Truck rates climb with sporadic shortages
Truck rates climb with sporadic shortages
In mid-April, with 200 loads of onions per day leaving the Rio Grande Valley of Texas, truck rates were skyrocketing and shortages were apparent.
"Call me back later," Melinda Goodman of Four Seasons Trading Co. in Donna, TX, said Friday afternoon, April 15. I'm looking for trucks and I just cant find any.
Two hours later, she said, Maybe you can e-mail me some questions and I can think about them over the weekend as I just have no time to talk right now. Trucks are really tight. Rates that were $3,200 are being quoted at $4,200 to $4,800. And there is no end in sight.
Mike Martin of Rio Queen Inc. in Mission, TX, agreed that trucks were very tight because of the large supplies of onions, mangos, limes and other items crossing from Mexico in Texas combined with the Texas production. He took somewhat of a circumspect look at the rising rates. It is what it is, he quipped. Fuel rates are climbing. I feel for the truckers.
Barry London of London Fruit Inc. in Pharr, TX, wasnt quite so charitable. He believes rates have climbed a bit too fast and said it would be better for all concerned if they didnt fluctuate so much. I know costs are going up and it is difficult [for the truckers], but sometimes I think it might be better to take a rate from lets say $2,400 to $3,200 rather than jumping all the way to $4,000. They are trying to get too much.
He said that those sky-high rates in Texas that truckers were quoting would probably fall as shipments of Mexican onions decline over the next few weeks. This is a peak shipping period for Texas, and others said that rates are as high as they have ever been.
John Jerue of John J. Jerue Truck Brokers Inc. in Bartow, FL, said that rates have not climbed quite as high as he predicted they would 30 days ago. We have passed our spring peak for vegetables, and we are doing all right. Thirty days ago, I thought we would really have problems now, but we dont.
Mr. Jerue said that weather and other factors combined to reduce production and keep rates down a bit, although they have risen in recent weeks. The longtime truck broker did not blame fuel prices. The produce industry is different, he said. The rate is the rate, and no one tacks on fuel surcharges. It might cost you $3,500 to go to Detroit when it only cost you $2,500 a couple of months ago. But that $1,000 difference isnt because of rising fuel costs but because of supply and demand.
Steve Lowe, manager of the Los Angeles office of the Allen Lund Co. Inc., had a little different take. He said that many California produce companies have worked with his firm on year-round contract rates for transportation, and there is a fuel surcharge. If it is quoted on the spot-market price, its not called a fuel surcharge, but you know its in there. For contract rates, there is definitely a surcharge. It is all over the board, but Id say right now, 13 percent is average.
Mr. Lowe said that the contracts are written differently, but typically the base price factors in a $1.25 to $1.50 per gallon cost for diesel fuel, so the surcharge is factored against that base price. That base price for fuel is probably outdated, he quipped as California is looking at diesel fuel prices above the $2.50 range.
As California heads into its heavy shipping period, Mr. Lowe in mid-April termed the supply of trucks tight but adequate. He said that coast-to-coast rates for produce were averaging $5,000 to $5,500. While he was very reluctant to predict how high they might go, Mr. Lowe said that he has seen $7,500 rates in the past couple of years, and that rate would not surprise him this summer.
Mr. Jerue was also reluctant to predict how high they might go. Two years ago, I saw rates well above $7,500 and I thought theyd get there again last year, but they didnt. I hardly saw anything over $6,000. Who knows how high they will get this year $7,000, $8,000, $9,000 I just dont know.
Obviously, rising fuel costs are a big factor as the cost of diesel has gone up 30-50 percent over the last 18 months, depending upon the region. A mid-April chart showed that diesel fuel prices ranged from about $2.25 to $2.60 across the country, with California having the highest-price gas. However, the price in California was up only 33 percent over a year ago compared to a more than 50-percent hike on the East Coast.
Ken Gilliland, who handles transportation issues for Western Growers in Irvine, CA, said that the freight situation was a hot topic of conversation at the associations recent board meeting. There is a shortage, and the number one reason is lack of qualified drivers, he said. Some of the trucking companies are experiencing more than a 100 percent turnover.
And even if there were enough drivers, he said that the slowdown in the economy a few years ago resulted in a lack of investment in equipment, which means there is also a shortage of good refrigerated trucks. Tack on the rising fuel prices and there is definitely a problem. At the board meeting, shippers were calling it a crisis.
Mr. Gilliland said that the railroad industry offers no respite for the produce industry except in a few isolated cases. Some carrots, potatoes and citrus do move by rail, but those rates are also going up and equipment is short. On May 1, the railroads are adding a 10 percent fuel surcharge. On a $7,000 or $8,000 rate, thats quite a hit.
While the lack of competition for refrigerated railcars means that there are enough cars to go around, there are not enough engines to pull those cars. We are competing for service with other industries, he said. The railroads only have so many engines and can only pull so many cars. Recently, [a railroad company] was an engine shy in Bakersfield, so some cars [filled with produce] would have had to sit in the yard a few days.
Mr. Gilliland said that foreign products from China and other Asian countries shipped by container to the West Coast and then transported by train to the East Coast are competing for those same engines.
Like others questioned, Mr. Gilliland does not see a simple solution to the problem. He said that some shippers are talking about owning equipment themselves, while others are looking for an industrywide solution. In either case, the answer is an expensive one, and only comes to mind during crisis situations. When trucks are no longer tight, drastic solutions are not considered.
However, Mr. Lowe of the Allen Lund Co. said that the crisis situations are tending to last longer and longer each year. When I came into this business 15 or 16 years ago, we had a shortage of equipment three or four months of the year and plentiful supplies the other eight months. Now the reverse is true.
"Call me back later," Melinda Goodman of Four Seasons Trading Co. in Donna, TX, said Friday afternoon, April 15. I'm looking for trucks and I just cant find any.
Two hours later, she said, Maybe you can e-mail me some questions and I can think about them over the weekend as I just have no time to talk right now. Trucks are really tight. Rates that were $3,200 are being quoted at $4,200 to $4,800. And there is no end in sight.
Mike Martin of Rio Queen Inc. in Mission, TX, agreed that trucks were very tight because of the large supplies of onions, mangos, limes and other items crossing from Mexico in Texas combined with the Texas production. He took somewhat of a circumspect look at the rising rates. It is what it is, he quipped. Fuel rates are climbing. I feel for the truckers.
Barry London of London Fruit Inc. in Pharr, TX, wasnt quite so charitable. He believes rates have climbed a bit too fast and said it would be better for all concerned if they didnt fluctuate so much. I know costs are going up and it is difficult [for the truckers], but sometimes I think it might be better to take a rate from lets say $2,400 to $3,200 rather than jumping all the way to $4,000. They are trying to get too much.
He said that those sky-high rates in Texas that truckers were quoting would probably fall as shipments of Mexican onions decline over the next few weeks. This is a peak shipping period for Texas, and others said that rates are as high as they have ever been.
John Jerue of John J. Jerue Truck Brokers Inc. in Bartow, FL, said that rates have not climbed quite as high as he predicted they would 30 days ago. We have passed our spring peak for vegetables, and we are doing all right. Thirty days ago, I thought we would really have problems now, but we dont.
Mr. Jerue said that weather and other factors combined to reduce production and keep rates down a bit, although they have risen in recent weeks. The longtime truck broker did not blame fuel prices. The produce industry is different, he said. The rate is the rate, and no one tacks on fuel surcharges. It might cost you $3,500 to go to Detroit when it only cost you $2,500 a couple of months ago. But that $1,000 difference isnt because of rising fuel costs but because of supply and demand.
Steve Lowe, manager of the Los Angeles office of the Allen Lund Co. Inc., had a little different take. He said that many California produce companies have worked with his firm on year-round contract rates for transportation, and there is a fuel surcharge. If it is quoted on the spot-market price, its not called a fuel surcharge, but you know its in there. For contract rates, there is definitely a surcharge. It is all over the board, but Id say right now, 13 percent is average.
Mr. Lowe said that the contracts are written differently, but typically the base price factors in a $1.25 to $1.50 per gallon cost for diesel fuel, so the surcharge is factored against that base price. That base price for fuel is probably outdated, he quipped as California is looking at diesel fuel prices above the $2.50 range.
As California heads into its heavy shipping period, Mr. Lowe in mid-April termed the supply of trucks tight but adequate. He said that coast-to-coast rates for produce were averaging $5,000 to $5,500. While he was very reluctant to predict how high they might go, Mr. Lowe said that he has seen $7,500 rates in the past couple of years, and that rate would not surprise him this summer.
Mr. Jerue was also reluctant to predict how high they might go. Two years ago, I saw rates well above $7,500 and I thought theyd get there again last year, but they didnt. I hardly saw anything over $6,000. Who knows how high they will get this year $7,000, $8,000, $9,000 I just dont know.
Obviously, rising fuel costs are a big factor as the cost of diesel has gone up 30-50 percent over the last 18 months, depending upon the region. A mid-April chart showed that diesel fuel prices ranged from about $2.25 to $2.60 across the country, with California having the highest-price gas. However, the price in California was up only 33 percent over a year ago compared to a more than 50-percent hike on the East Coast.
Ken Gilliland, who handles transportation issues for Western Growers in Irvine, CA, said that the freight situation was a hot topic of conversation at the associations recent board meeting. There is a shortage, and the number one reason is lack of qualified drivers, he said. Some of the trucking companies are experiencing more than a 100 percent turnover.
And even if there were enough drivers, he said that the slowdown in the economy a few years ago resulted in a lack of investment in equipment, which means there is also a shortage of good refrigerated trucks. Tack on the rising fuel prices and there is definitely a problem. At the board meeting, shippers were calling it a crisis.
Mr. Gilliland said that the railroad industry offers no respite for the produce industry except in a few isolated cases. Some carrots, potatoes and citrus do move by rail, but those rates are also going up and equipment is short. On May 1, the railroads are adding a 10 percent fuel surcharge. On a $7,000 or $8,000 rate, thats quite a hit.
While the lack of competition for refrigerated railcars means that there are enough cars to go around, there are not enough engines to pull those cars. We are competing for service with other industries, he said. The railroads only have so many engines and can only pull so many cars. Recently, [a railroad company] was an engine shy in Bakersfield, so some cars [filled with produce] would have had to sit in the yard a few days.
Mr. Gilliland said that foreign products from China and other Asian countries shipped by container to the West Coast and then transported by train to the East Coast are competing for those same engines.
Like others questioned, Mr. Gilliland does not see a simple solution to the problem. He said that some shippers are talking about owning equipment themselves, while others are looking for an industrywide solution. In either case, the answer is an expensive one, and only comes to mind during crisis situations. When trucks are no longer tight, drastic solutions are not considered.
However, Mr. Lowe of the Allen Lund Co. said that the crisis situations are tending to last longer and longer each year. When I came into this business 15 or 16 years ago, we had a shortage of equipment three or four months of the year and plentiful supplies the other eight months. Now the reverse is true.
