August 15, 2019 (Chicago) - The US Trade Representative's Office announcement that the government would delay implementation of tariffs on approximately $300 billion in consumer goods from China is an additional indicator that the holiday retail season may be stronger than expected. The news is expected to have an immediate impact on the freight futures market, which saw 50,000 miles of contracts for the LA-Dallas lane and 15,000 miles of contracts for the LA-Seattle lane traded in recent weeks.
"The LA-Dallas lane in particular is a strong indicator of freight rates for the holiday retail season and the market has begun to price-in an expected increase of imported goods that will work their way through the domestic supply-chain, as the LA market is the preferred port destination for Chinese manufactured goods," said Kyle Lintner, K-Ratio's Director of Markets. "Currently there is an excess of carrier capacity but if we do see a significant increase in volume, coupled with very little available warehousing on the west coast, it means spot rates are going to begin to climb."
Established in March of 2019, the Freight Futures Market is a tool for shippers, carriers and 3PLs to move their risk from business operation into the financial market, protecting themselves against freight rates that are prone to high volatility from external factors such as weather, construction and tariffs.
"July Retail Sales were up just a bit higher than expected as was the Consumer Confidence index which meant shippers, especially big box stores, could anticipate a healthy holiday season. This perception of greater demand would lead those shippers to take a long position in the market, protecting their transportation spend against rising rates," said Lintner. "I would expect to see considerable volume growth in the freight futures market by sophisticated businesses as this is exactly why it was opened, to hedge against price volatility."
ABOUT K-RATIO
K-Ratio is a sister company of K & L Freight Management, which was founded in 1997 by Russ Gallemore as a small, expedited freight forwarder. K-Ratio is the newest business in the K & L portfolio which also includes air cargo, brokerage services and a proprietary truck fleet. As a full-service risk management firm, K-Ratio provides solutions for shipper customers, carriers, and 3PLs by implementing aligned strategies to reduce the price volatility associated with the movement of freight over the road. They comprise a team of finance, mathematics, and logistics experts to provide the analysis, advisory, and execution services tailored to meet business objectives and remove price uncertainty. To learn more: k-ratio.com or KandLFreight.com.
ABOUT THE TRUCKING FREIGHT FUTURES MARKET
The Trucking Freight Futures Market has been developed in partnership between three companies. DAT Solutions is the leading authority for spot market freight rates in the trucking market, and is responsible for publishing daily spot dry van price assessments which will be used for the final settlement of the Trucking Freight Futures contracts. DAT will not have access to any participant trading activity. Nodal Exchange and Nodal Clear are the regulated exchange and clearing house respectively for the Trucking Freight Futures market. Nodal's role is to provide the trading platform and risk management for Trucking Freight Futures trading. The system is fully electronic; there will be no physical trading floor. Nodal also provides the regulatory compliance for the market, exchange activities and clearing house. Market news, information and analysis will be published by FreightWaves. For more info on the market visit: https://www.freightwaves.com/freight-futures/
