Posts Tagged “freight rates”
Chilean fruit exporters are experiencing lower profit margins due to the increased cost of ocean freight, according to the Association of Fruit Exporters of Chile (ASOEX) and the Agricultural Society of Biobio (Socabio).
ASOEX reports rates are increasing considerably in relation to the freight paid the previous two years.
The exporters association notes a U.S. study shows 25 percent of the price consumers are paying corresponds to the freight issue.
This hike has a direct impact on fruit producers and exporters throughout Chile due to freight increases and is one of the fundamental concerns of the industry is specific commodities, such as cherries, table grapes, peaches, nectarines, and kiwis, cannot directly absorb the increase in the cost of the freight.
Socabio reports the cost of freight has risen 30 to 40 percent, which affects the profitability of the exported crops, although it depends on the crop; in the case of fresh fruit, it becomes more expensive to export because it is important to export the crop quickly.
By Gerald Ebert, ALC Richmond
Is the severity of the “supply chain crisis” a direct result of the COVID pandemic? Probably.
Are 15 months of consecutive Year-Over-Year freight cost increases a direct result of COVID and the “supply chain crisis”? That question is not as easily answered.
Most of us in the freight business work in a right here and right now world. We win and lose looking into a crystal ball that has been very cloudy the last few years. We work hard to find commonalities with past trends to help give us even the slightest advantage.
Even with years of experience and more real-time data than ever before at our fingertips, every tight truck market is the “tightest we have ever seen”, while a loose truck market seems to add hours to every day.
As everything these days is a “crisis”, it is not uncommon to hear that the national reopening that followed the COVID shut down was the beginning of the current capacity “crisis.”
It’s true, that average truckload prices did increase approximately 80% from the end of the COVID shutdown through the close of 2020. This trend continued through 2021. Only as 2021 closed, did we see the Year-Over-Year gap shrink to reasonable comparisons.
With all that has happened since we found ourselves adjusting to a new and often unwelcome reality, it’s easy to forget that before The COVID Shutdown, The Great Reopening, The Workforce Shortage, The Supply Chain Crises, and Surging Inflation, there was January, February, and March of 2020.
I recall having numerous, maybe daily, conversations with colleagues in those three months in which we opined, “This the tightest market we have ever seen.” It wasn’t. In fact, it didn’t really come close in comparison to the capacity challenges we faced in June and July of 2018.
The industry, and those of us that work in it every day, were simply conditioned by an unusually long 24 to 26 month cycle of demand and rate decline. It is likely that the COVID pandemic was just an unpredictable pause of the inevitable rebound we are still dealing with today.
2022 is not showing any signs of a downward correction. Most are predicting mild 3-5% increases when compared to 2021. The reality is that we won’t know until the year concludes. That’s the way transportation works. Hindsight is crystal clear. The only thing crystal clear about the future in transportation is that it will be different than it was the previous year.
The market doesn’t recognize any calendar or bid cycle. It doesn’t show mercy for the unpredictable. When the market destroys your budget, it shouldn’t destroy solid relationships that have been built over years.
2021 proved, yet again, that any commodities market is measured by a simple supply and demand equation. From 2018 through 2019, that equation favored the shipper. For most of 2020 through today, and for the foreseeable right here and right now future, it has forced shippers to battle for capacity. Trusted resources and strong relationships have never been more important. That crystal clear hindsight view will verify those relationships.
Gerald Ebert began his career with Allen Lund Company as a transportation broker in the San Antonio office. In 1999, Ebert transferred to ALC Richmond and was promoted to the manager of the Richmond office in 2000.
Van and refrigerated (“reefer”) truckload freight rates hit new highs in December, with national average prices up 21.9% and 29.5% respectively compared to the same period a year ago, said DAT Freight & Analytics, which operates the industry’s largest marketplace for spot truckload freight and the DAT iQ data analytics service.
National average truckload spot van and reefer rates increased for the seventh consecutive month and the average van rate reached $3 per mile for the first time. Spot truckload rates are negotiated on a per-load basis and paid to the carrier by a freight broker.
DAT’s Truckload Volume Index (TVI) was 236, a 3% decline compared to November when the Index set a record for the number of loads moved by motor carriers in a month. The TVI was up 18% year over year, reflecting strong truckload freight volumes as 2021 came to a close. The number of loads posted to the DAT One load board network increased 13.7% in December while truck posts fell 10.5%. Compared to December 2020, load posts increased 48.8% and truck posts were up 6.9%.
“While it’s not unusual to see a decline in the number of loads moved from November to December, spot-market volume was historically strong last month,” said Ken Adamo, Chief of Analytics at DAT. “Truckers experienced unparalleled demand during the holiday season.”
Van rate up 54 cents year over year
• At $3 a mile, the national average spot rate for van freight was up 7 cents compared to November and 54 cents higher than in December 2020.
• After increasing 17 cents month over month in November, the average spot reefer rate rose 2 cents to $3.47 a mile in December. The spot reefer rate has set a new high for six straight months and is 79 cents higher compared to the same period last year.
• The national average rate for flatbed loads on the spot market increased 2 cents to $3.08 per mile, a 59-cent gain year over year.
Flatbed load-to-truck ratio jumps 36%
• The national average van load-to-truck ratio was 6.5, up from 5.2 in November, meaning there were 6.5 available loads for every available van on the DAT network. The reefer load-to-truck ratio was 14.0, up from 11.9 in November.
• The flatbed ratio jumped to 51.1 from 37.5 the previous month, as unseasonably warm weather extended the construction season.
Contract rates hold steady
The national average shipper-to-broker contract van rate was $2.94 per mile, up 1 cent month over month. The average contract reefer rate fell 1 cent to $3.11 a mile, while the average contract rate for flatbed freight was unchanged at $3.34 a mile.
• The national average diesel fuel surcharge was 40 cents a mile for van freight, down 1 cent from November when the surcharge was at a seven-year high.
Prices for truckload services spiked to their highest levels yet in October, reflecting shippers’ willingness to pay a premium to move goods through their supply chains.
The DAT Truckload Volume Index (TVI) was 239 in October, up 2% from September. An industry-standard indicator of freight activity, the TVI is a measure of dry van, refrigerated (“reefer”) and flatbed loads moved by truckload carriers last month.
“Congested ports, intermodal yards and warehouses acted as a drag on the number of loads moved last month,” said Ken Adamo, Chief of Analytics at DAT Freight & Analytics. “As a result, retailers and online sellers took on higher truckload prices in order to make sure their freight is positioned for success for the November and December shopping period.”
Spot van, reefer rates surged
• The national average rate for van loads on the spot market rose 3 cents to $2.87 per mile (including fuel surcharge) in October. The monthly average rate has increased for five consecutive months and is up 47 cents year over year.
• Reefer and flatbed spot rates averaged more than $3 a mile for the sixth straight month. The reefer rate was $3.29 per mile, up 4 cents compared to September and a new high. The flatbed rate decreased 1 cent to $3.08 a mile in October amid a seasonal drop in freight related to construction and heavy machinery.
Spot load postings fell 3.3%
• The number of loads posted to the DAT load board network fell 3.3% in October while truck posts rose 4.2%. The national average van load-to-truck ratio was 5.6, down from 6.3 in September, meaning there were 5.6 available loads for every available van on the network. The van ratio was 4.3 in October 2020 as the economy recovered from COVID-related lockdowns, and 1.7 in October 2019.
• The reefer load-to-truck ratio declined from 13.5 to 12.0 as harvest activity winds down. The flatbed ratio was 48.6, nearly unchanged from September.
Fuel surcharges spiked
• Contract rates increased for all three equipment types. The national average contract van rate was $2.90 per mile, up 7 cents month over month, while the reefer rate increased 9 cents to $3.07 a mile. The average contract rate for flatbed freight edged up 2 cents higher to $3.33 a mile.
• At 39 cents a mile for van freight, the national average surcharge for diesel fuel hit a new record and was up 20 cents year over year. The national average price of on-highway diesel was $3.61 a gallon in October, the highest monthly average since November 2014. After labor, fuel is the largest operating cost for truck fleets.
Strong freight rates were the norm for refrigerated trucks last summer and the trend in September showed continued strength. Big demand for refrigerated trucks should continue into 2022, according to the latest analysis from DAT.
Spot and contract truckload rates hit new highs in September, DAT reported, as shippers dealt with historic surges of freight, constraints on equipment and drivers and an early start to the peak holiday shipping season.
“The dog days of summer for freight did not materialize this year, DAT Chief Scientist Chris Caplice said in a news release. “Instead, the combination of strong consumer demand, new and evolving supply chain bottlenecks and early proactive shipping for the holiday season kept demand for capacity at record highs.”
Caplice said DAT expects truckload pricing to remain elevated into the first quarter of 2022 and for a market correction to occur sometime in the first or second quarter.
“This ‘correction’ will likely not be a ‘freight recession’ marked by consecutive quarters of decreased volumes and overcapacity, but a return to typical growth rates as shippers and carriers across all modes adjust to changes in consumer behavior, product distribution patterns and the effects of COVID-19 on the global economy,” Caplice said in the release.
The DAT Truckload Volume Index was 229 in September, down 1% compared to August and the highest for any September on record, according to the news release. The Index is an aggregated measure of dry van, refrigerated (“reefer”) and flatbed loads moved by truckload carriers each month. A decline of 7% to 10% is more typical from August to September.
“Businesses are shipping early and, where possible, by truck in order to make sure they have inventory, but this means using the spot market or higher-priced carriers to cover their loads,” Ken Adamo, DAT Chief of Analytics, said in the release. “If you’re accustomed to having the right truck in the right place at the right price, you can have one or two of those things but probably not all three.”
The national average rate for van freight on the DAT One load board network increased 9 cents to $2.85 per mile (including a fuel surcharge), the fifth time the van rate has set a new monthly high this year, according to the release. By comparison, the rate averaged $2.37 a mile in September 2020.
At $3.25 per mile, the national average spot reefer rate was up 10 cents compared to August and was 68 cents higher year over year. The spot flatbed rate averaged $3.09 a mile, up 1 cent month over month, according to the release.
The number of loads posted to the DAT network fell 1.5% in September, according to the release, while truck posts decreased 4.5%. The national average van load-to-truck ratio was 6.3, meaning there were 6.3 loads for every van posted to the DAT network, down from 6.5 in August. The ratio was 5.4 in September 2020.
The reefer load-to-truck ratio dropped from 14.9 in August to 13.5, in line with seasonal declines in agricultural production. The flatbed ratio, DAT reported, climbed from 44.1 to 47.9, driven by single-family home construction, an increase in oil and gas activity and recovery efforts following Hurricane Ida.
DAT reported the national average contract van rate was $2.85 per mile, up 3 cents compared to August and equal to the national average spot van rate. The contract reefer rate was $2.97 per mile, also up 3 cents month over month, while the average contract flatbed rate was unchanged at $3.30 per mile.
The national average price of on-highway diesel rose 3 cents to $3.38 a gallon, increasing for the sixth straight month. The spot and contract rates reported here include a fuel surcharge, which was 36 cents per mile for van freight in September. That’s 17 cents more than it was in September 2020.
Hauling Idaho potatoes by truck this season is coming with higher freight rates.
Between early August to October 9, the USDA reported the average rate for refrigerated trucks from Idaho to Atlanta rose from $4,675 to $6,500, a gain of 39%. This year’s October rate was up about 40% compared with a year ago.
The truck rate from Idaho to Boston rose from $7,000 in early August to $8,500 by October 9, a gain of 21%. Compared with the same time a year ago, the October 2021 rate was 37% higher.
Refrigerated truck rates from Idaho to Chicago were rated at $4,500 on October 9, 25% up from early August and 32% above the same time a year ago.
The Idaho Potato Commission of Eagle, ID expresses concerns over having adequate truck supplies during the holiday season.
Heading towards winter the commission is urging retailers to order early in order to build potato inventories, because transportation is going to be a challenge.
The commission reports factors which should favor truck availability include higher freight rates, driver signing bonuses and strong truck demand. Factors that could decrease truckload available range from slowed truck manufacturing because of part shortages and labor shortages.
Increasing demand for truck capacity is seen with the economic stimulus, retail spending, inventory replenishment, consumer sentiment, and housing.
However, the federal stimulus package enticed some drivers and warehouse workers to make money by “sitting on their couch” as opposed to joining the workforce, the commission reported.
Owner operators now account for 62% of truckers. Some observers predicted more owner operator entering the freight business.
C.H. Robinson of Prairie Eden, MN is projecting a 5% to 6% growth in spot rates from early September to the end of the year. Less-than truck load rates remain elevated compared to the historical five-year average and the truck driver shortage is not easing.
The company notes reducing wait time for drivers should be one aim, and investing in good facilities is another.
Twin Falls, Idaho potatoes – grossing about $8500 to New York City.
“Rates keep going higher and higher, adding difficulty to the already complex produce industry.”
Intergrow Greenhouses, a farming company located in Upstate NY, focusing on the production and sale of greenhouse grown tomatoes, is thankful to have their own private trucking fleet to help service their customers. Stating the primary goal of their own fleet is to give the best possible service to top tier retail customers. Understanding the importance of “On-time, In-Full” is fresh, perishable produce they have taken transportation into their own hands!
“When you contract a load through an outside broker or carrier you lose some of the visibility and control required to really deliver the best service possible. That’s why we’ve invested in our own fleet and in a freight market like this it has really paid off having the ability to run our own loads.” Explains Dirk Biemans, President of Intergrow Greenhouses.
“Although we are close to major markets, there is a lot of freight needing to be moved in this area of the US and there is, and has been more demand than supply in the market. That’s why we are so grateful to be running some of our own trucks.” Says Bill Cook, a 30yr transportation veteran and current Logistics Manger at Intergrow Greenhouses. “During the peak season we have as many as 50+ loads a week shipping out of our facilities, of course our own band of guys can’t handle of that high volume, so they remain on our retail accounts, providing consist and reliable transportation for the business. “ Currently expanding their business with another 10acre greenhouse, Intergrow says they are first and foremost a grower and farmer but saw the need to deliver consistent quality service to their customers in order to grow their business. “Here at Intergrow we’re not only striving for the highest quality product but also reliability. Our customers need to have confidence we can deliver of premium product, reliably and consistently throughout the year.” says Kris Gibson, VP of Sales and Marketing “This last part of the puzzle, transportation, has really helped us grow these past years.”
As rates increase Intergrow has also seen their own fleet benefiting them in other ways… cost control. “Our own transportation costs have increased as well, but in a controlled in regimented manor.” Says Biemans. “We are not at the mercy of the market for some of our most important loads. “Rates keep going higher and higher making it adding difficulty to the already complex produce industry. No matter the freight market you are expected to deliver product under your contracted price.”
Intergrow is currently looking to hire additional drivers to their fleet and asks anyone interested to email Bill Cook at email@example.com.
By Produce Business
Stretched out onto 113 acres, the Hunts Point Cooperative Market is the largest food terminal market of its kind in the world – that doesn’t sell flowers. It is estimated the Hunts Point Market employs more than 10,000 people directly and indirectly, supplying 23,000 restaurateurs and providing 60 percent of the produce that feeds the area’s 23 million people.
Hunts Point opened in 1967 with more than 130 produce companies. Ten of those original wholesalers who were on The Washington Street Market moved to The Hunts Point Market: Nathel & Nathel (then Wishnatzki & Nathel), S. Katzman Produce, E. Armata, D’Arrigo, Joseph Fierman & Son, Rubin Bros., Kleinman & Hochberg (now LBD), Robt. T. Cochran, A.J. Trucco and M&R Tomato. These firms have expanded and grown in the past 52 years. Today, after tremendous consolidation, there are 32 firms in total.
How do you feed 20.3 million people? It sounds like a mind-boggling feat, but it’s what the farmers, suppliers, produce wholesalers, distributors, retailers and shippers that work in the New York Metro area do every day. According to the 2017 American Community Survey (ACS) of the U.S. Census Bureau, 20,320,876 people live in the area defined as the New York, Newark-Jersey City, NY-NJ-PA metropolitan statistical area (MSA). In New York City alone, the U.S. Census Bureau estimated the number of people at 8,398,748 as of July 2018.
When Nathel & Nathel opened at Hunts Point, the company was called Wishnatzki & Nathel. The name change came in 1997, when brothers Ira and Sheldon, the company’s third generation, took over. It was their grandfather who started his business with a pushcart in 1922 in Brooklyn. Today, with tremendous consolidation, Nathel & Nathel is among the largest companies at Hunts Point with an average of 100 trucks delivering produce every day.
“Nothing compares to Hunts Point,” says Steve Kaplan, whose company, Florida Produce Brokers, Inc. in Stuart, FL, provides mostly corn and leafy greens to the New York area. “It is in class by itself. Nothing is larger and nothing compares to the scope of what goes on there all the time. It’s the largest wholesale market in the world.”
In the produce trade, transportation issues can arrive at a moment’s notice and attention must be given immediately.
“In our business there are so many factors affecting transportation and it has such a big effect on us,” says Stefanie Katzman, executive manager, S. Katzman Produce. “We try to mitigate it as much as we can by sourcing from multiple locations and trying to maintain an on-hand inventory, but there is only so much that can be done. Logistics is one of the most challenging parts of our industry because so much is out of our control, and everything that affects timing just trickles right down the line. There can be product delays at loading, hold-ups at previous stops, traffic, equipment issues, and about a hundred other things that affect the transporting of products from farm to table.”
Why would a wholesaler choose to hire a truck – which means dealing with the driving limits of the electronic logging device (ELD) – instead of a train? The ELD records the number of hours the driver has been driving, ensuring that the driver gets enough rest and is safer on the roads. Still, pulling off for a few hours to rest means unproductive time for perishable items.
“There is actually a lot of traffic on the railways,” says Evan Kazan, director of business development for Target Interstate. Located at Hunts Point Market, Target specializes in transporting produce. Since there are a lot of railcars on each train it takes longer to get them loaded and unloaded.
Instead of a one-day transfer, it can become two to three days. A trip that used to take six to seven days, now it is taking as long as nine days. At that point, especially when you’re dealing with produce, you’re better off going with trucks, says Kazan.
Since last year, capacity and freight rates have gone down. That means, produce wholesalers don’t have the same issues as in 2018. “Now the price difference is not as big of a difference. You are not looking at thousands of dollars, you’re looking at hundreds. For $500, I may decide it is worth it to get me my load to its destination three days earlier even if I am paying a little more. When the freight rates made the difference in price $2,000, wholesalers were faced with a potentially expensive dilemma.
Playing the spot market with freight rates on fresh produce is common with owner operators and small fleet owners. However, refrigerated fleets for years have often negotiated seasonal, if not year around rates.
The fleets see advantages to having more predictable produce rates with higher rates in the slower winter months, but lower ones during the peak shipping seasons of spring and summer.
However, record produce rates this past year has changed ways of doing business, not only for the fleets, but the produce shippers. For example, uncertainty surrounding freight rates has resulted in some Idaho grower-shippers of potatoes to shy away from quoting delivered prices for potato price contracts.
Sun-Glo of Idaho Inc., in Sugar City, has chosen not to take on the risk of volatile transportation rates by quoting delivered prices. The company has found trucking companies refusing to quote set rates, because of the uncertainties in trucking. If those fleets are unwilling to take the risk of contract rates, then the grower-shippers are not going to risk giving delivered prices.
Much higher truck rates have occurred, at least in part, by the implementation of electronic logging device (ELD) regulations last year. Higher truck rates is one of the biggest complaints of grower-shippers. Instead, companies such as Sun-Glo are quoting prices for their potatoes, something which they are in control.
Other shippers are doing business in a similar fashion. Wada Farms Marketing Group LLC of Idaho Falls, ID has indicated it may lose some customers this shipping season because Wada no longer is offering a delivered price contract. It has some contracts with trucking companies to haul potatoes, but it is on a month-to-month contract basis. Six month to one year contracts with truckers has become a rarity. Since Wade Farms cannot get seasonal or yearly contracts with trucking companies, it is avoiding offering delivered price contracts to customers.
Wade Farms has even inserted some flexibility clauses into contracts. For example. if there is an extreme shortage of trucks or holiday overages, it is not locked in to the same price.
Shippers have long complained of retail chains driving down prices on the produce they purchase. Potandon Produce LLC of Idaho Falls, ID has pointed out in the current truck rate environments, some retailers are looking to drive down f.o.b. prices to maintain delivered costs.
In a effort to cut shipping costs Potandon say if offers potato buyers a premium Idaho potato, or it can source spuds from 16 other states which may be closer to their customers. The company continues to seek alternative shipping methods to cut costs.
Potandon is still offering customers delivered prices and says it has the advantage of an in-house transportation department which is in constant contact with freight carriers to get the amount of trucks needed.
Higher freight rates, particularly from western shipping states, are making Michigan summer produce more attractive to buyers and receivers. The result is boosting Michigan produce demand and truck rates, because of the freight advantage of being closer to markets in the eastern half of the U.S.
The electronic logging device (ELD)mandate also is created with making trucking cost significantly more expensive.
For example, E. Miedema & Sons of Byron Center, MI will be shipping more summer vegetables to markets closer to home. Michigan sweet corn shippers have a significant freight advantage over Florida corn to midwestern markets. Sometimes Florida corn may cost as much in freight as the f.o.b. Additionally, shipping to closer markets means the corn is that much fresher. Sweet corn will not start for a few more weeks.
Superior Sales of Hudsonville, MI is another shipper noticing higher freight rates determining where receivers source their product.
Van Solkema Produce of Byron Center, MI is another shipper finding more interest in their Michigan grown produce in part due to the lower transportation costs.
As a result over the past five years the shipper has started handling items beyond the traditional staple produce items such as brussel sprouts and green onions.
Naturipe Farms of Estero, FL also handles Michigan blueberries. They ship Michigan “blues” to practically every major midwestern retail chain.
Michigan asparagus shipments also has experienced changes in the last few years. Michigan “grass” used to be known as a local product with distribution mainly limited to in-state receivers. It eventually widened its appeal and extended to markets on the east coast. This season a significant amount of Michigan asparagus is being shipped to destinations west of the Mississippi River. There are now even a couple of West Coast companies that are marketing asparagus for Michigan shippers. The asparagus season in Michigan is just wrapping up.