Digital Edition

July 9 2018

Issue link:

Contents of this Issue


Page 39 of 55

40 The Journal of Commerce | July 9 2018 Surface Transportation US WHOLESALERS AND shippers stocking shelves with produce are grappling with truck rates that have soared as much as 30 percent from last year, as the produce season in California and Mexico kicks into high gear. Refrigerated truck rates have fol- lowed the same industrywide trend: Spot market prices are up 20 to 30 percent year over year. Load-to-truck ratios are elevated because there aren't enough trucks to handle the demand, which gives the trucker leverage to prioritize shippers paying a higher rate. The electronic logging device (ELD) mandate has lowered productivity and increased transit times while the Cass Freight Index shows shipments rose 12 percent in May. In other words, more trucks are necessary to transport the same volume even before handling new freight. There was an agricultural ex- emption to ELDs, but refrigerated carriers installed the devices anyway because they also haul non-ex- empt commodities. The US Federal Motor Carrier Safety Administration (FMCSA) announced on May 31 that truckers hauling agricultural products wouldn't have to begin their hours-of-service clock within a 150-air-mile radius of the loading site and the clock would only start the minute they crossed the limit. Still, market conditions for the produce industry are the same. Truck rates out of Mexico through the No- gales, Arizona, crossing are up 24 percent year over year when combining all destinations tracked by US Department of Agriculture (USDA) data. From Imperial and Coachella, California, prices are up 25 percent; from Oxnard, California, 22 percent; from Salinas, California, 18 percent; and from Santa Maria, California, they are up 33 percent. The USDA data covers the week through June 13. The federal data is consistent with the weekly numbers from load board operator DAT Solutions. The national refrigerated spot rate soared 28 percent year over year for the week ending June 9, and 23 percent when rising diesel prices were excluded. "At one point this year, I paid $12,000 for a truck. Last year for the same load and same route, it would've cost me $9,000," said Peter Pelosi, director of transportation for New York-based A&J Produce. It's puzzling because produce volumes have been relatively un- changed from last year. "What we see is a spot market load is down, but overall activity seems to be up," DAT analyst Mark Montague said. "There has been a shift on the longer hauls to intermodal in some cases. Some of the freight has gone to dedicated contract carriage, and some has gone to power only." (Power represents shipments in which the trucker only supplies a tractor and is hooked onto the trailer at the loading site.) Ken Lund, vice president of La Canada, California-based logistics pro- vider Allen Lund, said volumes were up 3 percent in June versus June 2017, following a lull in the late spring. "We had storm after storm in the East, so people didn't go out and buy produce and that tamped down a lot of demand," Lund said. "You had this pent-up demand that really came out in May and now June." The shortage of trucks also tipped the scales of supply and demand, he noted. The USDA found there were slight or moderate truck shortages since the end of May at the major US-Mexico border crossings in Texas and Arizona, and out of California. "When produce season is a little slower in other parts of the US, trucks redeploy to California. Those are all long-haul routes out of California. When they go from Fresno to Boston, the trucks are out of circulation a lot longer than they would be if they were running out of the Southeast. So even though the volumes aren't there, the miles are," Montague said. Who is the loser in all of this? Those buying the transportation. Unlike other sectors, the receiver pays to transport fruits and vegetables from the farm. The receiver could be food brokers, wholesalers, coopera- tives, or a combination of the three. It's these middlemen that suffer mar- gin erosion because cost-conscious retailers negotiate hard with them. "No one cares that you paid $12,000 to move strawberries, it's all about what our customers are will- ing to pay: supply and demand. But we can't step away and say 'we're not going to load this particular item' be- cause that's not how [A&J Produce] was able to grow over the last 40 years," Pelosi said. Inflation is a problem for pur- chasers of transportation, but one truckload executive told The Journal of Commerce that the business climate won't flip until there is a macroeconomic disruption. JOC email: twitter: @ariashe_joc Cold reality for ag shippers Refrigerated trucking rates soar as produce season shis into high gear By Ari Ashe Fresh produce is transported by trucks on a California highway.

Articles in this issue

Links on this page

Archives of this issue

view archives of Digital Edition - July 9 2018