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Can you believe September is already here? It seems like we just started enjoying backyard grilling sessions, long weekends at the lake, baseball games with hotdogs and cracker jacks and late-night walks with fireflies lighting the path. But now, it’s already over.
It’s time to pull on those sweaters for brisk mornings, prepare for cozy bonfires and enjoy apple everything. Some of us will get to enjoy a day off for Labor Day, too. And, you might even start thinking about the upcoming holiday season — especially if you’re a driver who’s planning on going home to celebrate at least one of the winter holidays.
As we enter the final month of quarter three, you might be wondering what you can expect from the market and how you can adjust to find success.
Your success as a driver has been one of our top priorities since we were founded in 1955. This article will not only help you understand what’s happening with freight rates, freight availability and supply and demand, but it’ll also provide tips to navigate the changes. This article will cover the following:
- August recap
- September freight rates
- September freight availability
- Supply and demand in September
- Tips for success in September
What Happened in the Trucking Industry in August?
As predicted in August, we saw rates continue to drop across the board following the holidays in July.
We also saw a major player in the industry, Yellow, file bankruptcy and shutter its doors at the end of July and into August — displacing tens of thousands of drivers and company employees.
Freight Rates in September
In September, expect to see more of the same with rates continuing to fall. We won’t just see dry van rates continue to drop; we’ll also see it with flatbed rates.
Industry experts are currently arguing about how much further rates will fall, which has led to mixed predictions. Carriers are hopeful that rates are done falling, but analysts don’t think so. It’s predicted that rates could still drop anywhere from one to five percent. And even if carriers think we’ve reached the bottom of the barrel with rates, customers don’t base their pricing on this.
Profit statements from even the best, most stable companies aren’t looking great. That’s a good indicator that even the best trucking companies are dealing with some hardships.
One of the few sectors that’s seeing a slight increase and not struggling rate-wise is the reefer division. They’re slightly protected and saw rate increases in August. This may continue into September.
The fourth quarter typically saves the year and we see freight rate increases, but that isn’t as likely this year. Shippers put out rates in the fourth quarter and the prediction is that they’ll be decreasing rates to save even more money than they have been.
Freight Availability in September
Just as we saw in August, freight availability isn’t great. If you look at truck-to-load ratios, you’ll see that there are more trucks available than the demand to move freight. People continue to buy large goods at a lower rate than in the previous few years. Fewer loads are moving in general, too.
Truckstop.com’s Total Market Demand Index (MDI) shows available loads outpacing truck availability — in both the dry van and flatbed markets. It is most evident, however, in the dry van space. It’s clear this market — known for hauling household goods — is hurting more than any other market. Even the holidays likely won’t save us in this area. Holiday ordering won’t be nearly as high this year as in years past.
In fact, experts are predicting a false fourth quarter, meaning we won’t get the higher holiday rates we’re used to. We may still get the highest rates of the year in quarter four, but it won’t peak nearly as high as it usually does.
Supply and Demand in September
If you look at years past — before the pandemic, which wasn’t normal market behavior — the trucking industry follows predictable seasonal rotations. It follows this same pattern year after year. September is normally a busy season. However, this year, we’re slower than ever. Looking back, you’ll see that our current supply, demand and rates are slower now.
This is, again, largely driven by the pandemic. There’s a decrease in spend on goods and more of a focus on experiences — think money spent on hotels and restaurants instead of home goods or appliances.
The Federal Reserve System (the Fed) — the central banking system of the U.S. — announced recently that the inflation fight isn’t over. You’ll remember from earlier industry updates that the Fed raised interest rates to try to slow consumer spend and get the economy back on track. In fact, inflation hit 3.2 percent in July and interest rates are 5.25 percent — both the highest they’ve been in 22 years. And this is after 11 months of increased rates.
While we’re seeing that inflation has dropped a bit, the Fed will continue to raise rates to hopefully cool inflation down to a more manageable two percent. Ideally, this is a signal that we’re in the final steps of the inflation fight.
However, we won’t see interest rates go down overnight. If interest rates are lowered too fast, it triggers problems. So while we might see lowering inflation rates soon, until interest rates drop too, spending will stay suppressed. For a truck driver, that means freight availability will still be lower than usual.
The weird anomaly during this market is housing starts — a measure of new residential construction. Housing starts are inclining. Typically, this should drive demand and freight rates, but that simply isn’t happening. Considering the current economy — and the fact that mortgages are higher than they’ve been in 22 years— housing starts should be slow, but they aren’t.
The materials needed to build homes — sticks and bricks — are hauled on flatbed trailers. The demand for those trucks to haul the materials typically increases demand because it’s taking trucks away from other freight that needs to be hauled. However, we aren’t seeing that load capacity increase. This anomaly is a symptom of this abnormal economic time. As much as we’d like to think the pandemic is behind us, we can still see it affecting our economy.
Navigating the September Trucking Industry
There are several strategies you can implement to successfully navigate the industry in September and into the fourth quarter. They include the following:
- Work hard
- Fuel intelligently
- Monitor idle time
- Consider switching divisions
Working harder probably isn’t the advice you want to get, but here it is. It’s a tough industry to be in, and I know I sound like a broken record when I say that. It certainly isn’t easy, but as a truck driver, the reality is that when rates are the lowest, you have to work the hardest. To succeed, you’ll have to try to run as many miles as you can and grind through the struggle. Again, it sucks, but it’s the current reality for all truck drivers.
If you find that you’re struggling to keep pace and make the money you need to support yourself and your family, it might be time to take a break from trucking. You have to be able to sacrifice home time and you need to be okay with working harder while getting paid less.
If you can’t — and take no offense to this — a temporary job switch may be in order until the market levels out. In fact, we expect that owner-operators will try working for a company for a time before leaving the industry altogether. It wouldn’t be out of the realm of possibility to see drivers leaving the industry in droves soon.
Fueling intelligently is also important if you’re an owner-operator. Utilize the fuel surcharge on the load and only put in the amount of fuel you need to pick up and deliver the load. You’ll avoid putting all your money into the fuel tank.
Continue to monitor fuel efficiency with these key fuel-efficient practices.
Related: How to save money by fueling for the load
September is still fairly moderate temperature-wise in many parts of the country, but you may still see high temperatures in the southern states — especially as the country has been getting heat waves the past few weeks. Still, try to avoid excessive idle time by utilizing other temperature-cooling means, like using your auxiliary power unit (APU) if you have one. You can also plug in a fan if you have a power inverter.
If you want to be protected from some of the decreasing freight rates, you may want to consider switching divisions and hauling refrigerated or tanker freight. You can seek shelter by hauling this freight, which is protected a bit from the down market. Everyone needs to get fuel and everyone needs to eat. We’re about to enter the winter holiday season, which means a lot of parties (extra food and extra travel). Now might be the time to make the switch.
Related: The realities of switching trucking divisions and trailers
Prepare for Quarter Four
Times might feel dire. The stock market is behaving erratically, freight rates decreasing and inflation is as high as ever. It can feel very doom and gloom right now.
As September arrives, truck drivers face a shifting landscape. August's trends, marked by decreasing freight rates and industry shifts, set the stage for this month. Rates are expected to keep falling, impacting carriers' profits. Freight availability remains a challenge due to a disparity between supply and demand, tied to changing consumer habits.
The pandemic's influence continues, affecting sectors differently. Housing starts are defying expectations while consumer spending patterns remain altered. The Fed's inflation management adds complexity, affecting interest rates and spending.
Embracing hard work, efficient fuel use and reduced idle time offer ways to weather the challenges. You may even decide to switch divisions or careers. Despite uncertainties, opportunities exist for those who stay informed and adaptable.
Preparation is key. By staying proactive and flexible, drivers can navigate September and the upcoming quarter successfully.
Check out these tips to start preparing for the holiday season now.
For more success tips, check out the Drive4ATS Learning Center.