WEBVTT - DAT Sees Supply-Driven Freight Turn 0:00:07.560 --> 0:00:10.480 Hi everyone, this is Lee Clasgow when We're Talking Transports. 0:00:10.560 --> 0:00:14.240 Welcome to Bloomberg Intelligence Talking Transports podcast. I'm your host, 0:00:14.440 --> 0:00:18.720 Lee Clasgow, Senior freight transportation logistics Analysts at Bloomberg Intelligence, 0:00:18.960 --> 0:00:21.960 Bloomberg's in house research arm of almost five hundred analysts 0:00:21.960 --> 0:00:25.800 and strategists around the world. A quick public service announcement 0:00:25.840 --> 0:00:29.400 before we dive in. Your support is instrumental to keep 0:00:29.400 --> 0:00:33.720 bringing great guests and conversations to you, our listeners, and 0:00:33.760 --> 0:00:37.040 we need your support, so please, if you enjoy this podcast, 0:00:37.440 --> 0:00:40.400 share it, like it and leave a comment. Also, if 0:00:40.440 --> 0:00:44.120 you've got ideas, feedback, or just want to talk transports, 0:00:44.280 --> 0:00:46.600 I'm always happy to connect. You can find me on 0:00:46.720 --> 0:00:51.400 the Bloomberg terminal, on LinkedIn, or on x at Logistics. Lee, 0:00:51.680 --> 0:00:53.960 I'm very excited to have with us today. Indeed, grow 0:00:54.200 --> 0:00:58.760 principal analyst at dat. Dat is owned by Roper Technologies, 0:00:58.800 --> 0:01:01.720 with trades under the ticker rop and as a market 0:01:01.720 --> 0:01:06.080 cap of over thirty six billion dollars. Welcome to Talking Transports. Dean. 0:01:06.280 --> 0:01:09.040 Great to be with you, first time on the show. 0:01:09.360 --> 0:01:11.680 Yeah, I'm glad you're here. We've known each other for 0:01:11.760 --> 0:01:15.760 quite some time and I've always enjoyed doing, you know, 0:01:15.840 --> 0:01:19.759 various panels with you at some industry events. I didn't 0:01:19.800 --> 0:01:22.760 give much about your backgrounds because I wanted you to 0:01:22.800 --> 0:01:25.039 tell people because I think you have a very interesting 0:01:25.120 --> 0:01:28.760 background that only you you could probably tell the story 0:01:28.760 --> 0:01:30.840 better than I can. So why don't you tell us 0:01:31.240 --> 0:01:33.479 what you do with the dot and kind of how 0:01:33.480 --> 0:01:34.040 you got there. 0:01:34.760 --> 0:01:38.000 Yeah, I'm probably the only market analyst in the country 0:01:38.000 --> 0:01:40.640 that's got a CDA license and still drives a truck 0:01:40.680 --> 0:01:42.720 and still owns a truck, and it's got a few 0:01:42.720 --> 0:01:45.640 million miles under my belt. So it's a unique experience 0:01:45.680 --> 0:01:49.480 that I've been able to fuse the two. I'm a 0:01:49.520 --> 0:01:51.720 fan believer that when you do data analytics, you've got 0:01:51.720 --> 0:01:54.800 to understand the context and how the data came about 0:01:54.840 --> 0:01:57.800 in the first place. So all of my operational experience 0:01:57.920 --> 0:02:01.600 really can help me look behind and get a sense 0:02:01.600 --> 0:02:04.720 of whether they're real or not and what story they're telling. Because, 0:02:04.720 --> 0:02:07.960 as you know, it's such a nuanced market, the truckload market, 0:02:08.680 --> 0:02:11.160 knowing how it all fits together is really important. So 0:02:11.200 --> 0:02:14.160 I've been here twenty six years. Prior to that, I 0:02:14.160 --> 0:02:17.480 lived in Australia and did a few million miles driving 0:02:18.440 --> 0:02:21.359 road trains and hauling cattle all around the country. And 0:02:21.520 --> 0:02:25.240 I grew up in a family cattle hauling business in 0:02:25.720 --> 0:02:28.040 the outback of Australia and then in the latter part 0:02:28.040 --> 0:02:30.520 of the nineties moved to the US take up an 0:02:30.560 --> 0:02:33.519 opportunity to work with the Harvard professor who I met 0:02:33.520 --> 0:02:37.000 at a conference. So that sort of led me into 0:02:37.440 --> 0:02:41.680 the data science and data analytics piece, which was and 0:02:41.720 --> 0:02:44.920 it Cicadian. We were designing twenty four to seven workforce 0:02:45.000 --> 0:02:49.880 management scheduling programs in trucking. So my experience being an 0:02:49.919 --> 0:02:53.240 over the road driver and manager of large fleets enabled 0:02:53.240 --> 0:02:57.400 me to help help the data scientists build predicted models 0:02:57.440 --> 0:03:03.359 to predict things like sleep and accident severity, and build 0:03:03.440 --> 0:03:06.320 models that could actually help fleets figure out which schedules 0:03:06.360 --> 0:03:09.399 in the fleet had the most tired drivers, for example. 0:03:09.680 --> 0:03:13.160 So very interesting twenty six years that I've been here, 0:03:13.200 --> 0:03:16.880 but the last ten years they've been in freight market analytics. 0:03:17.120 --> 0:03:19.560 Five years at Freight Waves and then five years here 0:03:19.600 --> 0:03:23.119 at DAT but sort of all on the market analytics 0:03:23.200 --> 0:03:25.880 side of the business in more recent times. 0:03:26.240 --> 0:03:28.120 And I also know you did some great work with 0:03:28.200 --> 0:03:31.280 a wreath across America. Can you just talk about that 0:03:31.360 --> 0:03:32.200 data organization? 0:03:32.280 --> 0:03:36.520 What do you do? Yeah, I've got a big reachs 0:03:36.560 --> 0:03:42.480 Across America tribute on the back of my Peterbelt truck. 0:03:42.520 --> 0:03:45.040 It's on the fifth worel cover. So I get asked 0:03:45.040 --> 0:03:50.440 about it. A lot Reach across America is comes from 0:03:50.520 --> 0:03:55.560 the organization up in Columbia. Fall's main really started a 0:03:55.640 --> 0:03:59.720 couple of decades ago when the Wooster family had an 0:03:59.760 --> 0:04:04.200 ex of wreaths. The Worcester family up in Columbia falls 0:04:04.680 --> 0:04:08.440 make They have a reef company, and they decided that 0:04:08.560 --> 0:04:11.000 rather than throw the reefs away, they would take them 0:04:11.040 --> 0:04:14.840 to Arlington and place them on some headstones. That has 0:04:14.920 --> 0:04:18.960 grown into an event, an annual event, reeth Across America 0:04:19.000 --> 0:04:24.960 Reserve five our one c Every year they place wreaths 0:04:25.040 --> 0:04:29.080 on headstones of our fallen heroes all over the country, 0:04:29.080 --> 0:04:32.520 in fact, all over the world. LEE. The numbers are staggering. 0:04:34.000 --> 0:04:38.600 Last year they moved about eight hundred truck loads in 0:04:38.680 --> 0:04:43.160 this three week period to fifty four hundred destinations across 0:04:43.160 --> 0:04:47.320 the country. Each truck's got about maybe ten to twelve 0:04:47.400 --> 0:04:51.440 deliveries per trailer. They'll load about six thousand wreaths in 0:04:51.640 --> 0:04:54.560 every fifty three foot van and when you go to 0:04:54.600 --> 0:04:58.560 Columbia falls main to the driver lounge, which is what 0:04:58.600 --> 0:05:02.560 they call it. Some foods do all the catering, and 0:05:02.640 --> 0:05:05.880 then truckers come in and out. They cycle in and 0:05:05.920 --> 0:05:08.800 out of the driver's lounge, which is kind of a 0:05:08.839 --> 0:05:12.359 massive truck stop, but it's just dedicated solely to this 0:05:12.480 --> 0:05:15.039 three week period when Reads across America load all these 0:05:15.040 --> 0:05:17.440 wreaths and then ship them to all of the areas. 0:05:17.480 --> 0:05:19.520 And these truckers that do it do it every year. 0:05:20.560 --> 0:05:23.120 Large fleets, you know, large fleets that you would know 0:05:23.200 --> 0:05:26.400 Werner and Schneider always allocate a few trucks to go there, 0:05:27.040 --> 0:05:30.880 and it's a huge cost, but it's all donated services. 0:05:30.880 --> 0:05:32.960 There's a couple of million in freight that's donated by 0:05:33.000 --> 0:05:36.600 all the carriers and it ends up in Arlington is 0:05:36.640 --> 0:05:39.039 the main focus for Roots, where we go each year 0:05:39.080 --> 0:05:44.919 to place a few hundred thousand wreaths on the headstones 0:05:44.960 --> 0:05:48.240 of all of the fallen heroes there. So that's Reads 0:05:48.240 --> 0:05:51.479 across America. It's in December each year, is the main event. 0:05:51.720 --> 0:05:54.640 All right, great, you know that that's great work that 0:05:54.680 --> 0:05:58.880 you do for that organization. So dat you know they're 0:05:58.960 --> 0:06:01.640 kind of moved. Not just a load board, I guess anymore. 0:06:01.680 --> 0:06:03.520 Can you talk about it about what, you know, the 0:06:03.520 --> 0:06:06.440 evolution of DT and the services you guys provide today. 0:06:06.600 --> 0:06:11.440 Yeah, from the Dialer Truck in nineteen seventy eight, it's 0:06:11.440 --> 0:06:14.360 now become you know, DAT freight natalist. 0:06:14.560 --> 0:06:17.039 I always laugh when I hear that. I always like 0:06:17.400 --> 0:06:19.440 because for a long time I had no idea what 0:06:19.560 --> 0:06:22.120 DAT stood for. And then Dialer truck that's, you know, 0:06:22.240 --> 0:06:23.159 using the old phone. 0:06:23.160 --> 0:06:25.520 There you go. Yeah, I when I before the Internet, 0:06:25.600 --> 0:06:27.480 when I traveled to the US, I'd be in a 0:06:27.520 --> 0:06:30.400 truck stop and you'd hear this ding, And the ding 0:06:30.520 --> 0:06:32.640 was when a new load popped up on the screen. 0:06:33.120 --> 0:06:35.880 And back then they had TV monitors all around the 0:06:35.880 --> 0:06:38.000 truck stop and drivers could sit and look at the 0:06:38.040 --> 0:06:41.880 loads that brokers were posting. So that's sort of synonymous 0:06:41.880 --> 0:06:44.440 with DAT. Of course, now with the Internet and phones, 0:06:44.520 --> 0:06:48.080 that's all very mobile. But Dialer Truck is sort of 0:06:48.120 --> 0:06:51.239 the largest load board. We have about three million loads 0:06:51.480 --> 0:06:54.120 get posted on in our load board every week. We 0:06:54.160 --> 0:06:56.400 see about one hundred and fifty billion in freight spend 0:06:56.400 --> 0:06:59.839 every year, of which fifty is contract one hundred billion 0:06:59.880 --> 0:07:02.599 is spot. So we see about a third of the 0:07:02.640 --> 0:07:06.880 truckload market each year from a loads moved and rating perspective. 0:07:07.320 --> 0:07:09.960 But there's two parts. One is the freight match where 0:07:09.960 --> 0:07:13.640 we match carriers and loads, and the other is the 0:07:13.760 --> 0:07:18.320 rating engine, which is the historical rates going back a 0:07:18.360 --> 0:07:21.440 decade to twelve years now of all of the rates 0:07:21.440 --> 0:07:25.320 that have been carriers have moved loads on various lanes 0:07:25.440 --> 0:07:27.480 over that time, and then of course we forecast where 0:07:27.560 --> 0:07:33.480 rates would be and those rates are instrumental in shiper RFPs. 0:07:33.520 --> 0:07:36.480 For example, when a carrier or a broker would bid 0:07:36.560 --> 0:07:41.200 on a shipper's freight network and provide a commitment at 0:07:41.240 --> 0:07:44.080 a certain rate, and they use our product to do 0:07:44.120 --> 0:07:46.480 their bids and figure out where rates would be, and 0:07:46.560 --> 0:07:49.240 brokers use it to negotiate with carriers and carriers use 0:07:49.240 --> 0:07:50.520 it to negotiate with brokers. 0:07:50.960 --> 0:07:54.480 Great, and you know, we have some select data from 0:07:54.560 --> 0:07:58.600 DT on the Bloomberg terminal, which is critical and the 0:07:58.600 --> 0:08:02.480 research that I do that's again available on the Bloomberg terminal. 0:08:02.720 --> 0:08:05.000 So you know, I wanted to have you on because 0:08:05.040 --> 0:08:08.200 it seems like things are actually getting better in the 0:08:08.240 --> 0:08:12.160 trucking market, something we probably haven't said in four years. 0:08:13.120 --> 0:08:16.040 I was just at a an industry conference at the 0:08:16.120 --> 0:08:21.280 Arkansas Trucking Association conference, and the mood was, I would say, 0:08:21.400 --> 0:08:24.640 you know pretty good. I think people are pretty optimistic. 0:08:25.000 --> 0:08:25.680 So can you. 0:08:25.720 --> 0:08:29.600 Tell talk to us about what you're seeing, you know, 0:08:29.640 --> 0:08:33.200 with the data on det about you know, how is 0:08:33.240 --> 0:08:37.120 the spot market evolving and what does that mean for 0:08:37.200 --> 0:08:38.280 the contractual market. 0:08:38.840 --> 0:08:43.319 Yeah, normally we would say that spot leads contract by 0:08:43.320 --> 0:08:47.200 four to six months, and that hasn't been evident in 0:08:47.240 --> 0:08:50.160 the last three years because both have been relatively flat 0:08:50.480 --> 0:08:53.680 because it's been a multi freight recession. But this is 0:08:53.920 --> 0:08:56.240 a very It's the first time I've ever seen this happen, 0:08:56.480 --> 0:08:59.840 and this is sort of this capacity led market in 0:09:00.520 --> 0:09:04.040 we're not seeing demand change the narrative just yet, but 0:09:04.120 --> 0:09:06.600 spot rates are up and holding at about twenty to 0:09:06.600 --> 0:09:09.080 twenty five percent higher than they were a year ago, 0:09:09.240 --> 0:09:11.640 not because we've got more loads on trucks, but simply 0:09:11.640 --> 0:09:14.719 because there's fewer trucks to haul the same loads. And 0:09:14.800 --> 0:09:18.720 that means that we've seen a structural removal of capacity 0:09:19.240 --> 0:09:22.880 that's affecting both the contract and the spot market. And 0:09:23.040 --> 0:09:24.960 I'll sort of give you a sense of what that 0:09:25.000 --> 0:09:28.280 means if contract rates are up, well, spot rates are 0:09:28.360 --> 0:09:31.240 up about twenty to twenty five percent. Contract rates in 0:09:31.280 --> 0:09:35.280 the last few weeks have just started to rise from 0:09:35.320 --> 0:09:38.000 new rates and new rates entering routing guides based on 0:09:38.559 --> 0:09:41.240 a carrier and a broken negotiating with a shipper have 0:09:41.360 --> 0:09:44.120 been really flat for a year. Carriers haven't been able 0:09:44.160 --> 0:09:47.640 to get substantial rate increases on their bids. But in 0:09:47.679 --> 0:09:51.520 the last six weeks we have seen a noticeable trend 0:09:51.720 --> 0:09:55.920 upwards where last week new contract rates in drive and 0:09:56.120 --> 0:09:59.319 coming into routing guides for the very first time based 0:09:59.360 --> 0:10:02.720 on a recent up four to five percent than they 0:10:02.760 --> 0:10:05.559 were a year ago. Now the twelve month average is 0:10:05.679 --> 0:10:08.480 zero percent, like flat, but we're starting to see this 0:10:08.600 --> 0:10:12.760 inflection where drive a flatbed and reefer contract rates are 0:10:12.800 --> 0:10:16.640 starting to rise. Now we'll know a little bit more 0:10:16.640 --> 0:10:20.120 when the ISMPMI comes out Monday how domestic manufacturing is 0:10:20.160 --> 0:10:22.480 really faring, because that'll be the first read after the 0:10:22.480 --> 0:10:25.400 Middle East war. But demand is sort of going through 0:10:25.400 --> 0:10:27.880 this seasonal inflection. We always see there's a lot more 0:10:27.960 --> 0:10:31.920 volume in building construction nursery planting season, so that's driving 0:10:31.960 --> 0:10:35.280 more volume into the market. But because there's a structural 0:10:35.280 --> 0:10:40.440 removal of capacity that has meant that as spring seasonality hits, 0:10:40.840 --> 0:10:43.960 we're seeing far few available trucks to move those loads. 0:10:44.280 --> 0:10:47.679 And that's what's underpinning this. Now why, I mean, the 0:10:47.720 --> 0:10:50.400 bigger question is why. And this is this structural removal 0:10:50.440 --> 0:10:54.880 of capacity that we're seeing because of what's going on 0:10:55.160 --> 0:10:58.400 in the government world. So we're seeing this sort of 0:10:59.760 --> 0:11:04.120 eye think the biggest wave of regulatory change in a 0:11:04.200 --> 0:11:07.439 generation going on right now, and I think this is 0:11:07.520 --> 0:11:10.479 structural for all the shippers. This is not a cyclical 0:11:10.559 --> 0:11:13.800 seasonal thing. This means that the driver pool is going 0:11:13.840 --> 0:11:18.800 to shrink noticeably because of what the industry is doing 0:11:18.840 --> 0:11:23.800 with things like English language proficiency enforcement, non domicile CDL revocations, 0:11:23.960 --> 0:11:27.840 all the training school work that's been done around changing 0:11:27.920 --> 0:11:31.960 their requirements, making sure they meet standards. So we're seeing 0:11:31.960 --> 0:11:35.959 this tightening of rules around who can drive and how 0:11:36.000 --> 0:11:39.120 they train and how they're tested. It's resulting in a 0:11:39.160 --> 0:11:43.679 shrinking driver a qualified driver pool. So if you fast 0:11:43.720 --> 0:11:47.040 forward this too later in the year and next year, 0:11:47.720 --> 0:11:49.719 it means that it's going to be harder to get 0:11:49.800 --> 0:11:53.600 into this industry as a broker, carrier and a driver 0:11:54.240 --> 0:11:56.320 and it's going to be harder to stay in the industry. 0:11:57.400 --> 0:11:59.800 And what that means is the industry loses its see 0:11:59.840 --> 0:12:02.760 lessticity when it comes to ramping up demand. So a 0:12:02.760 --> 0:12:05.960 lot of contract carriers are going to find it harder 0:12:06.360 --> 0:12:10.880 to find qualified drivers because of the higher standards. Now 0:12:11.080 --> 0:12:13.680 you could add drug testing onto that, where they're looking 0:12:13.720 --> 0:12:16.160 to bring in hair follicle testing, which will pick up 0:12:16.200 --> 0:12:18.600 five times the number of drivers that currently gets through 0:12:18.600 --> 0:12:21.360 with urine testing. What that means if you sort of 0:12:21.400 --> 0:12:24.559 forecast this out, it means that with an aging population, 0:12:25.920 --> 0:12:27.800 you know, maybe for first time ever, we do have 0:12:27.840 --> 0:12:32.680 a legitimate driver shortage. Because that's where we're heading is 0:12:32.720 --> 0:12:38.200 to a shrinking available driver pool that is driven structurally, 0:12:38.320 --> 0:12:42.120 not by a market cycle necessarily. So that's where we are. 0:12:42.120 --> 0:12:44.160 We haven't been able to say that Lee for three years, 0:12:44.200 --> 0:12:47.880 maybe four years, that things are actually improving. I would 0:12:47.880 --> 0:12:50.840 not have thought things would be improving for any reason 0:12:50.920 --> 0:12:54.160 other than demand. There was a demand catalyst that the 0:12:54.200 --> 0:12:57.199 market took off. Well that's not the case. This is 0:12:57.240 --> 0:13:01.559 a supply driven market correction and here we are. 0:13:01.960 --> 0:13:05.280 So I'm dat. You know, you mentioned a lot of 0:13:05.320 --> 0:13:10.120 things that are driving this. You know driving some of 0:13:10.160 --> 0:13:13.200 this capacity to be leaving the market. Is there are 0:13:13.240 --> 0:13:15.760 there any numbers, facts and figures that you can share 0:13:15.800 --> 0:13:19.400 with us that kind of illustrates we? 0:13:19.679 --> 0:13:22.199 Yes, so there are, there are a couple. I'll give 0:13:22.200 --> 0:13:24.760 you a sense of what that looks like. So we've 0:13:24.760 --> 0:13:26.880 got you know, it's timely that we're talking now. We've 0:13:26.880 --> 0:13:31.600 got road check week next week and what's eleventh and twelfth, 0:13:31.640 --> 0:13:34.360 so it'll be the week after that. But they did 0:13:34.960 --> 0:13:37.440 in Florida, just to give you a sense of how 0:13:37.520 --> 0:13:41.640 much this how big of a problem this is, the 0:13:41.679 --> 0:13:44.920 federal government did how to think call operational safe drive 0:13:45.000 --> 0:13:50.520 in January this year, where they are across twenty six states. 0:13:50.559 --> 0:13:54.600 In January went and did all of these inspections around 0:13:54.960 --> 0:13:59.480 non domicil city or English language proficiency immigration checks and 0:13:59.600 --> 0:14:03.280 of the they found about six point eight percent of 0:14:03.320 --> 0:14:08.920 those drivers fail the English language proficiency test. And out 0:14:08.960 --> 0:14:12.160 of that came this sort of we started to see 0:14:12.160 --> 0:14:16.000 this exodus of capacity that the cold weather in January 0:14:16.040 --> 0:14:19.360 was masking it. But what we were seeing around certain 0:14:19.440 --> 0:14:23.160 areas was a noticeable decrease in truckload capacity. And I 0:14:23.200 --> 0:14:25.960 can't put numbers on in terms of how many trucks exited. 0:14:26.520 --> 0:14:29.280 But what we saw in January across this twenty six 0:14:29.440 --> 0:14:32.880 state sweep was and I think it's more than coincidence 0:14:32.920 --> 0:14:36.800 that when the weather started to improve, we started to 0:14:36.800 --> 0:14:39.280 see spot rates start to lift but hold at an 0:14:39.360 --> 0:14:43.120 elevated level. Normally, when you see cold weather events, rates 0:14:43.120 --> 0:14:45.840 go up and then they come down. Well, they went 0:14:45.960 --> 0:14:49.480 up when winterwstorm Fern hit, but then they remained elevated, 0:14:49.560 --> 0:14:55.200 which coincides with this rapid escalation in enforcement by the 0:14:55.240 --> 0:14:59.160 federal government and state transport agencies. So we saw this 0:14:59.280 --> 0:15:03.200 capacity ex and rates held higher during the first quarter, 0:15:03.240 --> 0:15:06.440 which is normally a pretty weak quarter, and then just 0:15:06.480 --> 0:15:10.800 a few weeks ago, the Florida Law Enforcement Group did 0:15:10.840 --> 0:15:15.400 a inspection on thirty three hundred trucks and put fifty 0:15:15.400 --> 0:15:18.240 four out of service because of English language. They were 0:15:18.280 --> 0:15:20.920 about thirty that were arrested, and there was a whole 0:15:20.960 --> 0:15:24.120 lot of crazy stuff. But I think that what we 0:15:24.280 --> 0:15:29.320 haven't seen before is this state and federal driven enforcement 0:15:29.560 --> 0:15:34.680 safety blitz on immigration status and driver qualifications. I haven't 0:15:34.680 --> 0:15:39.160 seen that outside of road check week, So that's the 0:15:39.200 --> 0:15:43.440 big difference. We're seeing the number of drivers that post 0:15:43.480 --> 0:15:46.120 their trucks on our load board each week, which is 0:15:46.160 --> 0:15:49.560 a measure of capacity. We're seeing that at the lowest 0:15:49.640 --> 0:15:55.800 level we've ever seen like so normally when capacities loose, 0:15:56.360 --> 0:15:58.480 lots of drivers are putting their truck on our load 0:15:58.480 --> 0:16:02.440 board to try and find freight. We are seeing and 0:16:02.520 --> 0:16:05.240 I'll just give you the numbers. Our number of trucks 0:16:05.240 --> 0:16:09.240 on our load board now down about thirty percent compared 0:16:09.280 --> 0:16:11.960 to last year. That's the number of trucks posting their 0:16:11.960 --> 0:16:18.600 equipment for loads. Volume of loads, they're probably about thirty 0:16:18.640 --> 0:16:21.320 percent higher than last year because brokers are scrambling to 0:16:21.360 --> 0:16:24.360 find trucks, so that's load posts, which is kind of 0:16:24.360 --> 0:16:27.400 a measure of desperation to find trucks. So if you've 0:16:27.440 --> 0:16:30.960 got more loads being posted on a load board and 0:16:31.040 --> 0:16:35.120 fewer trucks posting their trucks, you get this massive inflection 0:16:35.280 --> 0:16:38.400 in spot rates. And so if you look at our 0:16:39.120 --> 0:16:42.760 equipment post numbers, they have been steadily declining all year, 0:16:43.400 --> 0:16:47.960 which again is consistent with this exodus of capacity, notwithstanding 0:16:47.960 --> 0:16:50.960 some of the stuff we've seen on sixty minutes. More recently, 0:16:51.200 --> 0:16:54.000 there's been a lot of capacity out there that's added 0:16:54.040 --> 0:16:56.200 capacity to the market because they've been running a lot 0:16:56.240 --> 0:17:01.200 more miles than would be legally allowable now, so that 0:17:01.280 --> 0:17:03.560 comes out of the market. We bring a lot of 0:17:03.600 --> 0:17:06.359 drivers out of the market that shouldn't be in the 0:17:06.359 --> 0:17:08.760 market for a number of reasons. And then lee you've 0:17:08.760 --> 0:17:12.560 got this other phenomenon where you go to anything on 0:17:12.560 --> 0:17:17.280 the southern border. We are seeing incredibly tight capacity for 0:17:17.440 --> 0:17:20.560 a lot of Mexican produce that's coming across. We're in 0:17:20.600 --> 0:17:23.040 the peak at that season right now, because a lot 0:17:23.040 --> 0:17:26.240 of the capacity on the southern border, particularly for westbound 0:17:26.320 --> 0:17:28.879 loads back to Los Angeles, comes from California in the 0:17:28.880 --> 0:17:32.760 first place. So those rates when you look at McCallen 0:17:33.240 --> 0:17:36.840 in the Rio Grande Valley back to Los Angeles, from 0:17:36.880 --> 0:17:39.800 exactly the time that ICE and DHS set up shop 0:17:39.920 --> 0:17:44.600 on the southern border in Texas, rates started to rise 0:17:44.760 --> 0:17:48.320 for that lane, back to the fifteen hundred mile lane 0:17:48.359 --> 0:17:52.000 back from Mcallon to Los Angeles. The carriers now on 0:17:52.000 --> 0:17:54.560 that lane are getting double what they were a year ago. 0:17:54.800 --> 0:17:58.000 Double and that's because of the crackdown on the cabitage 0:17:58.160 --> 0:18:01.840 of those drivers trying to get more free while they're 0:18:01.840 --> 0:18:02.000 in the. 0:18:03.560 --> 0:18:05.520 It's not so much. This is where if you listen 0:18:05.520 --> 0:18:08.360 to enforcement numbers, you don't really see what's going on. 0:18:08.880 --> 0:18:12.199 Because this is a behavioral change. It's not they're not 0:18:12.240 --> 0:18:15.320 getting picked up on the road side. They're just electing 0:18:15.359 --> 0:18:17.920 not to go there. They don't want to leave California. 0:18:18.000 --> 0:18:22.879 And so here's where the inflection point for the produce season. 0:18:23.640 --> 0:18:27.600 Most of your long haul produce carriers out of California 0:18:27.760 --> 0:18:31.639 are minority carriers and they run teams. So where you 0:18:31.680 --> 0:18:33.479 and I sit on the East Coast, any of our 0:18:33.520 --> 0:18:37.040 produce coming out of California is going to be hauled 0:18:37.040 --> 0:18:41.160 by minority truckers in teams the vast majority. And they've 0:18:41.200 --> 0:18:43.560 been very selected about the lanes they run. So when 0:18:43.600 --> 0:18:45.439 you look at all of our produce lanes out of 0:18:45.480 --> 0:18:48.480 California right now, they're all sitting at about twenty percent 0:18:48.640 --> 0:18:52.120 higher year over year. And the produce season hasn't really 0:18:52.160 --> 0:18:56.320 started yet off the West coast. So there's to answer 0:18:56.320 --> 0:18:59.600 your question, there's everywhere I look in the market, I'm 0:18:59.640 --> 0:19:02.320 seeing spot rates sitting at about twenty to twenty five 0:19:02.359 --> 0:19:05.160 percent high than they wear a year ago across all 0:19:05.200 --> 0:19:08.880 of these major freight lanes because of the structural removal 0:19:08.920 --> 0:19:11.200 of capacity. It's about the best way we could put 0:19:11.320 --> 0:19:13.280 numbers around what this looks like. 0:19:14.400 --> 0:19:17.000 Yeah. I was talking to a CEO of a large 0:19:17.000 --> 0:19:20.560 trucking company the other day and they mentioned there was 0:19:20.600 --> 0:19:23.280 a back hall lane where they were getting forty percent 0:19:23.359 --> 0:19:27.720 increase in rates just because the shipper is just really 0:19:27.760 --> 0:19:31.720 looking to secure capacity. You know, I think it was 0:19:31.760 --> 0:19:34.359 interesting to think that you said about the sixty minutes piece, 0:19:34.720 --> 0:19:38.160 and there was also another piece that highlighted truck safety 0:19:38.400 --> 0:19:41.320 on CBS. You know, so not only are you getting 0:19:41.359 --> 0:19:44.199 a federal government that's cracking down on the supply side, 0:19:44.800 --> 0:19:47.720 these issues that are plaguing the trucking company and kind 0:19:47.760 --> 0:19:50.960 of really hurting the good players, because there's plenty of 0:19:50.960 --> 0:19:52.639 good players in the trucking market. 0:19:53.240 --> 0:19:53.399 You know. 0:19:53.440 --> 0:19:56.520 It's coming to the forefront of you know, the conversation 0:19:56.640 --> 0:19:59.080 that people are having, and it just seems that the 0:19:59.160 --> 0:20:03.040 industry is right for some good regulation that'll take a 0:20:03.040 --> 0:20:05.520 lot of these bad players out, that'll have that structural 0:20:05.600 --> 0:20:09.040 change on top of the things that we're seeing today. 0:20:09.359 --> 0:20:11.600 Yeah, I can't imagine what this market will be like 0:20:11.760 --> 0:20:16.600 when demand starts to materially improve. I think that's going 0:20:16.680 --> 0:20:19.320 to be you know, I think the freight recovery is 0:20:19.320 --> 0:20:23.520 still a second half of this year discussion. But you know, 0:20:23.800 --> 0:20:27.000 in prior years, we really weren't sure we had you know, 0:20:29.160 --> 0:20:31.160 the tariff, you know, the trade war sort of come 0:20:31.200 --> 0:20:33.680 in last year Liberation Day last April, then the market 0:20:33.760 --> 0:20:35.280 kind of went flat for the rest of the year. 0:20:35.720 --> 0:20:37.880 This year we've got you know, the Middle East war 0:20:37.920 --> 0:20:40.560 has caused diesel prices to rise sharply. That's put a 0:20:40.600 --> 0:20:43.720 lot of pressure on our small spot market carriers. In fact, 0:20:43.760 --> 0:20:46.320 it's accelerated the exodus of carriers out of the market, 0:20:46.320 --> 0:20:49.239 the more marginal ones. So that sort of steepens this 0:20:49.400 --> 0:20:53.720 rate inflection because of the reduction in available capacity. If 0:20:53.760 --> 0:20:58.080 the enough manufacturing side of our business starts to improve, 0:20:58.320 --> 0:21:01.800 and we've got this structural removal capacity going on, you 0:21:01.840 --> 0:21:05.160 get to a point where rates do start to rise materially. Now, 0:21:05.480 --> 0:21:07.719 the flip side of that is higher rates will attract 0:21:07.760 --> 0:21:10.919 more capacity into the market, so you'll have and I 0:21:10.920 --> 0:21:13.239 think they'll be the right carriers though, so if you've 0:21:13.240 --> 0:21:16.840 got new capacity coming in, there'll be different types of carriers. 0:21:16.880 --> 0:21:19.520 This year, I think we get to a more stable 0:21:19.640 --> 0:21:22.919 freight market cycle coming into twenty twenty seven. But I 0:21:22.960 --> 0:21:25.640 think the point for shippers will be at a much 0:21:25.720 --> 0:21:28.879 higher cost base because I think what you're seeing now 0:21:29.000 --> 0:21:34.240 is the inflationary effect of it's rising costs overall tariffs 0:21:34.280 --> 0:21:37.040 on steel, aluminum, things like that that go into the 0:21:37.080 --> 0:21:41.680 manufacturing of truck's the base cost. You add an EPA regulations, 0:21:42.040 --> 0:21:44.639 the base cost of a truck is rising, and then 0:21:44.640 --> 0:21:47.400 you've got the inflationary effect of all the other variable costs. 0:21:47.760 --> 0:21:50.159 So we'll end up with a higher cost base to 0:21:50.280 --> 0:21:52.920 run equipment in the next year or so. I think 0:21:52.960 --> 0:21:56.200 that's important to remember as we start to think about 0:21:56.200 --> 0:22:01.000 where rates might go. Carriers we read the recent earnings calls, 0:22:01.480 --> 0:22:04.879 they are all getting their adjusting their earnings expectations. I 0:22:04.920 --> 0:22:08.719 think from low single digits to maybe mid to you know, 0:22:09.200 --> 0:22:13.080 higher double digit rate increases. Based on some of the 0:22:13.160 --> 0:22:15.800 last earnings calls we read last week, I haven't seen 0:22:15.840 --> 0:22:18.960 them talk more positively about the market like they are 0:22:19.560 --> 0:22:22.399 this quarter than in the last two or three years. 0:22:22.880 --> 0:22:26.760 Yeah, just anecdotally. I was actually also at this Arkansas 0:22:26.840 --> 0:22:29.960 Trucking Association conference, which is which is a great show 0:22:30.040 --> 0:22:33.439 if you're ever in the area, you know, I was 0:22:33.480 --> 0:22:37.960 talking to somebody that leases trucks and they were expecting, 0:22:38.440 --> 0:22:42.280 you know, use prices to start really going down because 0:22:42.440 --> 0:22:46.960 so many of these I guess trucking companies that don't 0:22:46.960 --> 0:22:49.200 pass the mustards or drivers are going to be returning 0:22:49.240 --> 0:22:52.400 their trucks. And also the average age is pretty old 0:22:52.480 --> 0:22:52.800 right now. 0:22:53.080 --> 0:22:56.959 Yeah, yeah, I think you'll see new truck orders will 0:22:57.000 --> 0:23:00.719 start to rise, people will start to add capacity. But 0:23:01.080 --> 0:23:04.080