Imagine running an e-commerce platform where fluctuating logistics costs keep you up at night. Parcel shipping rates swing unpredictably, less-than-truckload (LTL) prices seem impossible to pin down, and full truckload (TL) rates resemble a rollercoaster ride. The TD Cowen/AFS Freight Index serves as a "shipping cost weather forecast," helping businesses anticipate market trends and optimize logistics budgets.
This joint venture between New York investment firm TD Cowen Inc. and logistics specialist AFS Logistics LLC has become the industry's barometer since its October 2021 debut. By analyzing vast datasets, it predicts pricing trends across parcel, LTL, and TL transportation modes, offering valuable decision-making insights.
TD Cowen/AFS Freight Index: The Logistics Industry's 'Data Compass'
The index's core strength lies in its sophisticated data analytics. AFS Logistics contributes extensive freight data across transportation modes, while TD Cowen applies machine learning to extract meaningful patterns. Their collaboration produces a precise forecasting model that incorporates historical data, macroeconomic factors, and microeconomic indicators—including General Rate Increase (GRI) announcements.
AFS Logistics CEO Andy Dyer notes: "While Federal Reserve rate cuts signal long-term optimism for TL and LTL carriers, our data suggests minimal Q4 impact on freight rates. The parcel sector faces additional holiday season complexities, with carriers offsetting pricing adjustments through discounts amid weak demand."
Parcel Shipping: Escalating Discount Battles and Declining Fuel Surcharges
The index reveals an intense discount war in the parcel sector due to sustained demand weakness. Carriers are expanding discount programs across services, even affecting fuel surcharges.
Q3 saw carriers' fuel surcharges increase 2.3%, but "substantial discounts completely negated this rise, resulting in a 6.8% quarterly decline per package." The ground parcel rate index plummeted from 26.2% above 2018 baseline in Q2 to 20.3% in Q3—the lowest since 2021—driven by 2.4% higher average discounts and 7.1% lower per-package surcharges.
For Q4, the report anticipates continued pricing pressure during peak season, with major clients securing growing discounts. The ground parcel index should edge up to 21.5% (still down 1.8% year-over-year). Express parcels show sharper declines, with the rate index falling from 4.5% to 1.6% in Q3, projected to drop another 0.2% in Q4.
LTL Shipping: Declining Weights Meet Resilient Pricing
The LTL sector presents a contrasting picture. While average shipment weights decreased 1.9% quarterly, carriers maintained pricing discipline—costs per LTL shipment dipped just 0.6% due to longer hauls and effective rate management.
Q4 projections show LTL rates 65.0% above 2018 baseline (up 0.5% quarterly, 2.2% annually), marking four consecutive quarters of year-over-year growth amid persistent upward pressure.
TL Shipping: Weak Demand Meets Excess Capacity
The index suggests Fed rate cuts won't immediately affect TL pricing, with the market still grappling with soft demand and surplus capacity. Q3 marked the seventh straight quarter of year-over-year linehaul cost declines, though rates remain 12%-14% above pre-pandemic levels.
The Q4 TL rate index should hover near recent lows, inching up from 4.6% to 4.9% above 2018 baseline.
Market Divergence Demands Strategic Flexibility
The TD Cowen/AFS Freight Index highlights a fragmented freight market: parcel shipping dominated by discounting, LTL exhibiting pricing resilience, and TL struggling with oversupply. Businesses must adapt strategies accordingly—e-commerce operators can leverage parcel discounts, LTL shippers should budget for potential increases, while TL carriers need innovative solutions to navigate challenging conditions.
This analytical tool serves as a strategic roadmap, helping companies uncover efficiency gains and cost-saving opportunities in complex market conditions.