By Alan Barrett
Truck capacity is booked either by spot market or through a contract rate. The spot rate is the market rate, while the contract rate is a forward contract. The advantage of a contract rate is knowing the future freight price and ensuring available truck capacity. Due to the world soybean market being dependent on unpredictable variables, such as weather patterns and government policy, the origination and destination locations are not always known a year ahead. As a result, most soybean truck volume is spot business transported by small trucking companies and farming organizations.
Actual truck freight rates per loaded mile indicate the available truck capacity and more truck drivers drove down spot rates from the August 2018 highs. With the new U.S./China trade deal being inked, volume should improve, and support the higher truck freight rates. Although higher truck rates are negative for the farmer, higher truck rates due to more soybean export demand is positive.
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