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Hello October!
Some people might call it scary season, but I call it TURBO SEASON! (Hopefully, you get that reference to cars getting faster in the fall…but if not, please ignore my excitement. And also, please remember to follow posted speed limits at all times. )
The leaves are changing before they’ll eventually fall off the trees entirely in November, the temperatures are starting to drop just a little bit and the stores are filled with a weird mix of picked-over Halloween decorations and newly arriving Christmas decor.
In other words, we’re entering a huge transition period and the trucking company is certain to see the effects. In fact, October is the start of the fourth quarter, which is historically the best quarter of the year in the trucking industry. However, expert analysts aren’t so certain that’s what we’ll see this year.
Here at Anderson Trucking Service (ATS), we’re in the business of helping to make you successful in your trucking career. One of the ways we aim to do that is by providing you with educational information about the industry — what’s changing, what to expect in the coming months and how you can succeed.
In the following article, we’ll touch on the following:
- September recap
- October freight rates
- October freight availability
- Supply and demand in October
- Tips for success in October
It’s hard to be successful if you don’t know what’s going on in the industry. Once you review these key takeaways, you’ll have the knowledge you need to succeed.
What Happened in the Trucking Industry in September?
National averages for rates were lower and below par for usual September rates. We saw that rates were flat in both the flatbed and dry vans divisions. Even the reefer market is underperforming right now. Previously they were sheltered from the dip in rates — everyone needs to eat, after all — but the produce season didn’t give them its usual boost.
However, based on industry data that ranks trucking companies against one another, ATS’ average rate-per-mile was better than a lot of other trucking companies. Our revenue per truck also increased in September. Even though the industry is struggling as a whole, this is some great news for you if you’re an ATS driver.
Freight Rates in October
Wondering what’s going to happen with rates in October? Analysts are predicting rates are going to rise. Truckstop’s Market Demand Index (MDI) showed a drop in load counts for the first time in a long time, while truck supply increased. This is what’s suggesting to analysts that rates are going to go up.
However, trucking companies aren’t seeing that change just yet. In fact, shippers aren’t acting like rates are done falling and they aren’t having problems getting freight covered at lower rates. Time will tell if analysts or shippers are correct.
There’s a spread that’s traditionally used when the market falls to measure the gap between spot market rates and contracted rates. Spot market rates typically fall faster than contracted rates. When that gap gets smaller, it’s usually a sign we’re near the bottom of the rate cycle and the market begins to normalize. We’ve recently seen the gap tighten, which is a sign we could start to see the market normalizing.
Typically a large trucking company closing could be a sign of a market shift — especially because it opens up capacity for a bunch of other drivers. We haven’t seen a major company close and cause a shift like this since Celadon closed in 2019. (Yellow’s closure in August is exempt from this because they’d been struggling financially long before the down market hit).
Some say freight recessions last a few quarters and some say they can last a few years. Either way, we’re right in the middle of the storm.
Freight Availability in October
Normally at this point in the down market, we’d see more driver departures, trucking companies closing and drivers giving up their authority. That isn’t happening as we predicted. While there are certainly more drivers giving up their authority than getting them right now, we simply aren’t seeing drivers leave the market in droves like we thought they would at this time.
That means a lot of companies ran smart businesses during the height of the pandemic and built up enough cash reserves to keep them afloat. While that’s great for those carriers, it isn’t the best news for drivers trying to secure freight to haul. More drivers equals fewer loads to haul per driver.
If we look at 2019, drivers were running on average 100,000 miles per year. When the freight boom hit during the pandemic and rates were high, drivers were able to run fewer miles and still make more than they were earning prior to 2020.
They started running an average of 85,000 to 90,000 miles per year. Now, drivers are being pushed to run more miles again to make more money in this tough market. They’re trying to run 100,000 miles per year again.
However, the current market simply can’t support the number of drivers trying to increase their productivity. To put it in perspective, it’s as if 100 drivers now are doing the work that 120 drivers were doing a year ago.
The increase in average miles run per driver has eaten up any extra capacity the market may have allowed for. To increase freight availability, a lot of drivers would need to leave the industry.
Supply and Demand in October
Both supply and demand are dropping in October. We saw supply (the number of drivers) drop slightly in September. That number will keep dropping if a trucking company closes, drivers leave the industry or new drivers don’t enter the industry. At the same time, however, demand is also dropping. Overall, load counts are down.
Together, supply and demand determine market pressure. Market pressure in September was 2.8 percent. Ideally, we want that number to be negative. To put it into perspective, however, market pressure was at 11.4 percent in August, so we’ve come a long way.
The demand is typically high in the fourth quarter — with more loads available than trucks to cover them — due to the holiday season. Holiday products are arriving at ports to be transported across the country, Christmas trees from the Washington area need to travel cross-country and food demand is high as everyone celebrates the holidays.
This year, however, we’re predicting another false fourth quarter like we saw in 2022. We should already be seeing a seasonality boost and we simply aren’t.
Navigating the October Trucking Industry
The holidays are coming up fast and furious. We’ve already seen the first Christmas ads of the year, and we’re still weeks out from Halloween. October is really the last month for you to get after it and run as many miles as you can to prepare for holiday downtime.
You’ll lose one or two weeks of productivity if you decide to go home to celebrate the holidays, so use your clock wisely now. Save as much money as you can to cover things like truck payments and insurance while you’re not on the road.
Many drivers stay put at their carriers around the holiday season and you’d do well to keep up with the pattern. Switching trucking companies isn’t a great idea right now, especially because it can be a slow start when you go to a new company, and take a while to start earning.
We’re about to enter the cold weather season, so make sure you winterize your truck now. Get your cold weather gear in your truck — from warm clothing to tools that help you secure in the elements — and get your truck in the shop to make sure your tires and battery look good. No one wants to be stuck with a truck that won’t start in freezing temperatures.
Remember: It might be cold in the Midwest and Northeast, but you should definitely capitalize on those good rates. Everyone will want to take loads south where it’s warm, so you’ll really benefit if you’re willing to travel to the colder parts of the country.
Prepare for the Holidays
As we enter the month of October, the trucking industry is experiencing a period of significant change and uncertainty. While historically, the fourth quarter has been the best quarter for the industry, this year presents unique challenges.
In September, national averages for rates were lower than usual, affecting various divisions of the trucking market. Looking ahead to October, analysts predict an increase in freight rates; shippers have not yet adjusted to this change.
The tightening gap between spot market rates and contracted rates suggests a possible normalization of the market, but the industry remains in a challenging phase. Many trucking companies are staying afloat due to strict financial management during the pandemic.
Supply and demand in October are both on the decline, impacting market pressure. While the holiday season typically boosts demand in the fourth quarter, this year appears to be an exception. In this dynamic environment, make the most of October by running as many miles as possible to prepare for holiday downtime.
Check out these tips to start preparing for the holiday season now.
For more success tips, check out the Drive4ATS Learning Center.