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Typical winter situation prevails in transportation industry

With the holiday season in the rearview mirror, truck supplies are currently sufficient to handle demand for refrigerated commodities, and that should remain the case until produce supplies pick up over the next several months.

"The freight situation is a little quiet right now," Lance Dichter, president of LD Logistics in the Bronx, NY, said in mid-January. "The weather has been cold in California, which has cut down on production. Right now trucks are plentiful and cheap."

Rob Goldstein, president of Genpro Inc. in Rutherford, NJ, echoed those comments. He said this is typically a slow time of year, and that is the case in early 2013.

The bigger question is what will be the situation as the weather heats up and produce supplies increase? Will the capacity be there to handle the peak periods? Also of note are whether new emission laws coming into play in California could affect supplies and rates for the Golden State?

Mr. Goldstein said that the improving economy does appear to be having an impact on the purchasing of equipment. He said that older equipment is turning over at a faster clip, indicating that newer equipment is being purchased and the nation's truck fleet is being upgraded.

Through the recession years of 2009 and 2010, it was widely reported that new equipment purchases lagged well behind replacement levels. The rule of thumb in the transportation business is that the industry needs roughly 200,000 new tractor trailers every year to replace those that are aged out or totaled by crashes.

In those two years, barely half that number was achieved. Equipment purchases did pick up in the last two years but still did not reach replacement level. That resulted in an older fleet that has more downside for refrigerated hauls than in the dry freight business.

Mr. Dichter said that rules in California from the state's Air Resource Board do have the effect of forcing off the road older reefers that cannot comply with the new regulations. He said that the need to purchase new tractor-trailers could have the effect of decreasing overall equipment for fresh produce hauls and increasing the freight rate over time.

But the two transportation experts interviewed for this story said that California's rules do not result in fewer trucks specifically for that market.

Mr. Goldstein said that a trucker in the business of hauling perishables "has to travel the big lanes," which includes California. Most of the higher-priced hauls originate on the West Coast and a trucker that doesn't operate in that corridor because of the Air Resources Board is putting himself at a disadvantage.

Mr. Dichter agreed that he rarely has a trucker refuse a California-originated haul. That just isn't prudent. There are certainly truckers that specialize in hauls between points that don't include California, but the truckers that have traditionally operated in that geographic space are complying with the state's new regulations.

Whether those hauls will be more expensive is more of a function of supply and demand than anything else. All things being equal, experts are predicting higher freight rates this summer. While fuel prices are not expected spike dramatically, the lack of replacement equipment over the last few years should play a role during peak shipping times.

In fact, the holiday period that just concluded did see a few tight truck situations with freight rates lurching forward.

One limiting factor, however, is the increase in rail traffic over the last couple of years. There are several dedicated rail operations focusing on produce hauls from the West to the Midwest and the East.

Mr. Goldstein said that while rail traffic is still only a very small percentage of total produce traffic, it does have an impact.

"Trains are offering better and improved service over what they delivered a few years ago," he said. "They do offer competition. A train can't do what a truck can do, but [the situation] has created some competitive pricing in certain situations."