Trucking Freight in the stock market through “futures”

Wednesday, March 27, 2019

A futures contract is an agreement that obligates the contracting parties to buy or sell a certain number of goods or securities at a future and determined date, and with a price established in advance. These contracts are negotiated in what is called the forward market or futures market. Futures contracts are a category within derivative contracts.

From now on, companies can start negotiating cargo futures contracts through Nodal Exchange, FreightWaves and DAT. These three organizations have come together to launch the first commodity transport futures exchange by road, which will open on March 29.

This modality will allow buyers and sellers to negotiate financial contracts for freight rates, helping them to cover (protect) their exposure to the spot rate. In other words, take care of the volatility in costs. By protecting the volatility of transport costs, you implicitly take care of all the factors that affect this, such as the demand, supply and price of fuel.

The project has been in preparation for three years and follows a series of recent presentations in seven major markets designed to inform potential participants of the need for a truckload futures market and how it will work. The initial contracts will be based on seven lanes between the main cargo transport markets, three regional lane baskets and an average national truck load rate, according to the companies.

Transportation costs are currently the biggest risk to earnings for 40% of S & P 500 companies. “Trucking Freight Futures” as they will be called will be financially liquidated contracts quoted in Nodal Exchange, a contract market regulated by the Commission of Commodity Futures Trading (CFTC) of the United States. The contracts will be settled through Nodal Clear, the clearing house of Nodal Exchange and the central counterparty of Nodal Exchange transactions.

By incorporating the hedging of the financial market into the transportation industry, it gives an opportunity for companies, with detailed analysis, to determine the type of coverage so that the costs that come will not affect their margins.

In DICEX we have the logistics and transport department, as well as the consulting department, these together offer clients and suppliers advice and detailed information on the different topics of interest in the transport industry to contribute to the success of their companies. The growth of our customers is our growth.