Attached Chart: Measures spot demand for truckload capacity. According to Internet Truckstop, a reading above 8 indicates truckload capacity is tight and pricing leverage resides with carriers; a reading below 6 indicates truckload capacity is loose and pricing leverage resides with shippers. Between 6-8, capacity is considered in equilibrium. I have stopped considering anything from Transcor as fewer and fewer carriers are posting trucks but few of the major brokers have stopped posting loads.
So what is the chart telling us? Truckload capacity during March was tight, with Internet Truckstops Market Demand Index recording its highest March reading in more than nine years. And what is more encouraging is that readings accelerated throughout the month, indicating favorable seasonal trends.
The good news is that we can expect tight capacity to favorably impact contract bids in the next several months, as well as having positive implications for 1Q12 spot market rates (this will also impact earnings for public trucking companies).
I am not ignoring the fact that favorable weather and an earlier Easter likely had an impact on year-to-date trends, recent indications from the market suggests sustained momentum from spring and summer order activity, seasonal produce shipments and modest improvement in housing related end markets.
Capacity is 20% below 2006 levels and major carriers are not looking at increasing capacity but putting efforts towards brokerage activities to spur growth (will post more on this later).
Market Rate Index/Analysis
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The only"flaw"to ITS data(or transcore,ect) is they go by how many trucks posted vs how many loads posted in any given area. We post just a tiny fraction of all the freight we broker and almost never post a truck. Many of the carriers we use post all their trucks even if they are already doing a load or two for us. At best it gives a very general view. If you match it to the rate index we could take another 10-15% and still be at a higher rate than the index shows.
What is important is not if a certain % do not report but that the same % (within the margin of error) do not report on a consistent basis year after year.
The people that make a living advising money manager test this data on a regular basis and find this Index to be the most reliable on the open market.
Where as the only valid data that Transcor publishes (the once gold standard) is contract freight rates.camaro68 Thanks this.
I don't get too excited about these load board charts. They are good short term trend indicators but I would stop short of broader generalizations. The data is a lot dirtier than they admit.
To add to what wichris says, we all know and have been stung by the large brokers inflating the available freight listings several different ways:
- Same load listed by multiple brokers
- Recurring postings of "daily" loads that are not actually there more often than not
- Same load listed with different start/end cities
Don't discount the value of contract freight rates. It's not dollar accuracy that matters. For most of us, the market we move in is an extension of that one. If you consider it a trend indicator, a 10¢ increase in the posted index doesn't mean add 10¢ to the rate you quote, you extend that in consideration of other trends like density and the data artifacts mentioned above that can only be seen by your Mark V eyeballs to come up with a more real value to plug into your quote.
With respect to Transcore vs. ITS, it depends a lot on the market. Having reefer equipment, I always do "RV" searches. On a good day ITS has less than half the postings in my market, more often closer to 20% compared to TC. Complicating that, ITS will not filter van-only from "RV" search results. Don't get me wrong, I don't hate ITS. For me it's just more work and less efficient, and at the end I have far fewer postings to consider. When I go fishing on the load boards, 80% of the time I get a match on TC. ITS and GetLoaded are ok backups, and I'm seriously considering dropping GL because it takes awkward to a new level and frankly hasn't done anything for me in the past month.
Final thought: load boards are market makers and cater to the brokers. Thumb through the ITS magazine and see who has the focus in their articles and adverts. Sure they make money off both sides of the transaction, but the broker listings come first to make the market. It isn't rocket surgery to figure out why brokers consistently get a pass on less than truthful postings and slimy follow through. Do you think that may also play into how load boards report trends?
Again, this is an index and not a percentage. With an index you have the ability to develop rules that clean the data. That has been done with this. And even if is hasn't. What is important is that the volume of double loads and number of trucks not posted is consistent year to year or adjustments are made for that.
ITS provides the raw data for this index and it is completed by private firm.
But the discussion that I was looking for was around the fact that rates are at sustained historic peaks. MANY sources of data is telling us that as we creep into this recovery we are going to see tight demand for extended periods of time.
Large carriers are replacing equipment but are investing for growth in the brokerage side. We are 20% below our capacity of 2006. LTL market has straightened itself out and has stopped the price wars. Rail has no excess capacity. Inventory levels are now measured in days rather than weeks.
So is everyone in the trucking industry pessimistic? Is all good news meet with skepticism? With a chart like this why are we not asking how the bad data is accounted for rather than finding the reasons it is not valid.
There has got to be more than a handful of O/O's that are more than along for the ride and are looking to see how they can capitalize on the industry.
Even guys that are on mileage based leases can benefit from understanding the market. While you are not going to be making much more money with your truck at least understanding what is happening and that trucking companies are going to be having record profits you can buy some trucking stocks.
My god, on one side you have people saying it isn't valid because of X and when then when someone hears that X is accounted for they are manipulating data.
What flavor is your Kool-aid BBB? I don't like it too sugary!
At Malone we seem stuck in contract rates and can't capitalize on the spot market as much as I would like. I am loyal though and won't forget I got through 2008 with them.
Thanks Bill, I appreciate the posts. Having a deeper understanding of the industry like this separates those companies that will be around for the long run and those that come and go with industry cycles.
Whether it is an index or percentage you can assign rules or clean the data. Or manipulate if you so choose. Don't get sidetracked by the term used. I've been with ITS since it's start,before that DAT(when they were still only in the truckstops)before internet. The best indicator i know of is when your contracted freight customers(those that have 1,3,5 year contracts) are offering to re-write at higher rates. That usually happens when their customers are putting in 6-9 month in advance orders. When sales increase due too competitors going out isn't an indicator of growth. New ones will come in. Even with under-capacity of trucks it doesn't take very long to catch up. Especially in the spot market.
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