Mid-quarter Coyote Curve takes a look at past, current, and future freight trends

In a mid-quarter update of the Coyote Curve by Coyote Logistics, a subsidiary of freight transportation and logistics services bellwether UPS, provided a wide-ranging overview of the freight market conditions, from three different perspectives: a look back at the second quarter; expectations for the third quarter; and a 2020-2023 forecast.

Coyote Logistics defines the Coyote Curve as a proprietary forecasting model that helps shippers and carriers position themselves for success regardless of market conditions. And it measures three concurrent cycles-seasonal demand, annual procurement and more elusive market capacity–to help supply chain professionals identify recurring patterns that can lead to better informed supply chain and logistics decisions.  The Coyote Curve made its debut in March 2018, and Coyote officials noted that it has “proven accurate in forecasting trucking freight rates and has correctly predicted the current deflationary market.

In comments provided to LM by Chris Pickett, Coyote Logistics Chief Strategy Officer, Pickett explained that, in looking back at the second quarter, the impact of the COVID-19 pandemic on spot rate activity has been, to date, relatively benign.

“Instead of a wholesale change in direction, COVID-19 pandemic disruption caused only a brief and relatively modest kink in the trajectory much like it has during previous natural disasters,” noted Pickett.

As for second quarter spot truckload rates, Pickett described the annual change in rates as being “all over the place throughout the quarter,” while ending up flat annually, which marked a decrease from the first quarter’s 5.3% annual gain, and topping Coyote’s revised forecast of -5.0% -7.5%.

“The widening gap between contract and spot truckload rates took a quarter off—expect that trend to pick back up in the [third quarter],” observed Pickett.

As for the state of macroeconomic conditions, which were, in many respects, unprecedented, Pickett noted that there were steep declines in consumption, industrial production, imports, exports, and trucking demand, which were all in line with expectations.

Looking at the current quarter, Pickett said Coyote thinks there will be some version of an economic recovery stimulating overall truckload demand from shippers.

But that thesis, he noted, comes with the caveat that a byproduct of a painful economic recession is that it will continue to lead poorly positioned carriers—or supply—to exiting the market, whether it be partially or completely, temporarily, or permanently

“Both of these inflationary factors will compound, driving market rates increasingly higher through the back half of 2020, starting with spot rates, then contract rates, as 2020 routing guides begin to break down before resetting in 2021,” said Pickett.

In the report’s 2020-2023 forecast, Pickett provided the following insights:

• spot market rates to peak around +30 35% annually as early as Q4 2020 and begin to inflect lower by Q1 2021 and remain inflationary through the end of 2021; and
• the expectation for contract rates to break inflationary by Q4 2020 and surge higher into 2021, hitting their respective peak of +5 - 7% by end of 2021