The OOIDA Foundation’s Freight Market Outlook
The Current Landscape
A note on timing: this analysis covers the OOIDA Foundation’s spring 2023 freight market outlook, a snapshot of the deepest stretch of the 2022-2024 freight recession. It reads today as a record of how bad that trough got: flat demand, loose capacity, bottoming rates, and stubborn operating costs. The market has since worked through much of that imbalance, but the dynamics the report documents (how capacity, rates, and fuel interact) are exactly the ones that drive freight pricing in any year, which is why the breakdown below remains worth understanding.
The report, updated that April, continued the grim tone of the Foundation’s March update: volume and demand flat, capacity loose, rates bottoming, and operating costs high.
A Closer Look at Specific Freight Markets
The Van Market
The van market is underperforming compared to typical seasonal patterns. Load-to-truck ratios have decreased, now standing 44% lower than 2022 and 50% below the five-year trend. Spot rates have dropped for the fourth consecutive month and are 10% below the five-year trend. Contract rates also decreased in April, but they are 5% higher than the five-year trend. The increase in inventory-to-sales ratios and the decline in monthly sales have dampened truck demand and pushed rates downward.
The Flatbed Freight Market
The flatbed freight market has seen a decline in load posts by about 80% from last year, following a pattern similar to 2019. Equipment posts are at their highest level in seven years. Total construction spending increased, while spending on highways and streets decreased month-over-month. Housing starts were up after a 5% decrease in March. Building materials, garden equipment, and supplies dealers sales showed positive movement, which could potentially bring inventory levels down.
The Reefer Market
The reefer market continues to underperform, but there are signs of improvement. Spot rates saw a fourth consecutive month of decline, and contract rates dropped below $3 for the first time since September 2021. However, the U.S. Department of Agriculture reports that carriers in the New York region are earning more per mile than any other region. The Pacific Northwest is earning the least, at $2.58 per mile. Capacity tightened after two months of loosening, but overall capacity is still loose.
The State of the Truck Market
The Transportation Service Index decreased month-over-month after seasonally adjusted decreases in rail intermodal, water, air, and trucking, according to the OOIDA Foundation. Railcar loads and pipeline showed growth. The Cass Shipment Index also decreased, but there are some encouraging signs in terms of freight volumes. Truck employment increased, marking the second consecutive month of gains. New and used Class 8 sales both decreased, with new sales nearly 7,000 higher than used sales in April.
Fuel Prices and Their Impact
Fuel prices have been decreasing for a fifth consecutive month. After the 11-cent drop in April, the average diesel price is now 20% lower year-over-year. This decrease in fuel prices is a silver lining in an otherwise challenging market, as it can help offset some of the high operating costs that truckers are currently facing.
Conclusion
The 2023 trough documented here eventually did what freight troughs do: excess capacity left the market, rates found their floor, and the cycle turned. The lasting lesson for anyone shipping vehicles or freight is that transport pricing is a live market, which is why quotes are estimates until a carrier is dispatched, and why the same lane can price differently season to season.
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FAQ
- What did the 2023 OOIDA freight outlook show? The spring 2023 report documented the freight recession’s trough: flat demand, loose capacity, and bottoming rates, with falling fuel prices as the one silver lining for carriers.
- How did the van, flatbed, and reefer markets fare in that period? The van market was underperforming with decreasing load-to-truck ratios and spot rates. The flatbed market has seen a decline in load posts but an increase in equipment posts and construction spending. The reefer market was also underperforming, though with signs of improvement, and carriers in the New York region earning more per mile than any other region.
