- Everyone and welcome to our
DAT iQ weekly market update.
This is our update for
September 2nd, 2020.
I'm Ken Adamo, chief of analytics at DAT,
joined as always by the astute, Ned Damon.
Who's our principal data scientist
and Dean Croke,
who's our principal
industry analyst at DAT.
Hey guys,
- (mumbles)
- Hi Ken.
- So as typical,
we are going to run through
some of the interesting stuff
happening in the market this week,
I'll lead us off with some key points.
Dean will take lead on market updates.
There's some really interesting
stuff going on in the market
and Ned will talk about forecast models.
I also want to talk about,
we will be going live tomorrow,
Thursday, September 3rd, at three o'clock
on LinkedIn and I think other channels
will be links in the descriptions below,
but we'd love to have
some questions come in
from our viewers.
It'll be our first experience.
So apologies ahead of time
if it's a little Rocky,
but we're really looking forward to it.
And getting to answer some questions about
what's going on in the market live.
So I'll quit talking in a minute
after I wrap up key points,
because like I said,
Dean has some exciting
stuff to talk about.
So key points for the week.
Spot rates continue to
defy seasonal trends
and pretty much all logic
and continue to climb.
So we had hurricane Laura last week
and you know, the impact
there was very centralized.
We put some stuff out on
social on twitter market update
about the new Orleans markets and Houston,
but kind of nationwide we're
continuing to see rates,
especially for dry vans climb.
On the contract side from
our partners at FMIC,
we're seeing spot market
volume is jumping,
but the contract volume
may be not so much.
And as a result, we're seeing
share of spot market increase,
up to 21%, right? Normally
it's in the 12 to 15% range.
We're seeing carriers, we've
talked about this quite a bit,
continuing to honor contract commits,
but just not the search volume.
And then lastly on the capacity front
ATA reporting 3% fewer
trucks operating this summer,
which again is fueling the
fires at the spot market.
So with that, I will turn it over to Dean
to walk us through the details.
Dean.
- Yeah, thanks Ken.
I'm going to set up the
supply demand update this week
with the dry van load board activity.
Last week we saw the load
to truck ratio jumped
by about 11% to 5.73.
It was fueled largely by an 11% increase
in load posts on the spot market.
It's interesting that that volume
is now about double the volume in 2019,
which is a reflection of
that marketing balance
that we've been talking
about in recent weeks,
plus hurricane Laura's impact last week.
Capacity loosened slightly though
about 1% more trucks
searching the load boards
for dry vans loads last week.
On the reefer side
the load to truck ratio spiked last week
up 20% to about 10.7 straight
tracking really closely
to 2017 levels now,
it was driven largely last week
by a 16% increase in load
posts again like dry vans
it's about double the
volume this time last year.
Capacity tightened slightly
about 3% fewer trucks were
looking for loads last week.
On the flatbed load board activity side,
there was an increase
this week against trend,
but it's fairly normal for
active hurricane seasons.
So it's tracking closely to 2017.
There was a lot of building
material activity being moved
into the Gulf coast of
Florida markets in 2017
when Irma and Harvey hit.
Low posts in the flatbed market last week
increased by about 5%.
Capacity tightened, there
are about 6% fewer trucks
searching for loads on
load boards last week.
So moving over to our market
condition index for dry vans,
focusing on the West coast this week,
as Ken mentioned earlier
there's a lot of activity there
after volume staying relatively flat
for the last couple of weeks
out in Los Angeles and Ontario
volumes are starting
to trend upwards again,
which is interesting.
Volumes are up about 6% week
over week after being flat
rates continue to climb though,
they're up 2% week over
week to $2.97 a mile,
which is the fourth week
for successive increases
out of those large West coast markets.
On the Gulf coast markets Hurricane Laura,
resulted in new Orleans
and Houston markets,
inbound volume spiking 20% week over week
as emergency agencies staffed
stage relief supplies.
In contrast though their volumes dropped
about 10% week over week,
which is fairly normal for
midway hurricane event.
On the refrigerated market
condition index side.
We're starting to see that
late summer early fall
Apple season volumes start to emerge
in States like Washington, New York,
Michigan, Pennsylvania, California.
If I look at the reefer volumes
out of those five States,
they're up about 12% week over week
and 20% month over month.
We start to see the Midwest markets,
especially up in the Michigan peninsula
come into their own this time of the year.
Most of the Midwest Apple
crop comes from Michigan.
Outbound reefer loads were
up about 17% week over week.
Volumes remain really strongly
out of the West coast.
The big produce markets
in particular Stockton,
Central clean Valley volumes
are up 7% week over week,
but interestingly shippers of breakfast
found plenty of capacity,
rates dropped about 3 cents
a mile to $2.88 a mile
on the outbound side.
And about 11% of those loads
out of the Stockton market
went to Phoenix, Seattle and Spokane.
On the flatbed side
the marketing events,
- Spokane
- Spokane, Okay.
- Spokane.
(all laughing)
- The Flatbed market condition index
for a lot of activity in
the Southeast last week.
Obviously Laura had a
big part to do with that
with building and lumber
material moving into that area.
A lot of it was concentrated in Alabama,
which is our number one flatbed state
of note was (mumbles) market
where out there load volumes
increased 12% last week.
The other area to look at this week
is the upper Midwest market of Cleveland.
It's a fairly large market for flatbeds,
volumes jumped 88% week over week,
and they're up about 50% for the month,
but capacity is also tight.
So for flatbed carriers
looking for work out of their
rates are up about 2% week
over week to $2.57 a mile,
that's about 47 cents a mile higher
than the national flatbed average,
which brings us to our year
over year view of spot rates.
We'll start off with dry van,
Dry van rates continue to
go against seasonal trend.
They're up to $2.11 a
mile as of last Sunday,
that's about 4 cents a mile higher
than the highest weekly
rate recorded in 2018,
which has been out past high watermark
for dry van spot rates
in the last four years.
Obviously, Laura was a factor in that.
We looked at the inbound
loads ahead of Laura
the seven day average for dry
van spiked 23 cents a mile
for loads into the Gulf
coast before Laura hit.
And that was largely due
to the emergency agency
staging large amount of freight
ahead of the hurricane.
Under the reefer side,
national average reefer rates
are now at their highest level
in the last five years for
the start of September.
Rates are up 3% week over
week to about $2.28 a mile
that's the 6 cents command increase
for reefer carriers last week
and rates are now 43 cents a mile higher
than this time last year.
On the flatbed side year
over year view shows us that
rates are trending along with our 2017.
They ended about $2.10 a mile
last week up 5 cents a mile,
rates are about 12% higher year over year.
They're approaching 2018 levels,
considerably higher though than 2016.
Sorry 2017 when confected
capacity tightened,
after a disastrous hurricane
season in September,
rates that's started what we saw in 2019
was the high rate rally
that started largely after
the hurricane season of 2017.
So that's the weekly market update
on the supply demand side.
What do you have for the forecast?
- Hey guys,
- before we move on,
I'm sorry a little bit of a
growing pains with our studio.
The Internet's a little
spotty until we get hard wire.
So I apologize for that.
I had written down a couple
of questions Dean one was,
I know we just came off
a DOT break check, right.
did you see the impact related to that?
And then part two is
the DOT safety blitz was
postponed from June until
I'm hearing like September.
And do you foresee any impact with that?
- Typically you see a lot of
smaller fleets owner operators
take a vacation,
especially if you follow
them on social media,
you'll see that they
do take the opportunity
to avoid those weeks.
Not because there's anything
wrong with their vehicles.
It's just because with ELDs,
they can't afford the
three or four hour delay
that it takes for the heavy
duty inspections that go on.
So it's more a time factor
than it is a compliance issue.
Typically when I've tracked
telematics data in the past,
I see about a 6% drop in truck activity,
around those particular weeks.
So again, anecdotally we saw
a number of trucks take time
off during the last break check
this year will be a little bit different
because it's more focused on the drivers.
So expect a bigger impact this time around
because the focus is on driver
compliance and paperwork,
which can be much more
punitive for drivers.
- Cool. Sorry to jump in.
I'll get back into the
flow and turn over to Ned.
But I appreciate the insight Dean.
- All right.
So we have our spot rate forecasts.
You can see in blue are
the historical market rates
measured by DAT
or I should say historical spot rates,
because some folks have a idea
that market rates are
different than spot rates.
And well that's a topic for another time.
Moving off to the right,
we can see our various forecast models,
in red is our short term model
in green is our rate cast model.
And then in between we
have our two blended models
that are mixtures of the two other models
in different proportions
and in different ways.
So for these models
we see there's initially
a fair bit of convergence
for the first week or so, but
then the differential slopes
are really what's taking over,
where the short term model
is expecting there to be
this continued up into the right,
the rate cast models expecting
that the kind of little neck
or
tilt you can see
in the forecast is going
to continue itself.
And the blended forecasts are expecting,
obviously a mixture of these two trends.
Given everything that I've seen
and obviously if you told
me this back in April,
I wouldn't have believed you,
but it's been up into the
right so I see no reason why,
there's been any signs of anything,
tilting it more down.
So I expect that the short
term model is going to be,
correct in this case or more correct.
- I got a question for you there.
It seems like just a few months
ago we were talking about
kind of a floor right
For rates, you know
- right.
- putting an artificial lower bound.
I mean, do you see any,
or how often do you think
about any upper bound?
Like how high could spot
rates go for dry vans?
- From what I've heard
- Yeah
- From what I've heard talking to folks?
2.50 is kind of the limit at
which a lot of the shippers
that don't have the
profit margins to absorb
that kind of price are just
going to stop shipping freight.
I don't know whether or not that's true
because if shippers can pass along their,
cost, the increased cost to consumers,
then you might be able
to see that continuing.
but honestly like we're getting
into uncharted waters here.
And I'm very curious about how
things are going to behave.
What are your thoughts on it, Ken?
- No, it's interesting.
I asked because I'm curious to get
kind of the technical
perspective, I think,
non technically in 2018, right?
You started to see a lot
of freight get bumped,
days out to, you know, defer, you know,
either you couldn't
right out find capacity
or you had to defer
to try to get a little
bit of a better rate.
But yeah I've been
thinking a lot about like,
what is that upper bound?
And when do the mechanics of
the spot market start to change
in a way that will,
you know shippers will take
action to minimize that.
Of course we're talking
about national rates, right?
I mean, it's over $3 a mile
heading into Denver right now.
- Sure.
- There are certain lanes
that have become one way rates
effectively we're just
looking at the national rates
as sort of a wholesale
barometer for what's going on.
- So to let you in,
yeah, to give like a little
bit more technical context,
I do have a saturating
ceiling and a saturating floor
on these forecasts.
So it won't go up to infinity
and it won't go down to zero.
I put them saturating
ceiling at about 2.50 a mile
based on prior evidence
in what you've seen.
But one of the things about modeling
is that you have to understand
when conditions are different
and to the extent that
we see no resistance
as we start to close in on 2.50,
I'm going to adjust the
saturating ceiling going forward.
- Awesome. Thanks for that.
Sorry to jump in there.
- Oh yeah, no, no, no, no worries.
I'm happy.
unsurprisingly as somebody
who does this show,
I love the sound of my own voice
and I love to talk about my models.
And so I'm happy to share
some of the technical details
of what's going on.
Moving forward to the reefer rates,
here you can see that there's
a little bit more agreement,
at least initially, but again,
that slope is winning out
where the short term model
is expecting there to be
a continued up into the right presence.
Whereas the rate cast model
is expecting more of a flat,
what we've seen in reefer is that,
although it is up until the
right on like a broad scale,
there have definitely been
some periods of more flatness.
If you can look back at like
the mid August flat period,
and then
the May through June
late June flat period,
I expect that, given the pattern of those,
I expect there to be at least
a little bit of flatness going forward,
but I expect the overall
trend is up into the right.
And so I think the blended forecasts
are probably going to have a
fair bit of truthiness to them.
Finally we're moving onto
the flatbed forecasts.
So again,
the blue line is a historical
rates and served by DAT
and then off to the right
We have our model suite,
with red being the short term model,
gray and yellow being the blended forecast
and green being the
flagship broadcast model.
Here in flatbed I'm going to be honest.
One of the reasons why I really
like having Dean on the show
is that he has a lot more
insight into the flatbed market
than I do
because the flatbed market
is just so heterogeneous.
There's just so much difference
between different flatbed rates
and the way that a flatbed
rate is constructed.
Like on a national perspective,
it's just an aggregation
of like individual markets,
rather than there being
like a world spirit
of this is how flatbed is behaving.
And what I would say here is
that there are definitely signs
of at least some kind
of a bump or a dip but,
I've had enough hat for this year
and so I'm glad I've got a
punch on which of these models,
but, you know, if you really asked me,
I'd say that the blended forecasts
are probably going to be,
have a fair bit of
informational content to them.
Obviously all the forecasts do,
but if you have to pick
a strand of spaghetti,
which strand are you going to pick?
And I'd go for maybe
the gray line(mumbles).
- You know what's Interesting there,
and I'm interested to get,
Dean's take on this too is
some of the areas that
we're seeing shortages
like building supplies,
lumber in particular
would impact on the
supply side the flatbeds.
I'm curious you know, I think
it'll be curious to watch
and see how that plays out.
It's also kind of a shame
that a lot of what's required
after hurricane to rebuild
is in what's short
supply right now, right.
It's you know, lumber
and building materials,
- I think the other
thing to remember is that
a lot of building materials
for construction in particular
goes to destinations one time.
So whether it's a rebar
for a high rise construction building,
or you know, plywood for you
know, prepping for a hurricane
or prefab concrete for a bridge span,
a lot of those loads go to areas that,
you know, one off events.
So what you see is also
a lot of empty miles.
That's why flatbed carriers
typically run the highest
number of empty miles
after they get into a market.
So there's a next point.
There's a lot of individual transactions
that go from very small
shippers who have small fleets
that service them on the spot market
to destinations that are
really one off events,
which is very different
to dry van and reefer
where you've got a lot of repetitious,
you know, transactions occur
on different ODP areas.
- Right?
Yeah. It'd be interesting to watch
across all three equipment types.
So with that, I'm going to transition
to our question of the week,
and we had what we thought
was a really good question,
but the more that we batted it
around as a team, we realized
we could probably spend the
entire length of the show
talking about this.
And the question really dealt around
what fundamentals,
when we say fundamentals,
you mean like seasonality
or head haul back haul
or retail industrial,
which of those are
holding true during COVID
and which aren't?
So we're going to use
this as a talking point
in our live show on
Thursday at three o'clock.
And we're gonna, you know, again,
we're interested to hear from you like
what fundamentals are you seeing?
You know we talk about
Denver market LA to Denver,
we're seeing, kind of crazy
rating patterns happening there,
and I'm sure they're happening
all over the country.
So, feel free to ask iq@dat.com,
send us a question to
discuss in the live show
and there'll be other ways
to get in touch with us,
we'll have links in the description below,
And we'll try to share out
the link to the event on our,
Individual social pages later today.
But for the sake of still
having a question to talk about.
I just wanted to go
around the room real quick
and talk about what
each of us are watching
from kind of the external
market perspective
that will weigh heavy
as we hit into the fall freight season.
With that I want to start with Dean
and just kind of go around
the room, the virtual room.
- Yeah. Thanks. Thanks Ken.
Great question.
My focus for the next few
months is on consumer spending
consumer spending accounts
for about two thirds of
the U S economic activity.
I've been studying the IRI
consumer packaging demand index
for the last few months,
you know, CPG packaging,
things that we buy in a supermarket
that need constant replenishment.
Those bonds, even though the volume,
the index for CPG is
up 11% year over year.
It's been trending down.
It's down about 6% since
its peak in June 21
sort of post the massive stock-up
that we had during the lockdown.
So it's very interesting
IRI tracked the latest data
that's available for consumer spending
at the point of purchase.
So it's good to watch because
it tells you about how consumers
are changing their spending patterns.
We're seeing things like
edible food volumes,
double digit rate increases.
Anything that consumers can buy
that have longer shelf life,
where they can stock up
and limit the number of
trips to supermarket.
Those volumes are high.
And a couple of things
jumped out this week.
You know, things like sales of bacon
are up 20% year over year.
Whereas a shaving
product sales are down 8%
year over year
as all of us work from home.
(laughing)
- bacon and beards,
- that's it?
- Oh, we're living in what
Ron Swanson's America.
All right.
(all laughing)
for my intake I'm really
interested in following MCI.
So what are the reasons
why I like MCI so much?
And one of the reasons
why I follow it in general
is because it does have a
leading effect on rates.
And, that's been historically true
but that's something that I'm
really interested in seeing
as things are going forward
whether that continues to hold.
Because there is a fair amount of
strange
behavior
and to the,
one of the big questions about MCI
and something that I
think is really important
is its ability to capture
both like the temperature,
but also the amount of heat.
And that heat rather than
just the temperature,
I think is going to be really
kind of put to the test
as market shifts and as things change.
And so I'm looking really closely at it.
- Alright.
I appreciate the
shamelessness as always Ned
to talk about a DAT product.
And for those not familiar,
Ned's talking about the DAT
market conditions index,
which we launched this spring,
which is a really great
way to compare markets,
relative heat and strength as
well as weakness in and out.
I'll just wrap it up with a
couple of things I'm watching.
I think the biggest story
that we're not hearing a ton about,
but I think it's really a big deal
is some of the rail surcharges
we're seeing coming off the West coast.
We all know that there's
been this flush of imports,
especially in the West coast
ports like LA and long beach.
A lot of that stuff comes off the coast,
inland via inter modal.
And with some of these surcharges,
we're essentially the
rail say, "no Thank you,"
to smaller shippers moving freight inland.
So that will almost necessarily spill over
into the truckload over
the road truckload market.
And those markets are
already fairly saturated.
So a lot of these just weren't in place
or were increased yesterday
or the day before.
So we're watching very
closely on those areas
to see what happens.
I think also it goes without saying,
I think we're all kind of
waiting for the government
to get its act together a little bit.
As far as stimulus and,
you know, Dean mentioned consumer spending
and my kind of
redundant and cheeky line has been,
if people have money this fall,
they're going to spend it,
I think, but to be able to
spend it, they need to have it.
And I think we've seen positive results
from the first round round
and a half of stimulus.
and I think folks are counting
on another round this fall.
So that'll be important to watch,
but with that, I'm going
to wrap it up for the week,
For this prerecorded show and again,
plug our live show on Thursday at three,
there'll be links in
the description below.
You can catch Dean's
long form market update,
which is outstanding and
chalk full of information,
at dat.com/market update.
And then lastly, if
you have any questions,
not related to what we talked
about here or the live show,
you're just genuinely curious
about what's going on out there,
or you're seeing something
funky that you can't explain.
I would suggest not calling Ghostbusters,
but rather writing, ask iq@dat.com
and we will do our best to help
you out in a timely fashion.
So with that,
we hope to see you Thursday
and we're signing off for now.
Have a good one.
- Bye all.
- Bye bye.
