There’s been a steep inventory depletion in Q4 2025 as companies are keeping less inventory due to tariff fears and high costs, ITS Logistics reported in its US Distribution and Fulfillment Q4 Index. In addition, the Logistics Managers’ Index noted that inventory levels dropped to 35.1 in December, a 17.4-point month-over-month decline that exceeded typical seasonal drawdowns.
“This release of warehouse capacity was driven primarily by inventory behavior, not new supply, creating short-term rate options for shippers and margin pressure for operators,” said Ryan Martin, president of distribution and fulfillment for ITS Logistics.
Martin calls this a “velocity cycle” rather than a “storage cycle,” wherein “firms reduced total stock while maintaining or repositioning space to support more frequent replenishment and downstream service.”
The inventory status, he explained, can also be due to U.S. tariffs, existing inventory carrying costs, and retailers trying to keep inventory lean, while wholesalers and others carry the larger burden.
DAT One’s data during the week of Jan. 11-17, 2026, echoed this inventory behavior: after a surge of post-holiday stocking, load posts dropped 20% to 2.67 million, with rates declining across all three equipment types.
California’s warning signal
Dean Croke, industry analyst at DAT Freight & Analytics, also highlighted that the U.S. Department of Agriculture reported truck shortages in all five California produce regions last week.
DAT Freight & Analytics/US Department of Agriculture
This is a significant anomaly, Croke explained, as mid-January normally represents the low point in the state’s produce-shipping season, when ample truckload capacity is typically available. Normally, the USDA reports that only the Imperial Valley experiences tightness as reefer capacity migrates there.
This year, carriers are avoiding the California winter vegetable market, Croke said, creating a shortage of trucks before the peak season even begins.
Rates are always low this time of year, Croke said, but the big difference is the increase of immigration enforcement in California.
“With the bulk of produce harvests still two months away, tighter capacity could make this an unprecedented produce season,” he noted.
But immigration enforcement isn’t the only reason carriers are avoiding California.
Croke explained that fleets could be avoiding the state as rates haven’t kept pace with costs. In addition, Southern California is also known for capacity-killing turn times and receiver congestion, and carriers are choosing better-paying freight with fewer delays in Yuma, Texas, or Florida’s winter produce programs.
Croke is tracking three specific indicators that will determine whether California’s capacity tightness will spread to other regions: how high reefer rates go out of Nogales, AZ, to LA and SFO reefer rates that are already 32% higher year over year; upcoming Valentine’s Day demand for roses out of Miami; and the February start of strawberry shipments from Lakeland Florida.
These three events lead to the start of the 2026 produce season in March and April in the Southeast, followed by the Central Valley and Salinas in California.
“What we’re seeing now will have been a catalyst,” Croke noted.
Capacity loss driven by regulatory enforcement
California’s truck shortage also reflects a broader loss of trucking capacity by regulatory enforcement that analysts note is impacting the market.
Regulatory enforcement continues to be one of the forces tightening truckload capacity, with some big fleets hopeful that it could improve market conditions by removing competitors and helping to boost rates.
“Capacity reduction is clearly under way,” said Knight-Swift (CCJ Top 250, No. 3) CEO Adam Miller, on a call with analysts regarding its Q4 2025 earnings results. “Regulatory enforcement of qualifications and safety standards was arguably the most welcome development in 2025 for our industry."
The truckload market saw generally stable demand during the fourth quarter, Miller said, but lacked seasonal uptick in demand until late in the quarter.
“While we did see some improvement in overall demand and a tightening spot market in December, it was a reduction in available capacity that seemed to be the primary driver of the tightening market.”
