For businesses grappling with unpredictable freight pricing and complex market data, the newly launched Cowen/AFS Freight Index offers a potential solution. This collaborative effort between investment firm Cowen Inc. and third-party logistics provider AFS Logistics LLC aims to provide forward-looking pricing insights across multiple transportation sectors.
Strategic Partnership Yields Predictive Pricing Model
Earlier this year, New York-based Cowen Inc. partnered with Louisiana-based AFS Logistics to develop the Cowen/AFS Freight Index. This innovative tool provides institutional clients with predictive pricing analytics for less-than-truckload (LTL), truckload (TL), and parcel shipping (divided into express and ground segments).
The partners leveraged AFS's extensive freight data access across multiple modes and applied advanced analytical techniques including machine learning algorithms. Their models incorporate both historical data and current macroeconomic factors, including recent general rate increases (GRIs) announced by major parcel carriers.
Tom Nightingale, CEO of AFS, emphasized the index's unique forward-looking capability: "We're actually predicting where rates are going, not just where they've been. The breakdown by LTL, TL, and parcel subcategories makes this particularly distinctive."
Nightingale described the launch as AFS emerging from "39 years of stealth mode," highlighting their $10 billion freight audit payment database now being transformed into actionable intelligence through collaboration with Cowen.
Data-Driven Forecasting Methodology
The development process involved six months of intensive work building models and machine learning components, benchmarked against Cowen's investor return database to validate correlations across transportation verticals.
The index will be updated quarterly, with each new release incorporating completed quarter data to refine the machine learning algorithms. Typically released at the beginning of each quarter, the index forecasts trends for the coming period.
Jason Seidl, Cowen's senior analyst for airfreight and surface transportation, noted: "The ability to track and predict industry trends has become crucial for our clients' investment processes. The freight index fills this need by combining machine learning, data science, and AFS's annual transportation spend data."
Initial Findings Reveal Market Trends
The inaugural report highlighted several key insights:
- Composite truckload rates per mile surged 15.2% in Q4
- Average LTL shipment weights have steadily declined since March 2021
- Express parcel rates per piece showed Q3 declines after previous increases
- Ground parcel rates per piece are projected to reach record highs in Q2 2021
Strategic Value for Industry Participants
The Cowen/AFS Freight Index represents more than just another market report—it signifies a new era in freight market analysis with several distinct advantages:
Forward-looking insights: Unlike retrospective analyses, the index provides predictive capabilities that enable proactive decision-making and risk mitigation.
Market segmentation: By differentiating between LTL, TL, and parcel (with express/ground subdivisions), the index offers precise market-specific intelligence.
Data reliability: Built on AFS's comprehensive freight database and enhanced by advanced analytics, the index delivers objective, trustworthy market information.
Investment utility: The index serves as a valuable resource for investors evaluating transportation sector opportunities and company performance.
Future Development and Market Factors
Plans call for quarterly index updates with continuous model refinement to enhance predictive accuracy. As the database grows, the machine learning algorithms will evolve to better reflect market dynamics.
Understanding key freight pricing determinants enhances the index's utility. Primary factors include:
- Supply-demand dynamics
- Fuel price fluctuations
- Labor costs
- Capacity constraints
- Seasonal demand patterns
- Regulatory changes
- Macroeconomic conditions
The Cowen/AFS Freight Index provides market participants with a powerful new tool for navigating the complexities of modern freight markets, offering both immediate insights and long-term strategic value.