By Matt Minthorn, Manager, ALC Phoenix
It is safe to say that the first quarter of 2020 was nothing that anyone in society had experienced in the past.
On January 9th, 2020 the World Health Organization (WHO) announced a mysterious Coronavirus-related pneumonia in Wuhan, China. Most of the rest of the world didn’t pay much attention and we were all going about with our lives totally unaware of the drastic changes to come. By January 20th, the CDC reported that three U.S. airports would begin screening for Coronavirus, JFK International, San Francisco International and Los Angeles International.
Then on January 21st, a Washington state resident became the first confirmed case of Coronavirus after returning from Wuhan, China. On January 23rd, Wuhan, China went under quarantine as well as nearby Huanggang, putting 18 million residents under strict quarantine. As we all know, things rapidly progressed from there. On January 31st, the WHO issued a global health emergency for only the sixth time in history.
February 2nd saw global air travel restricted from certain countries and required testing or quarantine before passengers could leave for their destinations. February 3rd the U.S. declared a public health emergency. Cases continued to rise around the globe and fear began permeating society. On March 11th, the WHO declared COVID-19 a pandemic, stating the alarming level of spread and severity as well as the alarming levels of inaction to prevent the spread.
On March 13th, President Trump declared it a national emergency allowing billions of dollars of federal funding to be allocated to fight the spread. On the same day he issued a travel ban on non-U.S. citizens traveling to the U.S. from several European countries.
On March 19th, California became the first state to issue a statewide stay-at-home order mandating all residents to stay home except to go to an essential job or shop for essential needs. This led to many sectors of the economy coming to a grinding halt and consumers mass buying essential (or not so essential, toilet paper?) items, stripping shelves and throwing the retail supply chain into chaos. This trend followed across the nation as state after state began issuing the same stay-at-home mandates.
My home state of Arizona followed on March 20th, thus all non-essential business halted and the state was on a semi-lockdown. Lines at grocery stores, home improvement supply stores, pharmacies and Costco in particular were insane and shelves were quickly bare. Providing food and essential items suddenly became vital to keeping society fed and supplied with the items necessary to adequately prevent spread of the virus and care for those that were unfortunately afflicted with COVID-19.
There was a tremendous decline in the need for transportation in the non-essential sector of the economy and a large increase in those essential businesses. However, struggles emerged throughout the supply chain to maintain the extreme level of production that demand was driving.
Entire production facilities were shut down due to cases and exposures, normal production schedules and timing was pushed out farther and farther and there became an excess in carrier capacity due to these circumstances as we moved into April. Average freight rates across the country took a nose dive and hit lows that we hadn’t seen in years.
Carriers began to run out of operating funds and a vast number of carriers ended up out of business over the second quarter of 2020.
So where are we today, a little more than a year after the first stay-at-home mandates were issued? Most states have re-opened fully or are close to resuming life as close to “normal” as possible.
In relation to the freight market, increased manufacturing and demand for all types of products has increased steadily as states reopen. The recent severe weather has also drastically affected freight demand and rates in most of the U.S. Spot rates for vans are currently up 34% over 2020 through February and reefer spot rates are up 28.5% in the same period nationwide.
Last March there was still a higher level of demand as restocking was driving the market with much more volume. April saw a tremendous decline in demand and saw rates drop to levels seen during the manufacturing recession of 2016.
Our comparable data for rates April 2020 versus this year will likely be even more dramatic than our current numbers, likely up 40% year over year. In the majority of the domestic fresh produce industry, we are approaching our peak seasons from several regions, including California and Arizona.
Rates will continue to be firm and demand for capacity from these regions will spike as we move through the second quarter. Shippers can help assure capacity by having flexible schedules, increased lead times on tenders and most importantly, understanding of the current market conditions when working with their carrier and broker partners. No one could have predicted the last year in perishable transportation, but we’ve all learned how to adapt and excel in this “new normal”.
Matt Minthorn is the manager of the Phoenix office. He was previously the assistant manager, refrigerated department Boston office, and has been with the Allen Lund Company for 19 years. Minthorn is a graduate of the University of Vermont with a degree in business administration and has 20 years experience in produce sales and transportation.