*This article brought to you in partnership with DAT Freight & Analytics*
Higher freight rates in 2024?
Shippers have enjoyed an inverted market with lower contract and spot market rates since Spring 2022, but this market has proven to be cyclical, informing analyst predictions of rising rates in 2024. DAT’s chief scientist, Chris Caplice, said “...the [truckload] spot market has hit bottom. We’re set up to start a recovery, but it’s probably two quarters away, maybe three.”Cass Information Systems’ July data confirms Caplice’s statement, reporting the freight market is staying “lower for longer” with sharp drops in shipments and expenditures. “Declining real retail sales and destocking remain the primary issues, but dynamics are shifting…the worst of the destock is in the rearview,” said ACT Research’s Tim Denoyer.
Ken Adamo, DAT Freight & Analytics’ chief of analytics, noted, “Shippers are using abundant truckload capacity to establish new contract rates at substantial savings and to strategically use the spot market. A mix of contract and strategic spot rates will continue beyond the current soft market.”
Insight from transportation giant C.H. Robinson provides additional context, pointing out “...it seems likely that the continued loss of small carriers, along with fleets slowing their hiring and letting some attrition go unreplaced, that net contraction will continue…” Denoyer explains this trend further, stating “[Carrier] interstate operating authorities are contracting at a record rate, and the rate is increasing. This is beginning to tighten capacity, which will also help spot rates find the bottom and begin to rise.”
While exact timing is unclear, these experts’ predictions unequivocally point to a market turn on the horizon.
Food and beverage industry mixed signals
Amidst inflation's impact on consumer spending on food and beverage categories, consumers cut back by 8% YoY according to RSM. Reflected in that reduction is a shift towards private label brands, which grew 11.3% in 2022, outpacing many national brands. In this context, we’ve seen large brands emphasize margin, while smaller ones race to pursue market share.
In parallel, restaurant operators' sales and economic outlooks have become increasingly pessimistic. The National Restaurant Association's Index fell below 100 for the first time since Jan 2021, posing concerns for food/beverage companies dependent on restaurant demand.
Data analytics provide an edge
As the saying goes, you can plan a perfect picnic, but you can’t predict the weather. Shippers can mitigate risk with strategic response plans built on reliable past, present, and future rate insights and analytics.
Effective data analytics comprise four essential components: comprehensive data, algorithm adjustments, validation against market prices, and isolation of variables like fuel surcharges and accessorial charges for accurate, reliable results. Equipped with these tools, shippers can tackle critical functions:
- Continuous transportation procurement with resilient contract rates and strategic spot usage
- Flexibility in handling volatility through visibility into market conditions and rate predictions
- Predictable market cycles allow for more accurate planning despite constant truckload capacity and demand fluctuations
- Becoming preferred shippers with data-driven carrier partnerships
As shippers face unrelenting challenges, market intelligence and data analytics will become increasingly critical for managing freight expenses and navigating uncertainty. For more information, visit www.dat.com/Empower_iQ and download free information sheets.
