By Noël Perry, Chief Economist, Truckstop.com
Harvey is still winding down along the gulf, leaving a path of flooding, destruction, and death in its wake. While transportation experts historically had to wait weeks or months after a major weather event to measure the effects on trucking, thanks to real-time data (and resources like Truckstop.com), we can increasingly follow developments in real time.
Here’s what the data from the full state of Texas tells us. Some of it’s expected, but there are surprises too.
First off, movements into the state decreased in the week prior to the storm, down almost 20%. This is likely due to the sensible fear of getting stuck in the region, or concern that normal supplies would not move during the storm, leading to excess inventory. But this pattern reversed during the first several days of the storm as emergency supplies began moving. Still, with the worsening of the storm’s effects, inbound volumes are down again.
Outbound moves were little-affected in the week prior, but plummeted when the storm hit (i.e. nobody is building or manufacturing anything along the gulf right now). Early in the storm, there were two days of aggressive outbound moves in dry van, when people seemed to realize it was now or never. Currently? Loads are very hard to come by. As a result, outbound prices have fallen, down 16% overall for the last week.
This is not the case with inbound freight. Prices are up by 25%, heading into Texas. Freight professionals understand the imbalance issue and are working hard to ensure they aren’t running at a loss. In other words: “If you want me to head into Texas, where I won’t find any backhaul, it’ll cost you.”
Finally, there are important differences by trailer type. Dry van moves have been more volatile, for instance. We suspect this is due to their flexibility. The reefer market is clearly traumatized. Farms are still producing, but why move goods towards a cold storage destination when the power might go out and the stores might close? Meanwhile, flatbed operators are eagerly planning around the prospects of rebuilding supplies. And specialty operators appear to be lying low.
The strong variability in equipment type and the imbalance in flows reminds us of the prime effect of such mega weather events. More than merely delaying and marooning trucks, severe weather can disrupt supply chains and the truck circuits that serve them. Movement will begin again quite soon, but normal movement will not return for several months, at best. In the meantime, trucks will be moving in atypical, inefficient supply chains, serving unusually anxious customers. This is the big reason that productivity falls and prices rise. It also explains why the effects go far beyond the geography where the rain pours, the wind roars, or the snow drifts.
The supply chains that start or end in Houston stretch across the country, involving much more than just Astros, Texans, or Rockets fans. That’s why we expect national prices to react more strongly than one would expect from a storm that limited its worst effects to Texas, and to the southern third of Texas at that.
The good news? Armed with timely and trustworthy data, the freight community will be able to adapt to such trials more quickly and accurately.
We’ll have much more for you as the week goes by and the water recedes.