Friday, July 12, 2019

Trucking Freight Futures As Christmas Season Retail Indicators

The volumes on the new(ish)* trucking futures are small enough that I'm not sure there is statistical significance, at any decent confidence interval, to the numbers but for what it's worth here's Freightwaves via Benzinga:

Los Angeles To Dallas Forward Curve Calling For Muted Peak Retail Season
The Trucking Freight Futures forward curve for the Los Angeles to Dallas contract (FWD.VLD) calls for a muted peak retail season for the last quarter of 2019. The market expects spot prices on that lane to be lower than in 2018 or 2017, peaking at around $2.01 per mile in November.
(Chart: FreightWaves SONAR)
The futures market expects 2019 to have a stronger finish than 2015 or 2016, but note that peak season contracts have been bid down in the past few weeks, with December 2019 futures falling 13 cents. In other words, as more information enters the futures market – like the final magnitude of the summer surge, and more port data in September and October – the $2.01 peak may not be realized. The forward curve represents market expectations at this particular moment in time.

The L.A. to Dallas lane is the heartbeat of the United States' national freight network, connecting the largest container ports in the continent to a major city in the interior. It's also one of the highest volume and most volatile lanes, pulling national average spot prices up and down with it. 
"Los Angeles to Dallas is off 16 percent from last year," said Kyle Lintner, principal at K-Ratio, a Chicago-based firm that offers risk management solutions to shippers, brokers and carriers, including Trucking Freight Futures. "If you look at the national average against Los Angeles to Dallas, you'll see the two move in tandem."

That correlation broke down at the end of 2018, as a rapid climb in Los Angeles to Dallas spot rates that took the lane to $2.43 per mile did not materialize in a national average move. The tightness experienced in southern California at that time was attributed to freight pulled forward to avoid tariffs on imports from China. That disruption is unlikely to be repeated this year as President Trump and President Xi apparently agreed to de-escalate the trade war at last month's G20 meeting in Japan....
...MUCH MORE

*Previously on the trucking freight futures:
March 29
Logistics: Trucking Freight Futures Began Trading Today
Feb. 18
Freight Futures For the Trucking Industry
Feb. 20 
Trucking Freight Futures: Former JP Morgan Marketeer to Head Up FreightWaves Part of the Effort
Now where were we?
Encourage Poland to invade Germany.  posted
Remind Pope of his mortality. posted
Ahhh, freight futures.

The rollout of new financial products is tricky if not downright risky and for this reason derivatives  are usually introduced after a considerable run-up in the underlying has generated interest and buzz.
A recent success story was bitcoin futures.

On the other hand the CME's milk futures never really caught on despite (because of?) the opportunity for cow puns when describing them. The expiring February's have traded 184 contracts today while the March's have seen a total of 144 change hands. Not very liquid.

I am so sorry.