Brokers, Please explain the plummeting rates these days.

Not much competition for the railroads. If there were only a couple three trucking companies in the United States and 2 in Canada I’m pretty sure they wouldn’t have any issue setting the rates, either.

 

One influences the other and vice versa. Saying otherwise is lying through your teeth.

 

please explain how that works.

Because in my experience it is always supply and demand. There isn't a drop in rates when gas prices go down. There is a drop in rates when there are more trucks than loads and an increase when there is more loads than trucks. Carrier have been pushing the rates up for 2 years while manufactures and retailers have been increasing their inventory so that they aren't scrambling for product/raw material. This means, once they have enough inventory, they don't NEED those Trailer to move quite as direly. This means they can, and will, wait for the broker/carrier that will do it for their price. You want to blame someone, blame yourselves for skinning the sheep this past 2 years, but ya gotta make hay while the sun shines. Rates were so high with service levels being so low that Shipper had to restructure how they are doing business to lower their costs. Getting rid of JIT logistics (most of spot) and moving to hold a larger inventory takes a signifignat demand out of the market. That is why you are seeing warehousing going crazy right now. Add to that all the new entrants to the market in the last year and you are looking at too many trucks for too few loads that NEED to move TODAY.

 

One does not influence the other, at least consistently. When you have a surplus of freight it can, but with a surplus of trucks, no.

What you pay for something has no influence over it's value, only what you perceive as it's value. Saying otherwise is lying through your teeth.

 

That basically how it was before Deregulation.

 

My rates go up or down with my expenses, particularly fuel. This is basic Business 101. If a broker's surety bond costs more than it did last renewal; do you not take a larger percent to cover it? If the answer is, "no" then you're on your way being put out of business.

If my personal living expenses go up; am I not to seek a raise in pay to cover them? Groceries, gasoline, car parts, house repairs etc etc are all increasing. If I don't raise my rates not only does my business begin to fail but my employee (me) takes a reduction in pay.

Fuel is an operating expense and if my rates don't go up to cover said expense then I'm losing revenue. Giving away services is a dumb way to conduct business. Sounds more like a charity.

 

Refer to my reply to the comment below for further education on the matter.

You mean to tell me you’ve never, EVER had a broker or shipper try to negotiate a rate when fuel goes down? You’ve never, EVER heard the words “Well fuel is down so the rate went down?”

Like I said, lying through your teeth. Either that, or you’ve not been in this game long. Which is it?

 

@tequesia2

If that doesn’t make it make sense for you, you might as well quit before you lose your ###.

 

Just want to follow this logic, I need to pay you more when one of your expenses goes up EVEN THOUGH there is someone who will do the same service level for cheaper?
When there are more truck than loads, rates go down. More loads than truck, rates go up. its not rocket science. Doesn't matter if fuel goes up if there is no freight to haul.
Also, no. never had a shipper try to ask for a less rate when the fuel prices went up or down. That's what a FSC is for, and makes it hard for the accounting dept to forecast expenses (see past 2 years) so most shipper don't use a FSC system and ask for all in rates on lanes. If that doesn't make sense to you, you might as well quit before you lose more of your ###

 

I get it, and it's easy to say. In the end, if someone hauls it cheaper, you're out of a job.

Business survives by adapting to changing markets.

I'm not saying hauling for free, but those that think 4-5$ a mile is bottom feeding, they're gonna have it rough.

Still, while YOUR rates are affected by fuel costs, brokers don't give a sheet about it.

 

Mega carriers and majority of brokerages negotiate 6-12 months ahead on rates, only thing fluctuating is fuel Surcharge.

so rates for 2022 was negotiated sometime in 2021, megas don’t run cheap only most Owner Operators do.


The spot market consists of loads megas couldn’t cover, last minute orders or just shippers who rather take a chance on just doing spot market.

since brokers see supply and demand and have contracts negotiated year or 6 months ago, the rate is still good for them and they see that demand is down, so they drop the price on the spot market side. Meaning they still getting paid $4-$6per mile (last years rates), but since many owner operators are spot market and are on spot market and demand is reduced, they know they can dip into the price more and more.