Broker Association Exec Says It is Just Supply and Demand

SCDigest has been reporting since the start of the coronavirus crisis in the US the challenges faced by US truckers, across many dimensions.

Supply Chain Digest Says...   So for now the misery for truckers goes on. How long smaller carriers and independents can hold on is unclear What do you say? Click here to send us your comments Click here to see reader feedback

Early on, while overall freight volumes were decent in the flush of high demand for food, paper products and other consumer staples, the challenges were focused around issues such as no place to find meals, lack of parking spaces as states closed rest stops, and rude treatment when delivering loads, in some cases having loads rejected if a driver had been to a virus hot spot.

But in recent weeks, the challenges for truckers have become more fundamental – a sharp drop in freight volumes – and rapidly falling rates.

Last week, we reported on Tony Signh, owner of Virginia-based Sam Trucking, which normally runs just seven trucks, as saying "There's no freight, no freight at all." (See Trucking Industry, especially Smaller Carriers and Independents, being Hammered by Low Volumes and Rates.)

Signh had told the Wall Street Journal that loads that recently went for $1,000 now have fallen to $300 or even less – below operating costs.

"Nobody can survive six months like this," Singh said. "How can I pay my guys, the payments on trucks, the insurance?"

His small fleet is mostly parked currently.

Just how far volumes have fallen depend in part of the region of the country.

Analysis from transportation-data firm Inrix finds truck-miles have declined 13% in mid-April than versus a typical week. But the data shows a very steep 37% drop in miles in Michigan, the home of the auto industry, and a 17% decline across the Gulf of Mexico region, with its energy-focused economy big drop in demand for oil.

Given their current bleak prospects, number of truckers joined a small scale protest in Washington DC on Friday morning, with several dozen independent truckers driving down Constitution Avenue NW sounding their air horns that they hoped could be heard all the way to the White House.

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The Washington Post reports that the trucking industry did not get a targeted financial support package from Congress during the last round of stimulus negotiations, and the organization representing independent truckers says most have had only limited success with the difficult Paycheck Protection Program run by the Small Business Administration.

"We are still concerned that enough small-business truckers are getting what they need to stay in business," said Norita Taylor, a spokeswoman for the Owner-Operator Independent Drivers Association.

Interestingly, truckers are aiming much of their wrath on the freight brokers from which many independents find their loads. While always something of a love-hate relationship, especially in lean freight times, now some independents are accusing brokers of a sort of reverse price gouging.

Alas, with many truckers falling loads, the real story might be simple supply and demand – though certainly some brokers may be squeezing every last nickel out of loads they have already secured with shippers at a profitable cost.

Robert Voltmann, the head of the Transportation Intermediaries Association, a trade group for brokers, said the rates reflect the state of the economy.

"There is a dearth of freight. In a market economy, when too many trucks are chasing too little freight, rates go down. And, that’s what’s happened," Voltmann said in an email to the post.

So for now the misery for truckers goes on. How long smaller carriers and independents can hold on is unclear, with potential major ramifications in terms of capacity down the road when freight volumes recover – and you can expect cries of financial pain from larger carriers soon enough.

Any reaction to the sad state of freight rates and the impact on truckers? Are brokers at all to blame? Let us know your thoughts at the Feedback section below.