Monday, February 18, 2019

Freight Futures For the Trucking Industry

From FreightWaves, February 6:

Trucking Freight Futures Road Show hits Wall Street, heads to Chicago
On Wednesday afternoon, at the Andaz Hotel on Wall Street in New York City, executives from FreightWaves, Nodal Exchange, DAT, and K-Ratio pitched Trucking Freight Futures to a diverse audience of investment bankers, equity analysts, hedge funders and techies. The event was completely booked. On Thursday, the Road Show heads to Chicago.

For a recording of the live stream and a copy of the slide deck, click here
Michael Vincent, Executive Vice President at FreightWaves, welcomed the attendees and began the freight futures presentation by recounting his transportation and logistics experience. Vincent joined FreightWaves after more than 32 years in the industry including less-than-truckload, truckload, asset-light logistics services, maritime, air cargo and warehousing and distribution.

“In my past lives I have managed $150 million-plus transportation budgets,” Vincent said, “and hitting those budgets throughout the year was a very difficult chore. I saw a lot of people lose their jobs over this exact problem.”

Vincent went on to explain that the U.S. trucking industry was very large (more than $725 billion annually) and very volatile (multiple moves up and down in price exceeding 25 percent in a single year), but his former colleagues in the industry had no way to de-risk their exposure to price shocks. Not only is trucking very large and very volatile, but freight markets are also very sensitive to external factors.

“Virtually everything that happens affects the transportation industry, from the mere suggestion of a new tariff to hurricanes,” Vincent said.

Recent advances in technology have connected assets on the road to cloud-based data streams, creating transparency into capacity flows and real-time market pricing. Meanwhile, recent price shocks both up (from the back half of 2017 through 2018) and down (the spot rate crash after the first week of January) underline the need for companies across the business community to hedge their natural exposure to freight market volatility. In The Wall Street Journal, articles about transportation costs were front page news.

Vincent pointed out that a successful futures contract needs a large and volatile underlying market (trucking), a benchmark index (DAT), an exchange and clearing house (Nodal), and market data, news and insights (FreightWaves).

Next, Nodal’s Senior Director of Energy Markets, Daniel Gomez, spoke about the mechanics of the exchange and the surety that traders of Trucking Freight Futures contracts would have.....MORE