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Truck rates remain strong as various factors affect supply and demand

by Tim Linden | August 30, 2010
Many different factors affected the supply and demand of trucks in the fresh produce business this year, but overall the rates remained fairly strong in the face of rising costs.

Speaking with The Produce News Thursday, Aug. 19, Cary Crum, president of Sierra Agricultural Transportation Inc. in Visalia, CA, said that the rate structure from California to the Northeast was in the $6,500 to $8,500 range. "I don't see any real changes in the next 30 to 60 days," he said. “Maybe when we get into October there will be less demand, but I’m not sure.”

Mr. Crum said that the rates have remained fairly high, despite some factors that would seem to have created downward pressure. “This summer, produce business has been slow and yet rates have remained higher than you would have thought.”

He added that the opening of refrigerated railcar service from Delano, CA, to points east should have also alleviated demand and resulted in lower freight rates. “Railex is moving two to three trains per week from Delano. They are specializing in [less-than-a-truckload volumes], so you would have thought that they would have an impact on the price [of freight], but they haven’t.”

He theorized that many truckers are avoiding California because of new regulations (see Bureaucrats and politicians affecting produce shipments with regulatory decisions, this page), so the increased supply of railcars merely made up for the gap rather than creating an oversupply of equipment. “I don’t think it is going to take much for these rates to jump. If we have an increase in demand, [freight] rates will increase quickly.”

Endorsing a similar philosophy was Mike Supeck, owner of Synergy Worldwide, a truck brokerage operation in Medina, OH. “My gut feeling is we are going to see an extended time period of demand exceeding supply [of trucks].”

He said that for a long time, truckers have been scraping by while getting a rate of about 90 cents to the mile, which is not enough to pay the bills. Consequently, the trucking industry has lost a lot of equipment and drivers, but the slow economy has masked the effects. “As the economy strengthens — and we are seeing signs of it now as we are booking some shipments that we haven’t seen in the last couple of years — there is going to be a long steady period where demand exceeds supply. It could last a couple of years until [the supply of trucks] catches up again.”

Mr. Supeck said that today’s freight rates are still all over the board depending upon where a load is being sent. “Right now, you could get $3 per mile to go from Tennessee to Miami, but only 90 cents coming back.”

Ken Adams, general manager of transportation for Pathfinder Logistics in Los Angeles, said in mid-August that truck availability in California was “moderately good” with rates also in the normal range. Unfortunately, he said that fuel prices were on the rise but were not affecting rates because it was difficult for truckers to pass on the increased cost under current economic conditions.

Interestingly, Mr. Adams said that Pathfinder typically does a lot more business in the second half of the year than the first half because it does a lot of business hauling potatoes and onions from the Northwest down into California. “For the second half of the year, we think the rates might climb because there is less equipment available.”

He said that the new California Air Resource Board regulations have caused some truckers to avoid California, which is adding to the demand-exceeds- supply situation.

Mr. Crum, who also does a lot of truck business in the Northwest, said that the increase in both refrigerated intermodal and refrigerated boxcar business via the railroad has affected the freight-rate structure from that region of the country. That is especially true on loads headed east, which must compete with railroad shipments. Rate quotes for truck shipments from that region have had to be tempered because of the competition. Consequently, cross- country rates from the Northwest should remain fairly steady even as shipments increase with the beginning of the apple, onion and potato seasons.

(For more on transportation and logistics, see the Aug. 30, 2010, issue of The Produce News.)