Texas Freight Got You Spooked?? Why it ghosted & what to do about it.
Updated: Mar 16, 2020
Freight in Texas took a nose dive in quarter 3 and while this isn't a surprise to those familiar with the ups & downs of the Texas freights market, we asked one of our freight consultants what might be happening behind the scenes and what our clients can do about it.
There are a number of potential reasons for the decline in Texas freight, but they aren't limited to just these.
Why it ghosted:
Frozen in fear: Because of the possible tariff impact on traditional sourcing locations, the supply chain for many markets has been thrown into paralysis of uncertainty. With the President's talk of restructuring tariff's with other countries, many manufacturers may be putting orders on hold while they wait to see how the cost for important/exporting goods will change - causing the demand for trucks to drop.
Nowhere (for loads) to go: Due to improving business conditions and this tariff threat, producers increased purchases in the 1st quarter as it was expected that prices would increased in the second half of 2018. While prices increased, they have since moderated causing producers to pause as there is a glut of inventory that is being worked off and thereby not being replaced. In other words - manufacturers had an excess of funds that they used to purchase more inventory than they needed in Q1 & Q2 and now they have no space of need for additional inventory.
Feeling the pressure: Pipeline capacity issues in West Texas have come from drilling slowing down in the Permian Basin around Midland, TX. Demand also cooled out of Houston, the largest flatbed market in the country and the top market supplying Midland and its surrounding counties. Regional van markets like Dallas and Memphis - which send freight to Houston - seem to be impacted by the slowdown in oil drilling as well.
What to do about it:
Don't panic: Freight in Texas is cyclical, which means what goes down much come back up. The tough nature of finding loads in Texas is that the cycles are usually bigger (no surprises there) than the rest of the country.
GET OUT ALIVE: Accept when the market is down and don't waste precious days waiting for the perfect load. For example:
Option 1: You take a $1.50 per mile load from Dallas to Kansas City. From Kansas city you get 3 loads that takes you 2000 miles at $2.60 per mile. Backing out $1,200 in fuel, you gross $4,750 for the week.
Option 2: You sit for 3 days, then find a $3.00 per mile load to Memphis where you get 1 more load taking you 500 miles at $2.60 per mile. Backing out $500 for fuel, you gross $2,150 for the week with an opportunity loss of $2,600.
Go to your safe place: Okay... we're being dramatic, but advice is dead serious - if freight is down in Texas, get to a region where you can consistently find high paying loads. We have found that historically, when freight slows, it is wiser to tighten up the radius of trips and stay in areas that are more conductive to keeping the truck busy daily. Stay focused on our unit costs (or rates per mile), can make all the difference in this type of freight environment. This may involve staying out of state longer than usual, but if it keeps your business afloat, it can be a good way to weather the storm until the market swings back in your favor.
If you're not sure where to start, give us a call and we'll put our ghost-freight busters to work for you!