Freight Market Cycles Explained: A Broker's Survival Guide

Freight market cycles are predictable patterns of boom and bust that occur over 2-3 year periods in the trucking industry. Each cycle passes through four distinct phases: Trough (low rates, excess capacity), Recovery (rising rates, tightening capacity), Peak (high rates, capacity shortage), and Collapse (falling rates, expanding capacity). To survive these cycles, freight brokers must adapt their strategies for each phase – building carrier relationships during troughs, securing capacity during recovery, building financial reserves during peaks, and focusing on operational efficiency during collapse phases.

What Are Freight Market Cycles and Why Do They Matter?

Freight market cycles are periodic fluctuations in freight rates, capacity, and demand that occur in relatively predictable patterns. These cycles matter tremendously because they directly impact broker margins, carrier availability, and overall business strategy. Understanding where we are in the cycle helps brokers make better decisions about:

• Pricing strategies: When to push for higher margins vs. when to prioritize volume
• Carrier relationships: When to focus on retention vs. when to expand your carrier base
• Customer acquisition: When to aggressively pursue new business vs. when to strengthen existing accounts
• Technology investments: When to invest in efficiency tools to maintain margins during downturns

Here's what a typical freight market cycle looks like:

The Four Phases of Freight Market Cycles

1. Trough (Where we are in 2025)

Key characteristics:

• Low freight rates (often below carrier operating costs)
• Excess capacity (trucks sitting idle)
• Carriers exiting the market
• Minimal tender rejections (<5%)
• Spot rates 15-25% below contract rates

Duration: Typically 6-12 months

During the trough phase, which we're experiencing in early 2025, carriers struggle to find profitable freight. Spot rates fall below operating costs for many carriers, leading to business failures and capacity exit. For brokers, margins are compressed as shippers expect continually lower rates.

2. Recovery

Key characteristics:

• Gradually increasing freight rates
• Tightening capacity as freight volume grows
• Rising tender rejection rates (5-12%)
• Spot rates approaching contract rates
• Carriers becoming more selective about loads

Duration: Typically 6-10 months

As economic activity increases, freight volumes rise faster than capacity can return to the market. This creates a gradual tightening that smart brokers can capitalize on by securing capacity before rates spike dramatically.

3. Peak

Key characteristics:

• High freight rates (often 25-40% above trough rates)
• Severe capacity shortages
• High tender rejection rates (15-25%+)
• Spot rates exceeding contract rates by 15-30%
• Carriers dictating terms and cherry-picking freight

Duration: Typically 8-14 months

During peak phases, carriers hold significant leverage. Shippers scramble to move freight at almost any cost, and brokers with strong carrier relationships thrive. However, this is also when many brokers make the fatal mistake of overexpansion, assuming the good times will continue indefinitely.

4. Collapse

Key characteristics:

• Rapidly falling freight rates
• Expanding capacity (often from equipment ordered during peak)
• Declining tender rejection rates (dropping below 10%)
• Spot rates falling faster than contract rates
• Intense competition among brokers and carriers

Duration: Typically 4-8 months

The collapse phase occurs when capacity expansion (often from equipment ordered 6-12 months earlier during the peak) coincides with slowing freight demand. Rates can fall dramatically in a matter of weeks, catching unprepared brokers off guard.

Key Indicators That Signal Cycle Position

To determine where we are in the freight market cycle, monitor these critical indicators:

Indicator	Trough	Recovery	Peak	Collapse
Tender Rejection Rate	<5%	5-12%	>15%	Falling, 5-15%
Spot vs. Contract Rate	Spot 15-25% below	Narrowing gap	Spot 15-30% above	Gap narrowing rapidly
Load-to-Truck Ratio	<3:1	3-5:1	>5:1	Falling quickly
Truck Orders	Very low	Increasing	Very high	Starting to fall
Carrier Failures	High	Decreasing	Very low	Beginning to increase
Broker Margins	Compressed, <10%	Improving, 12-16%	Strong, 15-20%+	Rapidly compressing

I closely track the Outbound Tender Rejection Index (OTRI) from FreightWaves and the Cass Freight Index as leading indicators. When tender rejections start climbing above 5% consistently, that's often the first sign of recovery.

Historical Freight Cycles and Lessons Learned

Looking at recent freight market cycles provides valuable context:

2018-2019 Cycle

The market peaked in 2018 with spot rates reaching record levels, followed by a significant downturn in 2019. Many brokers who expanded aggressively during the peak faced bankruptcy when rates collapsed.

Key lesson: Build financial reserves during peak phases to weather the inevitable downturn.

2020-2022 COVID Cycle

The pandemic created unprecedented volatility – an initial collapse in March-April 2020, followed by an extended two-year peak as consumer spending shifted from services to goods.

Key lesson: External shocks can create "super cycles" that last longer than typical patterns.

2022-2024 Post-Pandemic Correction

The market experienced a prolonged trough as excess capacity (added during the COVID boom) coincided with normalizing consumer spending patterns and inventory correction.

Key lesson: Downturns following extraordinary peaks tend to be deeper and longer than normal cycles.

Broker Strategies for Each Cycle Phase

Trough Phase Strategies (Current Phase)

1. Focus on carrier relationship building

   • Offer consistent freight to your best carriers
   • Provide quick pay options (at reasonable rates)
   • Be transparent about available opportunities

2. Differentiate on service, not just price

   • During troughs, every broker is competing on price
   • Superior communication and problem-solving become key differentiators

3. Invest in technology

   • Implement efficiency tools to maintain margins despite lower rates
   • AI-powered tools for carrier sales can help you move more freight with the same team size

4. Target less cyclical freight

   • Food and beverage, healthcare, and government freight tend to be more stable
   • Consider specialized niches with less competition

Recovery Phase Strategies

1. Secure capacity ahead of rate increases

   • Lock in favorable rates with carriers before spot rates surge
   • Build mini-core carrier programs for key lanes

2. Review and adjust customer contracts

   • Begin gradually increasing rates as the market tightens
   • Implement fuel surcharges and accessorials if they were waived during the trough

3. Focus on strategic customer acquisition

   • Target shippers who value service during tight markets
   • Position your brokerage as a capacity solution, not just a price play

Peak Phase Strategies

1. Build financial reserves

   • Set aside 3-6 months of operating expenses
   • Resist the urge to distribute all profits during good times

2. Be selective with new business

   • Focus on freight that aligns with your carrier network
   • Avoid customers who are likely to leave when the market turns

3. Invest in carrier retention

   • Develop programs to reward loyal carriers
   • Provide value beyond just high rates

4. Prepare for the inevitable downturn

   • Begin scenario planning for when rates fall
   • Consider locking in longer-term agreements with key shippers

Collapse Phase Strategies

1. Move quickly to adjust pricing

   • Don't hold onto peak pricing models as the market falls
   • Be transparent with carriers about market conditions

2. Focus on operational efficiency

   • Review all expenses and eliminate non-essential spending
   • Implement technology to automate routine tasks

3. Double down on customer service

   • As rates fall, service becomes a key differentiator
   • Regular communication with shippers becomes critical

Common Mistakes Brokers Make During Cycles

1. Overexpansion during peaks

   • Adding fixed costs (staff, office space) based on peak revenue
   • Taking on customers that only make sense with peak-level margins

2. Excessive cost-cutting during troughs

   • Cutting investments in technology and training
   • Damaging carrier relationships by squeezing rates too aggressively

3. Ignoring early cycle indicators

   • Missing the first signs of recovery or collapse
   • Reacting too late to changing market conditions

4. Failing to adapt strategies for different phases

   • Using the same approach regardless of market conditions
   • Not having contingency plans for cycle shifts

Technology Solutions for Navigating Market Cycles

The most successful brokers use technology to adapt quickly to changing market conditions:

1. Market intelligence tools

   • Rate benchmarking solutions
   • Freight demand forecasting
   • Capacity availability monitoring

2. Automated carrier sourcing

   • During tight markets, speed is critical for securing capacity
   • AI-powered sourcing tools can identify available carriers faster than manual processes

3. Strategic bidding technology

   • Algorithmic pricing adjusts to market conditions
   • Automated negotiation tools maintain margins in challenging markets

4. Carrier relationship management

   • Systems to track carrier preferences and performance
   • Tools to identify and reward your most reliable partners

The Current State of the Freight Market (2025)

As of Q1 2025, we remain in a trough phase, though early indicators suggest we're approaching recovery:

• Tender rejection rates have increased from 3.2% to 4.7% over the past two months
• The gap between spot and contract rates has narrowed to around 12-15%
• Small carrier failures have decelerated
• Truck orders remain at historically low levels
• Inventory-to-sales ratios have normalized

Based on historical patterns, I expect we'll see the early recovery phase begin in Q2-Q3 2025, with rates potentially reaching a new peak sometime in 2026. However, this recovery may be more gradual than previous cycles due to ongoing economic uncertainty.

How Smart Brokers Are Preparing Now

The most strategic brokers are using this trough period to position themselves for the coming recovery:

1. Building technology infrastructure

   • Implementing TMS systems with advanced analytics
   • Adopting AI tools for carrier sourcing and negotiation

2. Strengthening carrier relationships

   • Creating preferred carrier programs
   • Offering consistent freight to keep core carriers engaged

3. Reviewing and optimizing customer mix

   • Focusing on shippers with freight that attracts quality carriers
   • Implementing strategic prospecting to diversify customer base

4. Training teams on cycle management

   • Educating staff about cycle indicators
   • Developing playbooks for different market phases

Conclusion

Freight market cycles are inevitable, but they don't have to be devastating. By understanding where we are in the cycle and adapting your strategies accordingly, you can not only survive but thrive through each phase. The brokers who flourish long-term aren't necessarily those who make the most during peaks, but those who position themselves strategically during troughs to capitalize on the coming recovery.

At Foreigh, we've built our Strategic Bidding and Carrier Sales Automation tools specifically to help brokers navigate these challenging cycles – allowing you to move twice the freight with the same team size regardless of market conditions.