With Memorial Day now behind us the unofficial start to summer is here. We continue to see seasonality impact the produce markets across the south while the northern half of the country is in its seasonal trough. With FreightWaves SONAR’s Outbound Tender Rejection Index (9,022) running on a seven-day moving average, we see an artificially low reading this week due to Memorial Day. This 16% drop-off in tender volumes from pre-Memorial Day to post-Memorial Day is almost identical to 2022’s decline, indicating that as of right now, we are not seeing an accelerated descent from baseline freight volumes.

But what should we expect for the rest of the summer freight market as soft conditions stubbornly continue? Any change in sight? Get the lowdown in this week’s update.

Watch This Week's Redwood Rundown

It looks like we may have dodged the debt ceiling doomsday scenarios, but even so the post-Memorial Day market continues to be soft. However, there are a few major markets heating up. Take a quick pulse on where we’re at heading into June with our 2-minute Rundown:

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Summer Freight Market Level-Set: South & North Imbalances - U.S. & Mexico

Despite all the pressures that have been felt in the market over the last 2 weeks, we have seen tender rejections move up by a measly 0.7% over this time. Brokerages and enterprise-level carriers alike are absorbing operational pain in order to hold onto the historically lucrative contract freight as spot prices sit well below breakeven level for carriers, even with the rate increases we have seen over the last 2 weeks.

There are some markets tightening, though, particularly in the southern U.S. as seasonal peak starts in Georgia (Atlanta 4.4 to 1 load-to-truck ratio), along with neighboring markets of Alabama, South Carolina and North Carolina. Beverage season, especially ahead of the Fourth of July holiday will continue to generate volume throughout the south, with ripple effects into the Midwest, though the northern half of the U.S. remains a shipper’s market.

We also want to highlight the impact of nearshoring on the domestic freight market, a continuing trend. Northbound rail volumes from Mexico to the U.S. are up about 34% year over year, and we can see the sustained uptick in volume. While rail volumes and truckload volumes are not the same, this is a strong indicator to the overall movement of freight. On the flip side, we see a decline in southbound freight volume from the U.S. to Mexico by -23% year over year. This large imbalance between northbound and southbound freight volumes leaves capacity displaced without a backhaul once a Mexican carrier delivers at the border, which leads to higher northbound rates for service providers in Mexico. Until this imbalance eases with an influx of southbound rates, look for northbound Mexico rates to remain stubbornly high.

Overall, we remain committed to closely watching the summer freight market signals of supply (employment, truck orders/sales/cancellations, authorities) and inventory levels, as any pressure that would create a true sea-level change in this market would be tied to the restocking of inventory dovetailing with a significant decline of supply. The decline of supply has taken longer than expected, but we hold to the belief that this is inevitable given the current rate environment, and we see further reduction of contract rates against a soft freight market as a likely trigger to accelerate these exists, setting up the next turn in the freight market cycle.

Top 3 Charts for the Week

1. DAT Hot Markets

Lots of blue, but the red shows the tighter markets today, with a projected ripple effect in neighboring markets into next week.

Data adapted into map format with permission from DAT Freight & Analytics.

2. FRED Advance Retail Sales: Retail Trade

April retail saw the first month-over-month increase since January, one of many market supply indicators we’ll keep a close eye on throughout the summer.

U.S. Census Bureau, Advance Retail Sales: Retail Trade [RSXFS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/RSXFS, June 2, 2023.

3. FreightWaves SONAR Northbound & Southbound Cross-Border Rail Volumes

Bonus 2-in-1 chart feature: You can see just how imbalanced northbound (620.71) vs. southbound (411.29) rail volumes are, as discussed above, illustrating the nearshoring trend but also challenging capacity balance.

Data shared with permission from FreightWaves.

Looking for Even Deeper Market Insights?

Are consumers going to be imbibing enough beverages to raise freight volumes this summer, or will it be freight planners consuming their fair share as they navigate the ongoing soft summer freight market? Whatever the market holds, we’ll keep you in the know.

Follow the Redwood LinkedIn page to catch our Redwood Rundown videos typically on Tuesdays during non-holiday weeks, plus coming soon you’ll be able to sign up for exclusive deeper weekly market insights via email on Wednesdays. And keep checking back to our insights blog for these weekly highlights.