Article written by Dean Croke
Spot rates for truckload van and refrigerated freight gained steam during the month of June as jurisdictions eased shopping restrictions and retailers looked to move goods ahead of the Fourth of July holiday.
The national average van load-to-truck ratio, a measure of demand for carrier services, averaged almost 3.0 during the first three weeks of June and was 3.6 during the third week of the month. Spot truckload volumes and rates are on the same pace as they were at this time in 2019 and 2017, lackluster years for trucking but “normal” ones by most accounts.
Looking ahead, it’s clear we’ve got a long way to go toward economic recovery. As we move deeper into the summer, several important trends bear watching:
1. Shorter lengths of haul
Using data from their install base of 2 million commercial vehicles, telematics provider Geotab reports that even though the daily volume of truck trips in the U.S. was down nearly 11% in mid-June compared to pre-shutdown baseline levels in February, the number of daily fuel fill-up events has increased. That’s likely due to trucks running shorter trips with multiple stops, which compromises fuel economy.
Breaking the data down by truck type, the impact of COVID-19 on consumer buying patterns is evident by the 60% increase in light-duty commercial vehicle trips involved primarily in final mile e-commerce deliveries.
People are shopping. They’re just having more goods brought to their door from distribution centers, which changes the dynamics of trucking as companies move shipping operations closer to big population centers.
2. COVID cases in ag markets
We’re seeing reports of states slowing their pace of reopening as new coronavirus cases climb across the southern tier of the country where produce season is in full swing. Four of the top five counties for coronavirus cases (Imperial, Calif.; Yuma, Arizona; Yakima, Wash.; and Durham, N.C.) are at the heart of major farming states, which account for 68% of total U.S. produce tonnage according to USDA data.
Since agriculture is classified as an essential service, health officials are not likely to shut down crop harvesting operations, so it’s not yet clear how new cases will affect truckload volumes in the near term. If the produce industry follows what’s happening with Midwest meat-packing plants, then labor shortages, reduced production, and truck wait-times are almost certain to follow.
3. Port volumes
Lower volumes at major U.S. ports are affecting the coastal dray and truckload dry van markets. The Port of Los Angeles reported close to 30% fewer containers moved in May compared to the same time last year. Imports dropped 28.4% while exports were down 37.6%.
On the opposite coast at Elizabeth, N.J, container volumes dropped 7.5% in May year over year.
We’re looking closely at shipping activity this summer, when retailers typically build inventory for back-to-school sales and the year-end holidays. Warehouses across the country are already topped-off with merchandise as retail inventories-to-sales ratios are at their highest levels since 1996.
Very few in the U.S. have an appetite for more shutdowns. As we find ourselves searching for some sort of “new normal,” there’s little consistency to the reopening process as more hotspots emerge. The severity of COVID-19 outbreaks and how consumers respond after the Fourth of July holiday will tell supply chain managers a lot about what to expect during the balance of the year.
Driving uncertainty in the freight market is both the inconsistent pace of the reopening of economies on a state-by-state basis and each state following different pandemic guidelines. This means different regions will recover (or not) at different paces creating a challenge for shippers and carriers in managing their freight networks.
Dean Croke is principal analyst at DAT iQ, the freight data and analytics operation at DAT Solutions. He brings 35 years of experience in the fields of data science, supply chain management, risk management, and human performance. For the latest market updates related to COVID-19, visit dat.com/industry-trends/covid-19 and follow @LoadBoards on Twitter.