Cass Truckload and Intermodal indices are both up in June

Data from Cass Information Systems and Avondale Partners shows that both truckload and intermodal rates in June showed annual gains.

This pricing data is part of the Cass Truckload Linehaul Index and the Cass Intermodal Linehaul Index, which were both created in late 2011. The indices are based on actual freight invoices paid on behalf of Cass clients, which accounts for more than $20 billion annually and uses 2005 as its base month.

Cass and Avondale said the truckload index “isolates” the linehaul component of full truckload costs from other components such as fuel and accessorials, which in turn provides an accurate reflection of trends in baseline truckload prices.

June truckload rates were up 3.9 percent compared to June 2011, according to the Cass Truckload Linehaul Index, while remaining relatively flat for all of 2012. The report noted that as has been the case in recent months, “this stable pricing can at least be partially attributed to share shift toward intermodal.”

And while June truckload rates show nearly a 4 percent bump, last month Avondale was calling for 6-to-9 percent truckload pricing increases for later in 2012, and said it has since lowered expectations for second half rate hikes in light of what it described as a slowing macro environment.

Much of what is driving truckload rate increases stems from the fact that carriers are facing operational challenges and are now more focused on yield management, said Mike Regan, president and CEO of TranzAct Technologies and blogger for LM, during a recent Logistics Management webcast.

Regan said this basically means that carriers are looking at their books of business and looking at their operating ratios. If an operating ratio is over 100, Regan said carriers are going to institute corrective action to have operating ratios running at 92 or lower.

“Carriers at 105 or 110 are starting to institute corrective pricing…over 2012 and 2013 to get that operating ratio down,” said Regan. “And pending government regulations are going to affect available capacity in the carrier marketplace and drive up rates.”

On the intermodal side of the index, June rates inched up 0.6 percent to 100.8, with the report noting that this marks a seven-year high.

Avondale officials said in the report that the easing in diesel prices should begin to cause shippers to switch back to truckload for shorter lengths of haul, which could lead to a bit of a decrease in intermodal rates.

“We continue to believe that over the intermediate term, the large number of containers coming on line and aggressive pricing by carriers focused on ramping up their intermodal businesses will keep pricing grounded,” Avondale noted.

In a previous research note when the Truckload Line haul Index was first introduced in November 2011, Avondale Partners analyst Donald Broughton explained that the objective of this index was to deliver a more timely barometer of truckload pricing than the one provided by the American Trucking Associations (ATA), which does not fully “remove the effect of diesel in its revenue per mile series,” adding that the Atta’s revenue per mile series—on both a seasonally-adjusted or non-seasonally adjusted basis—tracks more closely with Cass’ Truckload Total Cost (per mile) Index, which is more sensitive to changes in diesel than with Cass’ Truckload Line haul (per mile) Index.

He added that whereas the ATA reports truckload pricing roughly 45 days after the end of the month, Cass data is ready to be analyzed three-to-five days after the end of the month.

“The fact that Cass processes $20 billion in freight bills annually is significant,” Broughton told LM in an interview. “The biggest concern initially when putting this together was protecting confidential information of Cass’ customers, as many of them compete directly with each other and do not want each other to have access to their respective freight spend. Once that was taken care of it is a matter of going through the data and delineating it to strip out accessorial and fuel-related charges.”

Removing fuel from the equation provides a better gauge of actual base prices, too, for both shippers and carriers, in that it provides a better baseline for gauging rates, said Broughton.