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Trucking Trends:
A Closer Look at the Persistent Rise of Spot Truckload Rates

By Dean Croke, DAT Solutions

The pandemic has made many aspects of our lives feel upside down this year, and commercial transportation is no exception.

National average spot truckload rates for dry van and refrigerated freight soared to new all-time highs just prior to the Thanksgiving holiday, when demand for trucks typically starts to slow. Groceries and a backlog of imports, especially in Southern California, have kept truckers busy and rates unusually strong.

Imbalanced supply chains

A chief reason for this upside-down feeling among truckload pricing analysts is the imbalance in the volume of freight on the spot market versus the amount moving under contract in 2020.

Typically, freight under contract represents about 87% of all freight hauled. Today, that percentage is closer to 78%. While overall freight volumes are roughly unchanged compared to 2019, substantially more truckload freight is being posted to the spot market this year due to supply chain imbalances at the industry, commodity, and lane level.

67% increase in spot loads

During the week ending Nov. 17, the number of available loads on the spot market was up 67% year over year compared to the same week in 2019 while the number of available trucks is down 5%. The national average van load-to-truck ratio has increased from 0.8 in late April to 4.5 in mid November—a record for this time of year. A ratio of 4.5 means there were 4.5 available loads for every available truck on the DAT load board network, the largest electronic marketplace for spot truckload freight.

Naturally, fewer trucks and more freight pushes spot rates higher.

Ratios and rates go hand in hand

Dr. Jason Miller, an associate professor of logistics at Michigan State University's Eli Broad College of Business, studied the correlation between load-to-truck ratios and spot rates. He found that a one-unit increase in load-to-truck ratio predicts a 12-cent increase in the line-haul spot truckload rate, whereas a one-unit decrease in the ratio predicts only a 5-cent decrease in the line-haul spot prices.

With load-to-truck ratios so high, the national average dry van rate has increased 95 cents since

May 1, when they were at their low point during the pandemic at $1.32 per mile excluding a fuel surcharge.

Spot market prices are expected to continue to rise (albeit at a decreasing rate) through the end of the year. However, these rates are not expected to maintain their elevated levels much beyond the New Year, as volumes for retailers and others typically start to decrease in late December and January.

Bifurcated freight volume

While many of the benchmarks you'll see are national averages, there is still a bifurcation of shipper volume. There are winners and losers mostly along industry lines, with quite a bit of variability within industries as well. For example, many DIY retailers experienced 50% increased volumes during the pandemic while other "non-essential" retailer volumes were down over 10% year over year.

Of course, the virus will continue to influence consumer demand.

Interestingly, those shippers with very high truckload volumes in the second quarter of 2020 (essential retail, packaged food, cleaning supply manufacturers) generally saw a decrease from those peaks in Q3, while those shippers with severe drops in Q2 (most industrials and non-essential retailers) experienced increased volumes in Q3.

The current rise in COVID-19 cases would suggest the freight volume imbalances at the commodity and lane level are likely to continue well into 2021 as consumers dig in for the long haul.

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.