Freight Market Update
Volatile Market As We Approach Produce Season
As America reopens, outbound tender volumes remain extremely elevated. Freight volumes across the US are 24% higher than this time last year during the pre-lockdown, panic buying surge (shown in orange on the top graph) and 54% higher than 2019 volumes (in green).
With an abundance of freight being shipped, the Outbound Tender Rejection Index hits its 34th day in a row above 25% (again) coming in at a 26.3% tender rejection rate nationwide.
What is even more alarming is the national refrigerated load rejection rate—almost half (49.7%) of reefer loads are currently being turned down or left on the dock, which is depicted by the chart below. Unfortunately, this is only going to get worse as we move into produce season.
On a positive note, new truck equipment orders have increased. However, truck manufacturers had to staff their facilities in accordance with social distance guidelines, which slowed production. Also slowing production was the arrival of parts ordered from overseas. The majority of new refrigerated units that will make an impact on the market are currently not expected to arrive until after produce season in 2022. Finding truck drivers has presented additional challenges. Due to the pandemic, CDL driver schools were closed and now are only operating at a fraction of capacity, thus slowing the hiring of new entrants into an industry that was already struggling to hire. Also contributing to the driver shortage, the FMCSA’s Drug and Alcohol Clearinghouse identified almost 8,000 positive substance abuse tests since January 6 (as of February 21). This removed even more drivers and capacity from the market. Approximately 4,000 passed their follow-up tests and are back to work. Additionally, many older drivers decided to retire from the industry due to the Pandemic.
Stemming from the increase in volume and tenders, along with a truck and driver shortage, spot rates have outperformed contract rates since last August. Currently, spot rates (in orange) are almost 10% more than contract rates (in blue) throughout the US (more than 40% in some markets). This feeds back into the tender rejection index because it is easy for some carriers to turn down loads to seek higher-paying opportunities and/or more desirable lanes.
Unfortunately, this market is here to stay throughout 2021, with the most volatile weeks ahead of us, as we previously mentioned, due to the onset of produce season. There is the potential for temporary relief in late summer/early fall before we move into the holidays, but consumer spend has shifted so drastically, and even with the reopening of America, maritime shipments are arriving in abundance.
The Port of LA reports an increase of imports of 52.91% year-over-year, comparing February 2020 to February 2021. There are 15 vessels in port and another 12 waiting to dock. As the charts above indicate, inbound maritime shipments to our coasts are 199% higher year-over-year.
Through all the volatility, MegaCorp is here to provide reliable service and fair pricing in any market. You can trust that we will deliver.
Load to truck ratio from the prior 7-day average:
MegaCorp Logistics, founded by Denise and Ryan Legg in 2009, specializes in full truckload shipments (dry van, refrigerated, flatbed, intermodal, etc.) and less-than-truckload shipments throughout the US, Canada, and Mexico. MegaCorp is committed to creating long-term, strategic partnerships with our clients who range from Fortune 100 companies to regional manufacturers and distributors. We serve all business sectors of the US economy including (but not limited to) food, retail, government, textiles, and metals/building materials. We strive to offer the best to our clients, transportation partners, and employees– It’s the Mega Way!
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