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Stable transportation rates predicted through spring

The typical heavy Christmas pull for fruits and vegetables combined with the weather issues and reluctance of some drivers to hit the road over the holidays caused freight rates to spike a bit through December. And while there was some lingering effect with $7,000 cross country rates still being quoted in early January, industry experts were expecting adequate supplies and a small drop in rates during the late winter/early spring period.

“There were some $7,000 raters, or slightly under, into New York this week,” said Lance Dichter, general manager of LD Logistics LLC, in Bronx, NY, on Tuesday, Jan. 14. “But I expect them to take a dip over the next few days and remain fairly steady through February and March.”

He said with the higher volume from the West Coast as May approaches rates will probably get higher but it is far too early to predict just how high they will go. “There are always shortages in the summer and the rates will go higher, but at this point I can’t tell you how high they will go.”

Dichter reviewed some potential impacts and didn’t note any overly alarming situations. Fuel rates have been steady or dropping for the past several months and the forecast is for rate stability throughout 2014. There have also been worries that as the economy heats up, there will be a shortage of drivers as the transportation and construction industries pull from the same labor market. “When supplies are heavy there is a shortage of trucks, but I can’t say that’s because of the economy getting better. Maybe, but it happens every year.”

He did say that the new hours of service for drivers that went into effect in July of 2013 have had an impact, especially on loads originating on the West Coast on Wednesdays. “It used to be that you could load on Wednesday and get into the Bronx (Hunts Point) on Sunday morning pretty easily. That’s no longer the case unless you have team driving.”

Dichter said solo drivers loading on Wednesday can’t get into the Bronx until Sunday night, which doesn’t fit the needs of some operations. Consequently on Wednesdays everyone wants a truck driven by a team, which puts a premium on that haul. “If everyone wants a team situation and only half the trucks are driven by teams, you can see the problem.”

But Dichter said another shortage-causing situation — California’s stricter emission standards — no longer appears to be causing a problem. He said truckers have either adapted their engines and refrigeration units to comply with California law or they avoid the state. Initially, truckers were either reluctant to comply or didn’t know the regulations. But newer trucks are basically in compliance by their nature and older trucks have either already been retrofitted or they are working other corridors.

Paul Kazan, founder of the Bronx, NY-based Target Interstate Systems Inc., and the head of its produce division, said the new hours of service have “absolutely” had an impact on produce transportation. He believes the government-mandated shorter service hours were designed to make trucks a bit less attractive in comparison to railroads. He believes the government is trying to move more freight via the rails and these service hours close the gap on arrival times for some commodities in some markets. While Kazan believes that the vast majority of fresh produce will continue to be hauled over the road, he said the railroads can now make a case for some of the hardier items, with only one day difference in service.

He said shippers and receivers aren’t always aware of the impact delays have on a truckers ability to drive. “If he is waiting at the dock for a couple of hours to load, that counts as service time. And the same thing happens at the other end if he has to wait to unload.”

In principle, Kazan agrees that for highway safety you don’t want a driver on the road for an extended period of time without rest. But he argues that the rules are black and white and don’t take in some of the nuances of hauling freight across country. For example, sitting in your cab resting while you are waiting to load isn’t the same as driving on the open road, yet it can be treated the same.

Both Kazans said they are expecting normal transportation shortages this summer but nothing out of the ordinary. Paul said the improved economy has created more shipments of all types of products which means there will be times when trucks are tight and thus they will cost more. But he does believe fuel rates will remain steady throughout 2014 and may even drop.

Evan said there probably will be a shortage of drivers this summer as there seems to be every summer. He does not necessarily believe the stronger economy will create that situation as he said the driver shortage occurred even during the height of the most recent recession. Paul Kazan said driving a truck cross country is a difficult job that requires many hours away from the family, and so there are always truckers coming in and out of the business as their individual situations dictate. “Turnover among drivers has always been very high and I’m sure that will continue,” he said.