As a part of our on-going COVID-19 coverage, we’ll be providing breaking news, resources, and insight into the pandemic’s impact on the industry.
Just three weeks ago carriers were hauling more FTL freight than ever before, but the sudden mid-March volume surge is now being matched by the early-April downturn. Freight volumes are currently experienced a whipsaw effect and as a result pricing power is shifting from carriers to shippers. The Freightwaves outbound tender volume index (OTVI) chart provides a stark visual of the swings shippers and carriers have been experiencing in the past month and a half. The domestic freight picture remains uncertain for shippers looking to source capacity as some carriers are opting to haul only essential goods while others have ceased operations altogether due to COVID-19 concerns. As a digital freight broker, Transfix remains well-positioned to provide capacity during these turbulent times. Our carrier network was specifically created to provide flexibility in tight circumstances such as those brought about by COVID-19.
This so-called “freight cliff” is impacting rates around the country. The DHL Supply Chain Pricing Power Index analyzes the market and estimates the negotiating power for rates between shippers and carriers. As illustrated by the Pricing Power Index below, domestic pricing volatility has been dramatic in the past six weeks. Here was the swing in favor of carriers between March 5th and March 19th.
A swing of this magnitude generally would take a quarter or two, but in this case, was achieved in just two weeks. The counterbalance in favor of shippers was nearly as abrupt between March 26th and April 9th. And industry analysts believe that rates will continue to drop in the coming weeks.
As previously noted in our weekly updates, produce season has begun in earnest in several parts of the country, but according to crop reports and analysis conducted by our internal team, the market is unlikely to be materially impacted. Justin Maze, a Senior Carrier Account Manager at Transfix, has kept close tabs on regional outbound markets usually impacted by produce season.
Produce season usually increases volume and rates across the county for a few months. Unfortunately, many farmers are unable to sell produce and 30% of their crops will be left to rot instead of being picked. This will really change the seasonality of markets this year. It’s similar to what is happening with milk right now. Over 100,000 gallons of milk are being dumped by dairy farmers every day because they are unable to sell it right now.
Understanding the regionalized impact of this unique produce season is one of the many reasons why new shippers are turning to Transfix. We blend our wealth of industry experience with cutting edge technology to navigate any fluxations in the market.
Drew McElroy, Transfix’s co-founder and chairman, was published in Fox Business over the weekend advocating for carriers. He believes that carriers will soon require immediate financial support and that the CARES Act should be augmented to grant them express access. In his op-ed he wrote, “the reality is that these heroes, these folks who are stepping up and putting country above self so that we can have food and supplies, are also small business owners that are deeply at risk right now. These are businesses that operate on razor-thin margins in normal times. And while demand has been sky-high, a new reality is approaching.” He continued, “Because of their deep importance to a functioning society, SMB trucking companies should be moved to the front of the line as the SBA provides CARES Act benefits. Carrier businesses need priority because they are an absolute necessity, and without them, things would be much worse. Just as the airline industry is being afforded special federal financial accommodations, so too should the hardworking men and women of the trucking industry.” To read his op-ed in its entirety, click here.
The Transfix team remains committed to providing critical services to our customers during this crucial time. For more on COVID-19’s impact on the freight market, please refer to our website, blog, social channels and via email.