We are back. Apologies to all of you who thought that we were indeed shutting down. It was just an April Fool's joke. In today's newsletter, we do a deep dive on the rising costs of surety bonds for freight brokerages and the impact it has caused in the market. Besides that, we have plenty of other interesting stories.
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🤔 Question of the Day: The world's oldest transportation company in operation and is currently expanding its market share in the United States is _______. Scroll to the Around the Freight Web section to find out.
*Greenscreens.ai, forecasts real-time truckload buy prices that are suited to each freight brokerage's purchasing power using AI and machine learning. Its engine takes into account over 130 attributes and data points in each rate forecast.
🐔 WHAT’S COOKIN’ IN FREIGHT
Current market rate differences compared to the second half of 2023. Source: greenscreens.ai.
📉 Rates March Madness. Greenscreens.ai's March 2024 Spot Market Update paints a picture of a trucking industry at a crossroads. Nationally, van and reefer rates are down 3.2% and 3.9%, respectively, from last year. Flatbed rates, though, are up 2.1% nationally year-over-year. The regional highlights show Midwest reefer rates hit a frosty patch, dropping 6.8%. Meanwhile, the Southeast's flatbed rates jumped 4.5%. Outlook for Q2? If the current pace keeps up, van and reefer rates might just level out, even inflate a bit as we roll into summer. But if rates keep sliding down this path, the rest of the year doesn't look so good.
🚚 Abrupt Trucking Firm Closure Leaves 200 Jobless. Tony's Express, a 70-year-old trucking company based in California, unexpectedly closed its doors on March 28, leaving over 200 employees without jobs, paychecks, and medical coverage. CEO John Ohle cited unsustainable market conditions and high fuel costs as factors. Despite efforts to save the company, including potential partnerships, all plans fell through last minute. The closure came with little warning to employees, who had observed signs of financial distress, including the shift to paper checks and a temporary halt due to insurance issues. Now, many are left seeking employment and awaiting compensation.
🤝 Sheer Logistics Acquires CargoBarn. Sheer Logistics has ramped up its freight brokerage and managed transport services by acquiring CargoBarn. This strategic move combines its top-notch 4PL services with CargoBarn's vast carrier network. This move is set to increase Sheer Logistics's market presence and offer customers a more comprehensive suite of logistics services.
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Freight Brokerages See Surge in Surety Bond Costs Amidst Freight Fraud
Timothy Dooner, host of What the Truck?!?, highlighted Brush Pass Research's latest report on active freight brokerages.
Freight brokerages are reporting a huge spike in surety bond costs, which look to be largely driven by rampant freight fraud. The rising costs are forcing many freight brokerages to reconsider their place in the market.
The Key Issue
Freight brokers in the United States are required by the FMCSA to obtain a $75,000 surety bond, known as the BMC-84 bond, before they can be licensed. This bond serves as a financial guarantee that the broker will comply with industry regulations, including timely payments to motor carriers and shippers.
As freight fraud cases have skyrocketed, so have the costs of these bonds.
Let's break down what's happening:
Rising Bond Costs: The pandemic period saw a nearly 70% increase in licensed freight brokerages, leading to an oversaturated market and higher bond prices due to increased risk.
Fraudulent Activities on the Rise: The industry has witnessed a significant surge in criminal activities, including identity theft and double-brokering, contributing to substantial bond claims.
Impact on Small Brokerages: Smaller firms are particularly hard-hit, struggling to cope with the financial burden and, in many cases, exiting the market.
Read more about this in a contributed blog post we shared on our website a few months ago:
FreightCaviar recently interviewed Mikhail Rasner, President of MiRUnited, about the escalating surety bonds costs, drawing a direct line to rampant fraud in the industry.
"Last year, we paid somewhere in the ballpark of about $18,000," he shared, contrasting it with this year's staggering quote of "$40 grand for the exact same thing." He pointedly attributes the surge to the industry's plague of scamming, a sentiment echoed by his surety providers.
They mentioned the majority of the reason for these increases are because of the rampant scamming that's happening in our industry. - Mikhail Rasner
And he's hearing the same across the industry: "I reached out to a few people... I have a statistical background. I could show very clearly how this is happening over and over again," Rasner explained.
The escalation in freight fraud acts as a primary driver for the increased costs associated with surety bonds. Increased fraudulent activities range from identity theft to double brokering, leaving a trail of financial damage in their wake.
Market Exodus
Craig Fuller, CEO & Founder of FreightWaves, shared that "tender rejections are roughly in line with 2023 numbers". Click here to see his full tweet.
According to findings from Brush Pass Research, the number of freight brokerage businesses that shut down has increased by 10.6% from last year as of March 2024. This means that from 27,684 brokerages that were in business last month, it's down to 27,450 now.
Founder Kevin Hill adds some context to this data, providing percent changes over time.
Industry Adaptations
Freight fraud prevention is becoming a bigger part of the conversation. From enhanced vetting processes to increased reliance on technology for fraud prevention, brokerages are searching for ways to mitigate risks and manage costs.
Certain load boards are also under scrutiny for allowing so many scammers to get through their systems.
Looking Ahead
Prediction: In the coming years, we can expect a tighter, more technology-driven market. The companies that survive and thrive will be those that not only adapt to higher bond costs but also lead the way in fraud prevention and detection.
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AROUND THE FREIGHT WEB
🌪 Tornado Alert. A tornado severely impacted I-265 in Louisville, KY, causing multiple tractor-trailers to overturn. Onedriverwas rescued with minor injuries. Check radar for safety.
🏛 The Oldest Transportation Companies. Discover the fascinating origins of the logistics industry, from ancient postal services to the world’s oldest transportation company, Gebrüder Weiss, still thriving today.
🚧 Traffic Update. I-95 NB in Philadelphia faces closures after a truck collision with a bridge overpass. Efforts by Conrail contractors are underway to repair the damaged bridge by the weekend.
💼 Growth Investment. Sope Creek Capital has spearheaded a recapitalization initiative for Commercial Truck and Trailer Parts, enhancing its distribution and manufacturing capabilities in the U.S.
🤝 Partnership Announcement. Carga Express and Saia are joining forces, promising to broaden their reach and foster growth in the transportationindustry.
🎣 FREIGHT CAVIAR CORNER
Michael Caney, the Chief Commercial Officer at Highway, joined us on the latest FreightCaviar Podcast to discuss how Highway is tackling the $700M fraud problem that is plaguing our industry.
Learn more about freight fraud & how Highway is stopping it by listening on Apple Podcasts, Spotify, or YouTube.
This weeks podcast is sponsored by Levity.ai. *Please support our sponsors. 😉
FREIGHT MEME OF THE DAY
Also, check out:
🎧 The FreightCaviar Podcast. Listen to this week's podcast on Spotify & Apple Podcasts.
🎧 The Bootstrapper's Guide to Logistics is a podcast that highlights and inspires supply chain entrepreneurs, sharing their stories and building a community from the ground up.
Want to get your brand noticed by freight brokers? FreightCaviar can help. Work with us to get your services featured in our newsletter, podcast, and more. Plus, we write great articles about what you do. Get in touch with Paul at pbj@freightcaviar.com to learn more.
I’m Adriana, a writer and editor at FreightCaviar. I’ve covered everything from freight tech to industry lawsuits and market shifts, helping scale us to almost 14K subscribers. My goal: to make logistics stories digestible, clear, and fun to read.
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