It has been a year since I wrote “Why I believe a freight recession is imminent.” The article, published on March 31, 2022, stated my case for why I thought the U.S. trucking market was headed for a significant downturn.
The information in the article was based on analysis from SONAR, FreightWaves’ high-frequency freight data and price reporting platform. SONAR is the market’s leading freight market analytics and price reporting system.
At first, there was a great deal of vitriol aimed at the FreightWaves analysis and also disagreement about the health of the freight market. This was most pronounced coming from asset-based truckload carriers that predominantly operate in the contract market. The downturn, they believed, was a spot market phenomenon that wouldn’t impact them.
Others contested the SONAR data and the FreightWaves staff analysis because they were using lagging indicators and government data. These tools have consistently proved to have little value and do not provide actionable insights that participants can use to manage their business — as SONAR does. Sure, they may provide some level of insight about what happened six months ago, but in the freight business, that might as well be a lifetime ago.
The freight market is one of the most volatile markets on the planet. Hot markets can turn ice cold in a flash, particularly after the federal government and central bankers flooded our economy with so much liquidity and then proceeded to institute the fastest monetary tightening cycle in history.
Hindsight is 20/20, and now the debate over the freight market downturn is a thing of the past. The freight recession has come, and carriers, regardless of whether they operate in the contract or spot markets, are having to contend with it.
Executives of both carriers and brokers who we’ve spoken with have said the current freight market is among the most challenging of their careers and this is supported by the same SONAR data that was among the first to signal a sharp downturn.
The last freight recession took place in 2019. It was called a “trucking bloodbath,” as excess capacity flooded into the market in the wake of the ELD mandate. Carriers operating on the edge couldn’t survive, particularly those operating strictly in the spot market. At one point, FreightWaves covered 10-plus bankruptcies per week.
Freight market conditions are a function of the balance of supply and demand and the build-up of excess capacity is the most probable cause of the trucking boom-and-bust cycle.
As we enter the second quarter of 2023, it appears that the freight market may be worse than the freight recession of 2019, as tender rejections are on the verge of dropping below 3% (now 3.05%). The low in 2019 was 3.86%.
Came out this weekend, higher prices for produce on its way since California supplies over 75% of produce until other parts of the counties farmland takes over. Pickin time for fruits and veggies from the mid and SoCal area is washed out since so much rain this off season. That means no produce to get into those trucks causing a double whammy. Produce out of central/south america will be whats left and that means an increase in prices.
It will be interesting to see our locals and how they react to farming in these areas. Was no snow, regular rain – will we get the shaft just because other parts of the country cannot produce?