Indiana Companies Uncertain About Trucking Futures Exchange
Representatives from One Southern Indiana and the Indiana Motor Truck Association will also take part in Monday's event.
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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowTennessee-based startup TransVix believes it can transform the U.S. trucking industry by creating the nation’s first trucking futures exchange. The idea is so new to Indiana trucking companies that some executives are scratching their heads, pondering if they would use it and how it could impact their business landscape—already heavy with challenges. Spot prices in the trucking industry are riddled with volatility; TransVix believes a futures exchange will help companies manage the price risk that has long been part of hauling freight.
Eli McCormick, president and chief executive officer of Vincennes-based Bestway Express says, generally, trucking companies can be divided into two categories: those that haul for the spot market, and others that operate in the contractual market. McCormick believes companies operating in the spot market would benefit most from a trucking futures exchange.
“In the spot market, pricing can change as much as 40 percent or so within a given week. That’s a big number if you think about it,” says McCormick. “For example, the lane from Los Angeles to Dallas—one week you might be getting $1.50 per mile, but then for whatever reason, that can change based on a number of things, capacity being one of them. The following week, that rate might be $1.25.”
TransVix says those swings in line haul freight rates can be caused by weather, seasonality, regulations and macroeconomics. It believes a trucking futures exchange would provide trucking companies, shippers and third-party logistics providers (3PLs) hedging options to manage price risk. The company is led by “serial entrepreneur” and “trucking alum” Craig Fuller, who has created two businesses that serve the long-haul trucking industry.
McCormick says Bestway Express operates primarily in the contractual market; he believes 3PLs would be most interested in a trucking futures exchange.
It’s a similar perspective at Indianapolis-based Venture Logistics, which operates about 1,000 trucks, almost entirely in the contractual market. Venture Logistics President Greg Eddy believes a trucking futures exchange is an “opportunity for companies with the scale or data intelligence to protect themselves against spot market spikes.”
“Unfortunately, guys like myself and other carriers—without the scale or data intelligence who have all the skin in the game with the assets, ever-rising variable costs and margin pressures—are subjected to yet another instrument initiated by people who have no skin in the game and want to prosper in an already-commoditized marketplace.”
TransVix’ website says it is currently seeking approval from the U.S. Commodity Futures Trading Commission and aims to be operating by the fourth quarter of 2017.
“I understand the concept and possibly the need for it,” says McCormick. “We’re in a business where every penny counts. If you have volatility in the market and there’s any possible way, depending on your size, that you can hedge on anything, at the end of the day, there’s probably a need for it. Like anything else, it’s probably going to benefit some and be a disadvantage to others.”
McCormick says he understands how the trucking futures exchange could be beneficial to specific companies in the trucking industry.