Reefer markets: ‘Coin-flip compliance’ prevails

Refrigerated trucking carriers enter produce season in a strong position, supported by strong demand, tight capacity, imbalanced networks and high rates that have prevailed since midsummer 2020. On a national basis, carriers are rejecting 50% of tendered loads, hence the term “coin-flip compliance.”

National average reefer spot rates on Truckstop.com’s load boards are at $3.73/mile inclusive of fuel, near a trailing one-year high and more than 40% above any level reached in 2019.

The data from the Truckload Carriers Association’s Truckload Profitability Program also reflects these conditions: Profitability for reefer carriers is improving with reefer consolidated operating ratios (ORs) of 95.3% as of February, which is well below typical seasonality (outside of a stellar 2020).

The restaurant industry in the U.S. is reopening, which should ultimately prove a meaningful headwind to reefer, though not likely until 2H 2021, once the jolt from produce season has passed. On that measure, restaurant sales in the U.S. are now positive on a y/y basis, while grocery sales are deeply negative y/y due to the difficult pantry-stuffing comparison from last year. On a two-year basis, grocery sales are still up ~10%.

Reefer carriers should still perform fairly well when the inevitable mean reversion back to services spending occurs once many Americans are vaccinated (likely in the second quarter of 2021), though to a lesser degree than peak 2020 and current conditions.