OOIDA Foundation Market Update calls for further drop in rates

In its February Market Update, the OOIDA Foundation said manufacturers and wholesalers are still experiencing high inventories and decreased sales depressing freight demand.

According to the Foundation update, capacity is also incredibly loose, especially for van and reefer equipment types.

Expect rates to continue to drop into April, said the Foundation report.

Here are the conditions by specific market type.

Van market

Typical seasonal patterns continue in terms of load-to-truck ratio, which decreased again in February. That ratio is now 66% lower than last year and 35% below the five-year trend.

Load posts are comparable to 2018 levels, while equipment posts are similar to 2022.

Rates are also following seasonal trends. The spread between contract and spot rates grew by 15%. However, spot rates are 1% lower than the five-year trend, and contract rates are 14% higher.

Inventory-to-sales ratio has grown overall, but monthly sales have stalled. This has dampened truck demand and pushed rates downward, says the Foundation update.

Before demand picks back up, demand will need to decline.

Flatbeds

Loads posts continue to increase, while equipment posts remain the same. The flatbed load-to-truck ratio has declined 84% since last year and is 64% below the five-year trend.

Spot rates are down the seventh consecutive month, and contract rates fell for the third straight month. The spread between this rate is 200% higher than a year ago.

Total construction spending and spending on highways and streets decreased month over month.

Housing starts broke a streak of five consecutive months of decline.

Flatbed volumes should continue to steady before spring construction season.

Reefer market

Produce volumes continue to underperform due to weather, maintaining the downward trend.

The reefer load-to-truck ratio is now 49% below the five-year trend.

Truck posts with refrigerated trailer equipment were still elevated.

Produce season doesn’t officially start until April, but torrential rains in California are delaying planting season for certain produce.

Reefer volumes dropped significantly in February and truck capacity loosened as weather continues to affect produce volumes.

Spot rates continue to fall due to an excess in reefer truck capacity and fewer volumes overall.

Trucking overall

Freight volumes declined in December due to seasonally adjusted increases in rail intermodal, water, air and pipeline. Rail and trucking grew.

January’s decrease came in the context of mixed results from other indicators.

There are still too many truckers chasing too little freight, according to the Foundation’s February market report.

The Cass Shipment Index expects current conditions will tighten over the course of the next year.

A loss in jobs combined with an increase in openings and a low unemployment rate, could mean drivers aren’t receiving enough miles per week and leaving to find other work.

Class 8 new and used sales both increased in February. New orders also increased, but are 10% below the five-year trend. The spread between new and used sales is now 6,500.

Many are hoping for rates to bottom out in early spring, but they might still have further to fall. This is especially true for dry van and reefers.

Fuel prices dropped 12 cents in February. This was the third straight month of decline. Diesel decreased month-over-month, but is higher year-over-year and 29% higher than the five-year trend.

Both imports and exports decreased month-over-month.

Ports are less and less congested around the country with containerships awaiting berth overall dropping 87% since January 2022.

Rail carloads continue to slide downward as intermodal containers and trailers remain relatively flat. This could signal a movement from rail to truck as truck prices continue to decline.

The Foundation has shifted its outlook from restrained in January to negative in its latest update.

Read the complete OOIDA Foundation Market Update report. LL

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