  • There are strong indicators of freight rates continuing to rise. However the year-over-year percentage of increase should be below 2018 levels.
  • Carriers are investing in new equipment, based on the increase in sales of Class 8 trucks. This is not an indicator of more drivers necessarily, more an affirmation of trucking companies need of technology upgrades to meet regulations. Added bonus: Cutting-edge equipment is attractive to new drivers.
  • Consumers are driving changes in trucking industry operations. Shippers have shifted to more regional hubs in order to cut transit time. This has impacted the average haul distance — dropping nearly 300 miles per load since 2005.
  • Owner operators are banking on the spot market continuing to pay off. Many leaving small and large carriers to go out on their own.
  • The driver shortage is expected to remain at record levels but will taper off.
  • Capacity should loosen up just a bit with a possible double-digit percentage decrease in the volume of freight tendered.
Note: The American Trucking Associations’ Freight Forecast projected freight volumes to increase more than 35% by 2029.

 

What Can Shippers Do to Prepare?

With so much in flux that can impact you and your business’s profits, how should you navigate the freight industry peaks and valleys? Here are a few ideas:

1. Don’t forget the basics

The freight industry is cyclical, often hand-in-hand with the national stage, driven by one of the most basic economic principles: supply and demand. When we have a capacity shortage, the freight rates will negatively impact bottom lines.

2. Invest in analysis

You have your shipment data; compare it to what is happening in the market. This can help you formulate a picture that leads to a greater understanding of trends to inform your longer-term strategies.

3. Work with a 3PL

3PLs are in the best position for industry knowledge. They set pricing with both carriers and shippers. A good alliance will help you to ride the freight waves gracefully, helping your business to succeed in protecting its bottom line.

Together, we can simplify logistics. Let’s partner and create solutions for your business. Give us a call at 877.367.2324 or email us at inquiry@agforcets.com.