By Collin Payne, ALC Denver
As we enter a recovery period from the COVID-19 “recession” the transportation industry is showing signs of strength. The threat of the virus has been reduced across the country, but inflation has been caused by rising commodity prices and record-level government spending.
Crude oil 1-year price change- $41.43>$81.35Coal 1-year price change – $60.74>$149.30Aluminum 1-year price change – $1944>$2640Apples 1-year price change – $102>$122U.S. dollars in circulation:October 2010 – $960,369,000,000October 2015 – $1,391,429,000,000October 2020 – $2,040,201,000,000October 2021 – $2,202,506,000,000
The re-opening of the economy has triggered a supply shortage in labor and productive commodities – microchips, lumber, aluminum, apples, lettuce. Due to labor shortages, the market has seen rapid increases in low-wage paying positions, further shrinking the number of drivers on the road.
Registered trucks drove 304.9 billion miles in 2019, carrying almost 12 billion tons of freight – making up 72.5% of the total tonnage shipped domestically. Why would you spend 10 days on the road driving from Washington to Pennsylvania and back, when you can find a paying job with benefits close to home?
This has had a domino effect on the supply chain industry, forcing shippers to seek expensive and/or creative solutions. When will the worst of inflation begin and when will we see the end of rising prices?
The average inflation rate of the United States over the last 10 years is 1.8% – in April 2021 the inflation rate rose above 5% and is currently 6.2%. Currently, the price of produce per pound is up 7.3% from early 2020, and the two-year outlook shows fresh produce transportation nearly doubling. There is a general consensus that we are nearing the peak of inflation rates, and this will continue through 2022.
With several trillions of dollars being added to circulation since April 2020 and no plans insight to stop, there are no guarantees of reduction from current inflation rates.
Carriers will see a direct increase in the price of equipment, tractor/trailer repairs, fuel, insurance, and meals. Shippers will see a direct increase in the cost of labor, transportation costs, and raw material costs.
We are in the position to see inflation happen from a birds-eye-view, giving us a special position to take. Allen Lund Company’s duty is to communicate this issue to our shippers and carriers to ensure they are properly prepared for the continued rise in prices.
Collin Payne is a transportation broker in ALC Denver and has been with ALC over 2 ½ years. Collin graduated from Texas A&M University with a BS in University Studies of Global Arts, Planning, Design and Construction Concentration.