Freight Futures daily curve: 3/18

April National Contract (VNU) trades at $1.375 per mile

The Trucking Freight Futures markets rallied across the board on Tuesday as tight spot freight capacity (VOTRI.USA) exerted upward pressure on rates. The spot National contract (FUT.VNU202003) ended the day $0.024, or 1.8%, higher to $1.364/mile. 

In the midst of this rally, ten futures contracts (10,000 miles) of the April National contract (FUT.VNU202004) were traded at $1.375/mile, highlighting that companies with exposure to spot freight rate volatility are moving back into the futures markets to hedge in these uncertain times. 

Could this be a tipping point for Trucking Freight Futures? Kyle Lintner, Principal at K-Ratio, noted, “This is exactly what futures markets are for, removing financial risk and uncertainty from the balance sheet, and right now we have a tremendous amount of risk and uncertainty out there.”

The timing of this hedge and the fact that it is in the April National Average makes sense given the current freight environment. Spot freight volumes and rates are melting up, but no one knows for how long.

“Nobody knows what will happen in two weeks; will there be further shutdowns and closures, quarantines or possibly more massive relief efforts?” Lintner asked. “These are the unknowns that are removed by hedging.”

As the world has been thrown into turmoil because of the coronavirus pandemic, a bear market in equities, an all out price war in oil and the real possibility of a global recession, it is more important than ever to manage risk. If you have any exposure to trucking freight rate volatility, you must consider the use Trucking Freight Futures as you would with any other risk management tool to protect your business.

SONAR Tickers: Tree Map Watchlist; Chart: FUT.VNU202004, VOTRI.USA