Dakota Coffman (00:01)
for the adventurous, for the backbone of America. For those who rise early and rest not for the weary traveler. Welcome to the Squatch Grist Truckin' podcast, where we dive into the world of truckin', whether you're just starting or a seasoned vet. Join us on this adventure. We're journeyin' into the heart of truckin', where legends are born and the asphalt stretches into the unknown.

This is where bravery and freedom collide, where truckers aren't just truckers, but explorers of the vast untamed highways. So strap in and buckle up because you're about to get squashed. Hey, guys, welcome back to another episode of the Squatchers Trucking Podcast. I'm your host, Dakota Kaufman. And in today's episode, we're going to be talking about trucking struggles, just the state of the economy, state of the trucking industry, some things that the trucking industry is facing right now. And we're just going to talk about some tips maybe that we can.

we can do to negate some of those, whether it's rates or insurance costs or just inflation in general, whatever it may be, we're just gonna go through this video, talk a little bit about it, and hopefully this video can help you navigate some of that stuff. So for many people, trucking industry in 2023 can be summed up by pretty much a single word, right? Recession. Analysts and industry experts, they've been predicting a recession since like 2022, right? But primarily due to, now this was primarily due to a surplus in trucks and drivers.

You know, everybody was hiring and, you know, there was just a great demand for it. And so it created a trucking bubble, if you want to call it that. And, but that bubble that's bursting is more severe than originally expected by a lot of people. And so making matters worse, outside factors like inflation, economic stuff, instability of the economy, obviously rates have been plummeting and record high operating costs. Like that comes from insurance and fuel costs and all of that stuff, right?

that created a lot of challenges that many carriers could not overcome. And by the end of quarter three in 2023, so last year of quarter three, by the end of that, an estimated 35 ,000 new trucking companies had shut down, which was about 10 ,000 more than in 2022 and about 20 ,000 more than in 2021. Now, the trucking industry is famously known for, it can be boom or bust, right?

It's a matter of when not if the market will rebound. It's going to come back around. We understand that. We know that. But there's been a lot of speculation, a lot of talk about when that time will actually be. When will that happen? When will the market come back? And so will the market finally begin to bounce back in 2024? Now, as we enter the second half of 2023, there was a lot of optimism that conditions for carriers would be improving during the first half of 2024. But as the.

2023 came to a close and now we're in April of 2024. We obviously, there's not as much optimism around it, right? Feelings of caution and uncertainty, high interest rates, all of those things doesn't seem to really be picking back up as fast as a lot of experts thought that it would. So there's a lot of uncertainty. There's a lot of the market, it's probably gonna remain soft for at least, you know, into the fourth quarter is what they're stating now. So the caution comes now.

really as a result of mixed signals. There's economic stuff, there's rates, and freight markets and the US economy as a whole are kind of affecting this and not giving a super optimistic outlook about things and about where they're at right now. So the bounce back didn't happen as fast as experts thought it would. They do still expect it to bounce back, maybe in 2024, maybe not. They're not quite sure from what I understand and what I read. But on the positive side, inflation's been falling, right?

Diesel has stabilized to some extent and economy has continued to expand and get a little better. So it seems that the trend is in the right direction, right? And so despite high operating costs last year, the previous year, and that forced a lot of carriers out of the industry, those factors then being pushed out have also allowed the companies that remained to perhaps stay in business longer. So.

there was just a overwhelming amount of new authorities that happened in 2023. And so that created a surplus. And so rates dropped naturally. But now a lot of those new authorities have now went out of business. And so rates are starting to stabilize a little bit because demand is back. It's not an oversaturated thing anymore. And so there's a lot of light at the end of the tunnel. We're just not quite there yet, but it seems to be trending in the right direction. But the problem, however, it's the fact that freight volumes and demand,

the demand of it is remaining low as of right now. Even as consumer spending has remained steady, the demand for loads has still dropped. But a major part of the issue, I think, is that the truckload market still has too much capacity. There's too many authorities, so it's stifling the demand, and naturally the rates are following that and they are getting lower. So a lot of these authorities, the new ones happened during the pandemic move. There was a lot of demand for new authorities.

It happened, it happened quickly, but now things have kind of steadied back off a little bit. And so we're seeing a lot of authorities go out of business, which is bad, but at the same time, it's also creating a little bit more stability for rates and making those come back up to where they were maybe pre -pandemic era. But this kind of all kind of highlights the unfortunate state of the transportation market right now. The improved conditions have allowed some companies to continue, right? But there's still a lot.

there's far too much competition, right? That creates a situation where more will have to leave the industry in order for the market to improve. And so that comes with significant costs and a lot of owner operators and trucking companies and add some incurred costs to them. But like I said, all these things are kind of happening. And so it's trending in the right direction. There's going to be less authorities by the end of 2024 for sure, is what everybody's pointing at. And so, like I said, the timeline that they're expecting the bounce back for trucking is

towards the end of 2024. We'll see if that happens. I hope it does. But that's kind of the trend and what they're talking about. So, but there's still some questions about when exactly that's going to happen and if it will for sure happen at the end of 2024 or that fourth quarter, third quarter win. So there's a few things that are affecting it though. We have some geopolitical stuff. We have the war in Ukraine and Russia. We have the Israeli, you know, stuff that's going on with them in Gaza. So the mix, it's providing a lot of mixed signals, right? And it's affecting our economy, whether it's oil or

or just us getting involved in another regional conflict or whatever it is, right? But those things are affecting our economy. And so it's adding just another element of instability to the market right now. And so experts aren't super confident about when for sure it's going to bounce back because there's a lot of outside forces that are kind of acting on this stuff. So the market as of yet has not shown true signs of a rebound. There's a lot of industry experts that are confident that...

they're stabilizing, their rates are stabilizing, the conditions around it are stabilizing and progress is slow. It's been really slow to this point. The beginning of this year has shown some promise though. With that said, demand is typically softest in quarter one and the market is expected to remain really sluggish for the first half of 2024. And then you have your more pessimistic people that are saying that a full rebound might not even come until 2025.

So there's a lot of rigmarole. Nobody really knows exactly when it's going to happen. And this is despite the fact that rates are trending toward normalcy and there is an increasing number of authority revocations. So how will we know when the market is starting to turn and starting to stabilize and get back to where it was? One of the best indicators is tender rejection rates. So the pandemic saw rejection rates reach higher than 20 % on average. In this past year,

we saw the average dip as low as two and a half percent, right? So, and that was in May of 2023. So this means that carriers are, they are accepting just about any load. It didn't matter the rate, but they were just accepting anything that was offered to them just to get business. And often at a lower rate and on less optimal routes, when rejection rates are higher, it will signal that capacity has corrected. So here are some key trends you need to know as a trucker. In the meantime, it's gonna be a game of survival.

survival of the fittest, right? That's gonna be for a lot of carriers. Better times are ahead for the trucking industry and 2024 will be an improvement for sure over 2023, but progress will be small and incremental probably. And it's important that as the market continues to rebound and get better, the companies stay mindful of current trends in order to remain competitive. So here's some things that maybe you can do to remain competitive until stuff starts to get a little better. Operating costs.

So how can you reduce your operating costs? That's your insurance, that's your fuel, you know, all of that stuff. Fuel prices, you can get a fuel card or maybe you already have one and if you do, that's great. But that's just one tip that you can do. You know, there's insurance costs have steadily increased on a yearly basis and there's really no sign of decreasing, unfortunately. We have a bunch of episodes on insurance, how you can keep your rates in check, how to make sure that everything is staying proper on your insurance and it doesn't just keep going up and up and up and up, right?

So there's some things that you can do to control your insurance. Go check out those episodes, it's worth a listen. We have a whole section in our YouTube just about trucking insurance and about how to keep your rates lower with your insurance. And even if you don't ever get a quote from us or you don't ever buy insurance from us, those are still there on how to help you keep your rates lower when it comes to your insurance, whether it's your safer scores, driving records, wrecks, that type of stuff. We cover all of that and more.

So that's just another thing that you can control and make sure your operating costs are staying efficient and effective is by making sure your insurance rates are staying in check. Another issue that is kind of plaguing the trucking industry right now is driver turnover. You know, there's, there's lack of parking, truck parking, and there's a lot of regulatory changes and a lot of compliance stuff that's going to further add to some of these costs that you're experiencing. So it makes it super important that you emphasize driver retention, safety and training. Make sure you have it in a good culture. You're paying your drivers good.

making sure you're doing all of that stuff because it costs a lot of money to lose drivers, you know that, to do what you can to keep them. And so that's just a few things that maybe we can do to kind of combat some of these trends and low rates right now. Okay, another thing that you can do, increased importance of technology. So like use a TMS, use some sort of technology to kind of help you streamline your operations, whether that's invoicing or getting payments or whatever it is, right? Just add some sort of technology, like look at your business, take a step back and look at it and say,

Is there something that I could do to make this cost less money and be more efficient? And you can have both of those things. So take a look at that. See if there's some sort of technology like a TMS system or your ELD. Maybe you can find it cheaper somewhere else or without a contract, right? Just different things like that. It allows you to make data -driven decisions, find technology that can help you kind of leverage that type of stuff. And your drivers will thank you for it too because maybe they get paid faster, you know, that type of stuff.

But yeah, technology can play a huge role in lowering some of your costs and streamlining operations a little more as well. Okay, another concern is possible supply chain disruptions. The past few years have really shown how vulnerable our supply chain is in America and really globally. With weather patterns are more extreme now, geopolitical tensions, there's wars, there's all of this stuff that's happening. So it's important to kind of develop some contingency plans in case of a disruption. So that can mean,

widening your pull of suppliers, using analytics or finding a different broker, having more than one broker, that type of stuff, just kind of widening that grasp that you can have if something does fall apart or something does happen. Now for brokerages, recently there's been a lot of cybercrime, a lot of cyber fraud, so maybe improve your cybersecurity measures to protect some of those things, especially if you're a broker as well. And that's an important aspect because there's been a lot of...

A lot of hacks and a lot of cyber attacks for the brokerage industry. All right, let's talk about one of the biggest expenses that you will have for as your trucker. I mean, it's your diesel. Experts cite that there will be less volatility in diesel prices expected in 2024. So maybe not as much as up and down. The forecast really, it stands to replicate a pattern that we've seen during 2023 when fuel prices stabilized after experiencing a stretch of unpredictability, right? And this is a from Gas Buddy head of petroleum analysis.

Patrick DeHaan. I would hope 2024 will be a gentler year for diesel is what he was saying. And that's what he told Transport Topics. He says the US on highway retail diesel price average started the year at $3 .87 per gallon. According to the Energy Information Administration, it's a significant drop from 2023, which was $4 .58 per gallon. Last year, the national average saw a trough.

of $3 .79 in July and a peak of $4 .63 in September. American Trucking Association's chief economist Bob Costello said there is unlikely to be a great deal of movement, either up or down this year. He compared his expectations for the year to how diesel prices fared in December when the national on -highway average lingered around and mostly sat below the $4 per gallon mark.

And so this is just, you know, some of these experts that are kind of giving us some insight. Watching the Fed and OPEC oil ministers was a favorite sport of energy market observers in 2023. But analysts said the latter will have the tougher task in 2024 as its members balance ensuring sufficient revenue for their oil dependent economies through output cuts and retaining market share at a time when U .S. crude production.

is churning along at record levels of nearly 13 million barrels a day. Now, some questions still linger about the issue, right? Like what's going to happen with the fuel prices? And we have the Russian -Ukraine war that could impact diesel and oil prices. But as of April 8, 2024, diesel prices are heading higher, up 6 .5 cents. It's the largest one -week increase since a big 21 -cent increase on February 12.

And some experts are saying that Brent will get back to $100 a barrel. If that continues and that happens, we can expect to see diesel prices to continually and steadily increase. Sadly, one prominent headline, an article in Bloomberg summed up that view. The news agencies take the odds of $100 oil are rising as supply shocks convulse the market. I want to read this excerpt from Freight Waves. Since oil prices are moving higher in part on tension in the Middle East.

Though there is no evidence that any production has been cut as a result of that uncertainty. But the drumbeat of potential conflict involving Iran, Israel, and possibly the U .S. is helping to light a fire under the market price. Ultra -low sell for diesel has mostly failed to keep pace with the increase in crude prices on the CME commodity exchange. And the spread between diesel and Brent on March 18th was almost 72 cents per gallon.

On Monday in CME trading, it was down 58 .3 cents, a key reason why retail prices are not climbing at the same rate as crude numbers. That fact combined with stability and physical market trading for diesel and key hubs such as the Gulf Coast has helped protect diesel slightly from the more bullish market that we're seeing when it comes to Brent crude. The reason why diesel has trailed Brent. So JP Morgan.

According to reports, said its analysis of pipeline data suggests that U .S. crude production in the lower 48 states has fallen recently to about 12 .32 million barrels a day from 12 .71 million a week earlier. The report did note that output among the lower 48 over time has generally been less than in March, but it is U .S. production that has done the most to offset the continuing cuts by OPEC plus members. So Financial Times also stated Commodities Global Summit in Switzerland,

This was Sebastian Barak, the head of commodities at Citadel Hodge Fund, said oil markets are likely to be extremely tight in the second half of 2024. So as it stands right now, it appears that diesel prices have somewhat stabilized, but some experts are concerned with the stability of that changing due to outside circumstances like Israel and Iran and Hamas and Ukraine and Russia, that type of stuff.

But it appears that the best way to insulate the market from that is to keep U .S. production high. So let's hope that politicians can get that in their head and keep U .S. production, oil production high to kind of insulate, you know, at least the trucking industry from some of those economic woes that everybody else is, you know, pushing, you know, with conflict and stuff like that. All right. Let's move on to kind of our next segment about another thing that's affecting, you know, trucking struggle right now. Regulations. So I'm going to go over a few proposals for 2024.

that the FMCSA is proposing for the trucking industry for compliance and regulation. So the FMCSA is wanting to update their SMS, their safety measurement system update. And so perhaps the largest potential shift in commercial transportation is the FMCSA SMS score. So FMCSA has proposed nine major changes to their methodology, including they're going to reorganize your basic score. So they're going to include a few new safety categories like unsafe driving and vehicle maintenance.

reorganized roadside violations, and they're gonna bucket all 950 currently recognized violations into 116 distinct groups. They're gonna have a simplified severity weight, replacing the one to 10 scale with a one or two score. And they're gonna have a greater focus on carriers who have received a violation in the last 12 months. So I don't know exactly what that will imply on the replacing the severity weight score from the one to 10 scale to the one to two score.

I'm not sure how that's going to affect a lot of things, but I don't think it would be a better thing for you. It seems that it would kind of could hurt you worse. So in some ways. But so a lot of these changes will have a lot of impact on you as a carrier. And we're going to we're going to talk a little bit about that more as we go. But some of these changes will add more, more regulation, more stipulations, more money, more fines, that type of stuff. So let's hope some of these things don't happen.

Second regulation that they're talking about, CDL drug and alcohol clearinghouse and the return to the duty process. Okay, so drivers with drug or alcohol violations are given prohibited status in the FMCSA's drug and alcohol clearinghouse. And as of November 18th, 2024, all prohibited drivers will lose either existing commercial driving privileges or their approval for a commercial learner's permit. So.

Drivers are going to be required to undergo a rigorous reevaluation to return to good standing and prohibited drivers must meet with a DOT qualified substance abuse professional, complete recommended treatment and or education plan, pass a return to duty test and pass six unannounced follow -up tests assigned throughout the first 12 months back on the job. So to prevent potential suspension, drivers and fleet managers alike must learn the ins and outs of the clearinghouse procedures.

So that includes pre -employment drug and alcohol testing and how to access records and what data must be reported to the FMCSA. So that's a big change. There's a lot more hurdles here for the CDL drug and alcohol stuff in the clearinghouse and that will take effect November 18th, 2024. Okay, the third thing that the FMCSA is wanting to change is mandatory speed limiters. So a redacted DOT report ruffled feathers this fall.

suggesting that commercial vehicle speeds would soon be limited to 68 miles per hour on interstates and highways. The organization quickly backtracked and explained that the specific speed limit was yet to be determined. The valuation is still underway. However, and the official proposal will be published on Friday. It was published on Friday, December 29th, 2023. In addition to the maximum speed limit, the documentation will also outline which types of vehicles are subject to the new regulations.

It's widely believed that speed limiters will only be required for vehicles made after 2003 that weigh 26 ,000 pounds or more. Now it's gonna take a while probably before speed limiters affect your day -to -day operations, but it's always a good idea to kind of keep this on the forefront of your mind of stuff that may be happening and kind of be prepared for some of this stuff. Number four, the fourth thing that FMCSA is wanting to implement, competency and skills testing.

In 2009, the advocates for highway and auto safety submitted a proposal urging the FMCSA to implement a competency test for commercial drivers, ensuring that all commercial drivers on American roadways are qualified, properly trained and well versed in federal regulations. The petition set in limbo for the next 14 years. In August of 2023, to the surprise of many, the FMCSA issued an advance notice of potential rulemaking indicating their intent to pursue the motion.

Now this regulation has not went into effect yet, but it's in your best interest to revisit their approach to training and hiring. How you hire and how you train drivers in 2024. You need to take a look at that and make sure that you're going to be getting routine training for new drivers and seasoned drivers too. But Samba safety data shows that fleets who undergo monthly training have 50 % fewer violations. So try to implement some of that stuff into your company because...

FMCSA is coming up with some stuff that's going to make it a little more difficult when you're trying to find talent. So an effective driver training program should incorporate a healthy blend of topics though, like space management, distracted driving, defensive driving, and they're all relevant to all people of all skills, right? Doesn't matter how long they've been doing it, but commercial carriers should also maintain strict hiring practices to mitigate problems before they happen. And we've talked about this in several of our podcast episodes.

about the importance of finding good drivers, how to find good drivers and keeping good drivers. But you have to vet your drivers very, very carefully. And what that will do is that will allow you to quickly identify high risk candidates. And that's going to ensure that only the safest and most skilled drivers are behind the wheel. Okay, insurance. Let's talk about some FMCSA stuff, some regulations that are changing for insurance and rates with insurance. So I'll be really transparent with you as an insurance agent. Insurance rates for trucking are not looking great.

they are really bad. And I don't know when that will stabilize or when that will get better. And it's not looking great through the end of 2024 really. Who knows beyond that. But I want to talk about a few reasons why rates are the way they are right now. So Fitch Ratings expects the U .S. commercial auto insurance segment to remain unprofitable through 2023 and into 2024 without a deadline on that in 2024. So commercial auto insurance companies,

There's only a couple that have been profitable all throughout 2023 and into 2024 now. So that's another thing that's driving rates up is they're not profitable. Now there's a lot of stuff that we could talk about and why that's the case, right? But that's just the way it's trending right now. Another thing is rising claim severity from inflation and then burgeoning litigation and lawsuits despite continued price increases and underwriting changes.

those things are outpacing rates and those things are making companies unprofitable as well. Fitch Ratings also cited this, says, we expect the segment combined ratio for commercial auto. So the combined ratio is their loss, right? So over a hundred percent means they're losing money, less than a hundred percent means they're profitable. But he said, we expect the segment combined ratio to exceed 106 % in 2023. And it did. I want to say it was like 113%, if I remember right, overall. And it -

remains unprofitable now through the first quarter of 2024. Fleet owner reports that nuclear verdicts continue to plague the truck insurance industry. Cargo net reports a 59 % increase in cargo theft compared to third quarter of 2022. Over 31 .1 million in shipments were stolen in the third quarter of 2023 alone. The cost of simple small claims is also increasing. You have technology and then you just have inflation as well.

because parts and equipment have gone up due to those things too. So that's why underwriters are now looking at the frequency of claims more than they have in the past. The US economy continues to be the number one worry for drivers and fleet carriers alike. Factors like inflation, rising interest rates and higher diesel prices are causing a ripple effect all throughout the transportation industry. We understand that, you feel it, you know that.

but insurance is right up there with it. And so there's a lot of stuff that you can do to mitigate the insurance part. Maybe the regulations and diesel prices you can't do a whole lot about, but the insurance part you can control. You just have to make sure that you're doing it the right way. So go check out some of our old videos on insurance, then helping those rates. But prices continue to climb and the higher cost baseline is expected for repairs, maintenance and new vehicles. So your regular costs are increasing.

and the prices for rates and everything seem to not be matching that, right? So these same inflationary pressures are also impacting the insurance industry through increased claim costs and settlements. Premiums are going to need to increase to keep pace with inflation -driven increases in the cost of selling claims and nuclear lawsuits. In addition to economic pressures, government regulation at the state and national level for insurance carriers will also be a concern. So...

How can you weather the storm when it comes to your insurance? Hire good, safe drivers, manage your SMS scores well, telematics, and do what you can to prevent claims. So when will it bounce back? When is the trucking industry gonna bounce back? It seems that transfer rates to bounce back and the overall outlook to improve are on the rise. It's looking better. It's not gonna happen overnight, but experts are expecting it to bounce back towards the end of 2024. We will see, right?

with most of the new authorities that started in 2023 starting to pull out of the market, being that they can't run on cheap rates. We should start to see things begin to get better and level back out. So we'd like to hear from you. How are you weathering the storm? What does it look like for you? Have you been more busy? Have you been less busy? What are rates looking like for you? Are your diesel prices way up? What are your insurance costs look like? We'd love to hear from you. Let us know in the comments or shoot us an email. Like I said, we'd love to hear from you and get some feedback on.

what you're seeing, what you're facing, and what your insurance rates are like, what your diesel rates are like, and how you're combating that. Are you just having to work more? We'd love to hear from you on that. But guys, we thank you for tuning in. We appreciate you. We'll catch you on the next episode. Thanks, guys.