Posts Tagged “California Air Resources Board”
Remember only a few summers ago when produce trucking rates from California to the East Coast were hitting $10,000? It hasn’t even come close to that in 2015 – and there appears to be a number of factors why.
As we head towards the Labor Day weekend final shipments to receivers for the holiday are now underway, if not already delivered. Don’t expect major rate increases.
East bound coast to coast rates in the summer of 2014 that were in the $8000 range are closer to $6500 this summer.
Here’s my take on why produce trucking rates are off.
***Less California Produce Volume. The 5-year California drought is beginning to take its toll on agriculture and it’s going to get a lot worse unless the El Nino weather pattern in the Pacific Ocean changes things this winter.
The San Joaquin Valley is being hit relatively hard by the drought and it is adversely affecting volume on many crops ranging from cantaloupe and honeydew and other melons to stone fruit, tomatoes and citrus. In the Salinas Valley, which has not suffered from the drought as much as in the San Joaquin Valley, all types of lettuce volumes have been like a roller coaster this summer.
The highest rates from California to the East Coast this year have been in the $8,000 range, and those were only for a limited amount of time.
***Rail Competition. While the railroads provide only limited competition, it still has an affect of produce trucking rates. After all, the rail rates are based trucking rates and often offer 10 to 15 percent less to haul. Still, we’ve seen a couple of rail related companies go out of business this year. The railroads have a history of dropping produce related services for other, less perishable products.
***Rules and Regulations. The insanity of excessive rules and regulations from both the federal and state levels continues, and it is having disasterous effects on owner operators. Rates are not keeping up with increasing costs of operations, although lower fuel prices have helped. Still, when you have the California Air Resources Board and their emission standards and other business killing rules, plus the feds pushing to implement Electronic on-board Recorders, not to mention many others, it all adds up.
The lack of qualified drivers continues to be a problem, although it could become a lot worse when the economy turns around. Attracting young people into the trucking industry continues to be a challenge. It’s a hard life and there’s certainly easier ways to make a living.
***Mexico. Over the past 20 years more and more produce is being grown in Mexico, and much of it is being driven by investments from American farming operations. Mexico has cheaper labor and less government interference in their operations. At the same time there is less produce being grown in California — Bill Martin.
California’s Air Resources Board (CARB) issued regulatory guidance last week stating the state is cleared to enforce elements of its emissions regulations requiring truck and trailer owners to install aerodynamic add-on devices and use certain tires.
A ruling by the Environmental Protection Agency gives the go ahead for CARB to enforce areo add-on requirements on 1011-2013 year-model tractors and integrated sleepers, plus with trailer equipment.
CARB’s guidance issuance comes two months after the EPA issued California a waiver allowing it to enforce in full its greenhouse gas regulations.
The rule went into effect in January 2010 and requires the use of SmartWay-verified tires and other SmartWay-verified equipment on all new trucks and trailers.
CARB had only been enforcing the rule for 2010 and earlier model trucks and trailers However, the EPA’s Clean Air Act had preempted state regulations.
In June 2013, CARB asked EPA for a waiver of the preemption, which would allow it to enforce the GHG regs for 2011-2013 year model trucks and 2011 and later trailers.
The equipment required by CARB are verified by the EPA to improve fuel economy and therefore reduce emissions of greenhouse gases.
Both the American Trucking Associations (ATA) and Owner Operator-Independent Drivers Association (OOIDA) had released statements in August stating their opposition to enforcement of the rule, but for different reasons.
Meanwhile, it appears more owner operators and small fleet owners are refusing to truck in California for economic reasons and in some cases in opposition to mounting and intrusive regulations.
It was in early June that truck broker Kenny Lund saw the spot market on produce freight rates hit $10,000 for loads between California and the East Coast. While part of the reason was seasonal volume increases for fresh fruits and vegetables, and truck availability, he saw other factors contributing to the rise in rates.
Lund was speaking at the 2014 convention and exhibition of the United Fresh Produce Association in Chicago June 11th.
The vice president, support operations, for the Allen Lund Co. Inc. of LaCanada, CA cited the recently completed 72-hour U.S. Department of Transportation check points held across the country. This was delaying truck schedules.
Another factor was the CARB (California Air Resources Board) regulations, which Lund said were resulting in more truckers refusing to come to California. It takes a minimum investment by truckers of $8,000 to comply with CARB regulations.
“It is impossible to be compliant and move significant amounts of refrigerated product into and out California,” Lund stated
He noted less than 30 percent of refrigerated carriers are compliant with CARB and truckers simply do not have the money to become compliant.
In an effort to assist produce haulers, he noted Allen Lund Co. provides $1.5 million a week in advances to drivers.
Lund, who has been with company founded by his father and namesake 25 years, said there were over 50,000 carriers in the United States, but the average trucking company has less than six trucks.
“90 percent of the trucking companies have six or less trucks,” he noted. At the same time the percentage is very low of trucks having team drivers.
Getting more specific, Lund said refrigerated carriers are dominated by owner operators and companies with less than five trucks.
As for CARB, Lund said he has “fought tooth and nail with them” (California bureaucrates). Since the CARB rules were implemented in 2004 fines have been extended to brokers, shippers, receivers and specifically to drivers.
“It (CARB rules) has driven a lot of drivers away from California,” Lund stated.
He also was critical of hours-of-service regulations, and particularly the 34-hour restart. While the restart requirement may be okay for local trucking, it is not good for long haul drivers.
During a question and answer session, Lund said the reason more large refrigerated carriers do not haul produce is because “it comes down the driver having a stake in that load. I see a lot of large carriers get in and out of hauling produce. It comes down to not having enough good drivers,” Lund concluded.
100 years ago the railroads ruled when it came to long haul freight transportation. The advent of the interstate highway system in the 1950s changed all of that and led to a thriving trucking industry. Then in the 1970s there was a renewed interest in rail service, and this involved fresh produce. It was primarily refrigerated intermodal trailers and refrigerated box cars. However, as the trailers and rail cars aged, the companies invested in those ventures too often had problems coming up with the capital to replace the equipment. Additionally, in those days the rails had difficulty understanding perishable produce had to be treated differently than coal or auto parts. There also were too many produce receivers filing claims at the drop of a hat. The rails also were notorious for taking forever to pay claims.
But times have changed. Here are some of the rail related companies that have come on the scene in recent years.
****Railex LLC, Rotterdam, NY. This was perhaps the first one, and it partners with the Union Pacific Railroad, using 64-foot refrigerated railcars transporting produce from the West Coast to an upstate New York distribution center, where trucks take over. It also is establishing a presence in the Southeast.
****Rail Logistics Cold Train, Overland Park, Ks. The Cold Train used containers shipped out Washington and Oregon to the Midwest and East Coast.
****McKay TransCold, Minneapolis. It works with the Burlington Northern Sante Fe Railroad using refrigerated boxcars out of California to Wilmington, IL citing each boxcar is equivalent to 3.5 to 4.2 truckloads of product.
****Tiger Cool Express LLC, Overland Park, Ks. According to its website it “Provides retailers an efficient, cost-effective, safe alternative to all-spot, all-the-time brokered transportation that relies on small, independent owner-operators who supply shippers through intermediaries.”
****C.R. England of Salt Lake City. While it is widely known as the nation’s largest refrigerated carrier with about 4,500 trucks, it also has had an intermodal division for about eight years and uses refrigerated containers.
Ricky Stover is director of business development – intermodal, for C.R. England. The company has 1,150 containers and plans adding 400 more this year.
“The percentage of produce we haul is small. We do a lot of frozen food, dairy, beverages, etc. That type of stuff is really our bread and butter,” he says.
Jason Spafford, McKay’s Vice President of Business Development credits the down turn in the nation’s economy resulting in people being “more open to new ideas.”
Spafford also points to increasing regulations on the trucking industry working in favor of the railroads.
“There’s the restrictions on driving hours that’s making it harder and is pushing it more towards a rail solution,” he states.
Additionally, Spafford says McKay TransCold believes they have to offer rail rates that are eight to 15 percent less than truck rates, depending upon the commodity and specific traffic lane.
“Traditionally rail has had difficulty with box car and intermodal concerns with damage claims. We’ve developed a racking system that creates a rock solid load. It can actually have less shifting than in truck load,” Spafford says.
McKay TransCold took a different approach in that it initially developed westbound rail shipments from the Midwest with commodities like eggs and ice cream. It then developed its eastbound freight, which is the opposite approach from most companies.
While a lot of attention is being paid to rail hauling fresh produce, Kenny Lund, Vice President of Allen Lund Company of LaCanada, CA states, “Owner operators move probably 95 percent of the produce cross country. Owner operators dominate cross country transportation of produce. The carriers that haul for us have 25 trucks at the most. We work with over 9,000 refrigerated carriers and they are mostly guys with 25 trucks or less.”
Continuing, Lund points out it is the rules and regulations that are hurting the owner operators. He adds there is no driver shortage, it is an owner operator shortage. The truck broker has been one of CARB’s (California Air Resources Board) biggest critics, citing such requirements on equipment such as refrigerated units for trailers cannot be over seven years old. Lund also is critical of the new diesel engines calling them a “nightmare. They shut down and you can’at fix them out in the field. You have to tow them in. They are so complicated and these regulations are going to make it worse.”
Paul Kazan, president of Target Interstate Systems Inc., Bronx, NY, is equally critical of excessive regulations on 18 wheelers.
“You don’t see it (increasing regulations) with trains, but at every turn you see it with the trucking industry. There is a very concerted affect out there by the rail industry to restrict trucks and I’m surprised there is not a more concerted effort by the trucking industry to push back against this effect. We’ve never had the power or the clout of the rail industry,” Kazan states.
At the same time, Kazan adds he is having conversations with rail entities and says, “we need a rail component.”
Target is headquartered on the Hunts Point Terminal Wholesale Market. Still, Kazan sees the rails “shying away” from wholesale terminal markets because these facilities hold on to the trailers (TOFC) too long using them as storage.
Kazan concedes, “Rails are here to stay. You have the green (environmental) technology, the carbon footprint.”