What Makes the Freight Market Fluctuate?
By Seth Newman
When requesting rates from carriers and brokerages, the rate can rapidly change from month-to-month or even day-to-day. Rates can be affected by many factors, some of the reasons are due to weather, seasonal produce or special events. Here’s an in-depth look at what makes the market fluctuate during certain times of the year and what you can do to prepare yourself for rate changes.
Produce season is the biggest reason that the market changes, so let’s start with that. Produce season can start as early as February and last into July. The wave will usually start in California and Southern states before moving to Northern states when the weather warms up. Even if you are not in the produce industry, this will still affect your rates because capacity will tighten with carriers. Carriers have more negotiating leverage because they can pick-and-choose their loads with the abundance of produce. Most produce is time-sensitive with fresh fruits and vegetables being harvested, so as the carriers become busy, the spot market picks up.
According to the DAT North American Freight Index, the spot market freight volume typically rises about 30% in the Spring and peaks in April, showing the value of having a third-party logistics company as a partner. With having so much freight available during produce season, many carriers are looking for a back-haul load to get to their destination and that’s where a broker can come in and help find a cheaper rate for a carrier that is trying to head back to the produce destination.
The second reason a market can change is the weather. Weather won’t affect the rates like produce season does, but it can last two or three weeks. The Midwest and South regions of the U.S. are no strangers to bad weather and this can significantly affect rates. As one of the busiest cities in the US for freight, Chicago, was hit hard by the arctic blast in early 2019. According to DAT, outbound rates rose in Chicago especially for reefers, which are used to protect freight from freezing. Rates rose 10.1% for flatbeds and 6.5% for reefers carriers leaving Chicago during the week of January 30th, and because of this the outbound volume also fell nearly 45% during the arctic blast. While the South doesn’t get hit with arctic blasts, it does deal with hurricanes from time-to-time, and that will affect the rates for both inbound and outbound freight.
The third factor into the market changing are large events. Sporting events, especially the Super Bowl can increase rates. The Super Bowl in Atlanta this year saw a huge increase in traffic, delays and rates. Carriers do not want to sit around in traffic for a few hours trying to move ten miles. Be careful when shipping freight into an area that is hosting a national event. Delays at shipping centers and receivers are a common issue during these events and carriers will be more weary of going into that area.
How do you protect yourself against the change of the market? For starters, be aware of the seasonal changes, with Spring and early Summer comes increased rates. Knowing that you may see an increase in your rates, will help prepare yourself for the produce season. Another tip would be to set up time-specific contracts with your carrier and brokerage. If you ship a dedicated lane throughout produce season, get in touch with a brokerage about a contract for a flat rate during the season. Having more flexible hours as a shipper and receiver will also help combat the increase in shipping during these times. If you are more open to shipping later or receiving earlier, you may find some carriers that are willing to haul for you at a less expensive cost.
The freight market is ever changing, but with these trends and tips, you can find yourself protected and prepared as you continue to grow as a company. To see how Ally Logistics can help you during produce season, call 888-466-1024 or visit our services page at www.allylogistics.com/services/