Chart of the Week: Reefer Outbound Tender Reject Index, Truckstop 7-day all-in Reefer Spot Rate, USA  SONAR: ROTRI.USA, TSTOPRRPM.USA

Spot rates for refrigerated (known as reefer inside the industry) truckloads continue to see upward pressure as contracted load acceptances increase this summer — leading to a polarizing experience for shippers. 

Spot rates for temperature-controlled loads have trended higher since the end of April, increasing approximately 13% over the past two and a half months, according to the average of’s top 100 lanes. Reefer contracted tender rejection rates have fallen from 43% to 33% over the same stretch, indicating the contract and spot markets are moving in two different directions — but are they? 

Tender rejection rates are the percentage of loads being rejected by carriers that are submitted electronically by shippers. Most of these transactions are dependent on having an existing rate agreement, or contracted rate, in place. Rejection rates are a measure of carrier willingness to offer capacity at these contracted rates. 

The higher this percentage gets, the tighter capacity is expected to be due to carriers either having more demand than they can handle or shippers being willing to pay higher than the contracted rate on the spot market. 

Most of the time, the tender rejection rate leads the spot market rate by a few days at least, and rarely do they move in opposite directions. This summer, spot rates appear to be moving higher as rejection rates fall. There are a few reasons for this temporary divergence. 

Fuel prices

The first thing to note is that the spot rates include fuel, and fuel cost fluctuations can heavily influence the direction of an all-inclusive rate, such as the ones presented in the chart. Fuel costs have surged over 40% since November, increasing about 7% from the end of April till now. This explains about 10% or 4 cents of the 43-cents-per-mile increase, which is not substantial enough to see such a strong divergence. 

Increasing contract rates

Contract rates have been increasing over the past several months and are certainly contributing to the divergence between spot rates and tender rejection rates. As contract rates increase, rejection rates tend to fall as they approach the present market value depending on how much demand exceeds capacity. 

Contract rates for reefer have risen 7%-10% year-over-year, according to FreightWaves contract rate data. A large amount for almost any other year, but a little underwhelming compared to the van market. There is a bit of a weakness here due to the fact many reefer carriers have contracts for nonrefrigerated freight to fill their backhaul lanes, implying the increases are probably much higher in more seasonal lanes where demand is much higher than supply. 

Inconsistency and service

This leads to the third and potentially most important factor creating the divergence: the nature of the spot market itself. Shippers do not use the spot market just when capacity is tight. They also use it when they do not have consistent freight to move and when service is critical. A lot of the freight that requires temperature control is seasonal — experiencing surges at specific times of the year. 

Since the windows of demand for refrigerated freight are smaller than most others, shippers do not form as many long-term contract rate agreements. The most visible example of this type of freight is produce.

Spot rates for produce are currently at historic levels looking at the USDA reported rates in various California origin lanes, with some prices exceeding $10,000 per load to the East Coast. Note that there are long periods of no report intermittently as harvests only occur at certain times of the year. 

There is limited shelf life and storage capacity at the origin for produce, and service is critical. With over a third of the consistent freight being rejected, shippers have no choice but to bid up the price to guarantee capacity and service. There is also a level of sensitivity to the market after an extended period of tightness that plays a role in spiking spot rates. Shippers will inflate the rate faster when they feel capacity is limited. 

In other words, the spot market is much more sensitive to wild swings than its dry van counterpart. Inevitably rejection rates and spot rates will directionally come back into alignment, but this divergence is largely a byproduct of an extended market tightness leading to an exaggerated reaction as shippers have become accustomed to an era in which resources are scarce. 

About the Chart of the Week

The FreightWaves Chart of the Week is a chart selection from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on SONAR to help participants visualize the freight market in real time. Each week a Market Expert will post a chart, along with commentary, live on the front page. After that, the Chart of the Week will be archived on for future reference.

SONAR aggregates data from hundreds of sources, presenting the data in charts and maps and providing commentary on what freight market experts want to know about the industry in real time.

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