Where Is the U.S. Truckload Market Heading?

Register below for the U.S. Truckload Market Forecast webinar on May 2.

At this time last year the U.S. truckload market was in an inflationary environment of historic proportion. Truckload shippers of all shapes and sizes were concerned, and rightly so, with securing capacity, maintaining service and defending their transportation budgets.

To help gain a competitive edge relative to others battling the same challenging market conditions, many pursued “Shipper of Choice” strategies in an attempt to make their freight more desirable to carriers in the marketplace.

And suddenly minimizing dwell times, improving facility amenities for drivers and providing network flexibility all became tactical initiatives in an attempt to prop up failing route guides and mitigate against spot market exposure.

Register for the U.S. Truckload Market Forecast webinar on May 2.

Fast forward one year and the market has flipped 180 degrees as we now find ourselves in the depths of a deflationary spot market environment — also of historic proportions.

Current truckload supply now materially exceeds truckload demand, both contract and spot market rates are in free fall and “Carrier of Choice” has replaced “Shipper of Choice” in much of the industry dialogue.

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We’re in a a volatile environment where supply and demand are rarely in a state of balanced equilibrium.

This market whiplash has left many asking: What happened? How low will we go, and how long until it bounces back? How do I develop a long-term plan in such a seemingly volatile and uncertain environment?

Understanding the market

In an incredibly large ($700 billion-plus and growing), incredibly fragmented market with low barriers to entry and exit and hundreds of thousands of market participants making both short- and long-term decisions with imperfect information and expectations. The result is most often a volatile environment where supply and demand are rarely in a state of balanced equilibrium.

Between the inherent volatility and the rapidly evolving technology and regulatory landscapes, the U.S. truckload market can feel chaotic, unpredictable and downright impossible to effectively navigate on a long-term basis.

But while we agree wholeheartedly with the volatile and chaotic part, we propose that things are less unpredictable than most think and that successful long-term strategies are indeed possible given the right organizational perspective and operational capabilities.

At Coyote Logistics, we work to help shippers and carriers alike navigate the market’s inevitable ups and downs. With our experience in architecting, managing and optimizing diverse transportation networks, we are able to distill and identify meaningful underlying patterns from what most others might see as a market in disorder.

As Chief Strategy Officer at Coyote, I analyze more than a decade of proprietary market data against a backdrop of select economic indicators and industry data points to anticipate and recognize cycle inflection points that help to signal the next major shift in market pricing — like the one we are experiencing now.

Our model is known as the Coyote Curve, and it charts four distinct capacity cycles observed during the past 11 years, which reveal a more predictable market than previously thought.

Coyote Curve: Four Observed Cycles (2007 – 2018)

The past predicts the future

Though many market participants felt 2016 was an extremely “soft” year and that loose conditions would likely persist well into 2017 and 2018 until Electronic Logging Device (ELD) started to become legally mandated, the Curve accurately projected that the market cycle had already inflected and would likely turn inflationary by Q2 2017 at latest. It also predicted that the net impact of the looming ELD mandate would be mostly nullified by the inflationary market rate environment.

Later in 2017, the Curve then projected that the market would peak in the next quarter or two — then decelerate rapidly before reaching deflationary territory by Q1 2018.

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We propose that things are less unpredictable than most think.

This time, Hurricanes Harvey and Irma helped prolong the inflationary leg of the cycle by a quarter and drove the peak to a historical high. But the inflection point was indeed observed in Q1 2018, and we ended up in deflationary territory by the fourth quarter — or a quarter earlier than forecasted.

Once we felt there was historical evidence to feel at least somewhat confident in our understanding of these cycles, we published the general Coyote Curve theory in May of 2018, and it again accurately projected the impending deflationary market we’re in now when most were still talking about scarce capacity and higher rates.

By monitoring the data and market indicators as they develop, using the Coyote Curve as our framework, we believe that it is possible — with at least some degree of directional certainty — to project where the market is heading.

And we can prepare your organization accordingly.

2019 market forecast

By sharing quarterly Coyote Curve market updates with shippers and carriers, Coyote hopes to provide some additional perspective that can be used to help make better short- and long-term decisions that create better outcomes for them and their teams.

To that end, I’m hosting a U.S. Truckload Market Forecast webinar on May 2 at 1 p.m. CST, where I will review Q1 2019 observations and the implications for the rest of the year.

The webinar will focus on helping you understand:

  • What dynamics — including seasonal demands like produce — move the market
  • How the Coyote Curve “reads” the market data and indicators
  • Why the market is likely in its current state
  • What to expect for the rest of 2019

Can’t make it on May 2? Register now, and the recorded webinar will be available for you to view anytime on-demand.

Stay tuned for additional market updates, including one in early Q3. Subscribe to Coyote Logistics’ webinar channel for details.

Chris Pickett is Chief Strategy Officer at Coyote Logistics. He is responsible for helping Coyote’s leadership develop, evolve and execute an enterprise growth strategy across an increasingly dynamic global market.

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