Posts Tagged “freight rates”
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.
During the next couple of months Mexican asparagus will be crossing the border at someplace besides Nogales….Also, 2017 closed out the year with some record setting trucking freight rates in the U.S.
Asparagus out of the Mexico’s Caborca region in northern Sonora, Mexico will be crossing the U.S. during February and March. Volume is expected to increase 15 percent over last year. Quality is reported to be good.
“The weather in the Caborca region has been excellent and pending continued good weather, we anticipate promotable quantities in February and March in a full range of sizes,” said Katiana Valdes of Crystal Valley Foods of Miami in a news release. The company is a grower/shipper and importer. Mexican asparagus is imported as product from Peru comes to a seasonal low. The Mexcian “grass” crosses the border into the U.S. through San Luis, AZ, located just south of Yuma.
Yuma vegetables – grossing about $8700 to New York City.
Record December Freight Rates are Reported
According to a press release by DAT, a load board, freight rate and trucking trends company, the average reefer rate for December was $2.46 per mile, 3 cents higher than the November average and another all-time high. Spot truckload van rates averaged $2.11 per mile nationally, up 4 cents compared to November and the highest monthly average since DAT started tracking freight rates in 2010.
Truckload freight availability in December was cushioned by retail shipments, demand for fresh and frozen foods, and e-commerce fulfillment. Available truckload freight was 25 percent higher than in December 2016.
However, overall freight volume in December fell 3 percent compared to a strong November, according to the release. Some of the factors in that decline were inclement weather in parts of the U.S and the December 18th electronic logging device mandate. That combination of strains on equipment and drivers meant that shippers and freight brokers paid premiums for available trucks.
Importers of Mexican produce at Nogales are frustrated over the lack of adequate truck supplies, high freight rates and are looking to the railroads to solve some of their problems, according to a recent news story in The Packer, a weekly newspaper for the fresh produce industry.
Struggling to acquire enough refrigerated trucks, complaints were common as the holiday season approached in late 2014. One importer described it as the worst holiday season they ever experienced getting enough trucks. However, some say the equipment shortages extend well beyond the holidays. As a result importers are taking a look at rail service.
Rail is conducive to a number of Mexican vegetables crossing the border at Nogales ranging from had shell squash, cucumbers and other hard grown Mexican items.
The Union Pacific Railroad is currently upgrading 20 miles of rail near the U.S.-Mexican border to make it easier for inspectors to check loads. There also is development of a rail switching yard in Tucson, which would help rail service.
If rail service is fast enough, items such as bell peppers also would be considered. One shipper complained of paying up to $6 per box in some cases to ship product from Nogales to the East Coast this past vegetable season.
Nogales is pretty dead this time of the year with the exception of the Mexican grape season which has just got underway.
At the Hunts Point Terminal Produce Market there are four long rows. On the ground floor are the sales offices and docks. Upstairs one can stand at one end of a hallway one-third of a mile long and the other end is so far away the walls, floor and ceiling appear to come together. On each side of the massive hallway are the offices of the wholesalers.
In 1967, the new Hunts Point produce market had 125 wholesalers receiving fruits and vegetables. Today, due to mergers, consolidations and companies falling by the wayside, there are only 40 wholesalers, although their operations tend to be much larger than in the early days.
The largest company on the market is D’Arrigo Bros. Co. of New York Inc., which has 30 units. However, it is even larger when considering the family owned operation also has 30,000 acres of farming in California and Arizona. At the same time D’Arrigo and other wholesalers service thousands of produce buyers from all walks of life on a daily basis.
In some form or another, they all are dependent on the reliable service of the trucking industry to be successful in their own businesses.
I’ve known Matthew D’Arrigo, vice president of D’Arrigo Bros. for nearly 30 years. The company has a great reputation not only in the produce industry, but with produce truckers who have delivered product to the operation. D’Arrigo knows the livelihood of the company depends in part on good, reliable service from produce haulers. His company treats truckers accordingly.
He speaks of the continuing rise in costs of transportation and recalls late June 2014 when some produce rates from California to New York City hit $10,000. Many produce folks who pay the freight rates don’t necessarily like the higher costs, but rationalize their thinking knowing their competitors are pretty much paying the same rate for a truck.
Wholesalers at Hunts Point tend to depend upon truck brokers and logistics companies to handle their transportation needs. Most wholesalers simply don’t have the time, expertise or inclination to arrange the trucks themselves. — Bill Martin
(This is the third of a four-part series based upon my visit to Hunt Point on Dec. 4, 2014)
Here is a glimpse at shipments on Northwest pears, as well as California melon loadings, and finally tomato shipments out of Southern California and Mexico. Finally, are produce rates too high as one shipper claims?
The Northwest pear shipping forecast has been revised for the upcoming 2014 harvest, with 20.2 million, 44-pound cartons now expected to be packed by season’s end. This estimate is two per cent larger than the five-year average but six per cent smaller than last year’s record shipments. This year’s initial spring projection showed a crop of 18.7 million cartons.
Shipments have been underway about a month, and with no significant weather issues so far, and harvest is expected to extend into mid-October. Green Anjou pears are expected to make up 53 per cent of the total 2014 crop, with the Bartlett and Bosc varieties likely to yield 22 per cent and 15 per cent respectively. The organic portion of the Northwest crop has increased by around three per cent, with around 976,700 cartons.
In California, Westside district melon shipments from the San Joaquin Valley should continue into mid October, although volume will be much smaller that last month of the season. Quality is reported excellent, however, shippers are complaining about movement not being as good as it should. A big crop is reported, so could it be the market is a little high and consumers are resisting?
California Tomato Shipments
Further south in California, tomato shipments are in full swing with another large crop moving from the San Diego area and Mexico’s Baja California. One tomato shipper recently described freight rates on tomatoes as “ridiculous.” He said it was costing $4 to $5 per box to ship his tomatoes.
California truck supplies have been seasonally tight this year, but there hasn’t been any critical shortages of refrigerated equipment for eastbound produce loads. Often, the biggest demand for trucks comes towards the end of the week.
Many produce shipments out of the West have come a week or two later than normal due to a cold, wet growing season. While record California table grape shipments are possible this year, most fruits and vegetables appear they have relatively normal volume, if not somewhat small production this year.
As a result freight rates on produce this spring and summer haven’t hit the height some thought would be possible. Sure there have been some $9,000-plus coast-t0-coast east bound rates, and even a few topping $10,000, but those seem to have moderated some in recent weeks.
This is not said folks are complaining about rates, for example that are common out of Salinas and the San Joaquin being in lower to upper $8,000 range.
Vine ripe (pole) tomatoes as well as romas are being shipped in good volume from Southern California areas such as Oceanside. Loadings will be available into the fall.
Mature green tomatoes are originating out of the San Joaquin Valley, with the best volume located in the Newman and Tracy areas.
Rates has been plummeting out of Nogales, AZ as border crossing of table grapes from Mexico are in a rapid seasonal decline. There are still items such as melons, mangos and tomatoes available, but overall, Nogales should not be the place your are looking for loads this time of year.
Fernado is both a company driver and a small fleet owner. HaulProduce.com caught up with the Los Angeles-based trucker a couple of months ago at a Pilot Truck Stop in Vienna, GA, while he was waiting word from dispatch for his next load.
He is driving for I&F Transportation and operating a 2005 Peterbilt, powered by a 470 h.p. Cat diesel, and pulling a 53-Utility trailer with a Carrier reefer unit.
The 40-year-0ld trucker says, “I’m just not happy with this Pete. It shakes too much; rides rough, and there just is not enough room in the sleeper. I want to drive a Classic. I own two Freightliners, and I like them a lot.”
He says the Peterbilt consumes too much fuel and only averages 4.5 mpg.
As the small fleet owner of FJ Transport, he prefers his Freightliners. His own company uses a combination of working directly with some shippers on loads, while using brokers on others.
Fernado has been trucking six years and wishes the rates on dry freight would pick up, noting that produce loads are paying a lot more.
He had a load of produce from Californa, requring six pick ups that took three days to get loaded. It was delivered to Pompano Beach, FL. He deadheaded to Georgia and had been waiting seven hours at the truck stop for his dispatcher to assign a load.
No one said trucking was easy, but Fernado was trying to show patience, waiting on a load to take him back to the West Coast.
Hauling fresh produce tends to provide much higher freight rates than dry freight, obviously because of the perishability of fresh fruits and vegetables, and the extra care required with temperature, humdity, air circulation in the load, etc.
The higher risk to which truckers are exposed, also includes the possibilites of claims that reduce a driver’s pay check, or even worse, having the load rejected.
The degree of exposure to problems upon arrival at destination can depend on the honesty and integrity of the parties involved. Did the shipper pre-cool the product? Did the driver maintain proper temperature settings? Did the buyer or receiver pay too much for that product five days ago when the order was placed, and now the fruit on the market is worth $2 a box less? All of these examples can lead to claims or rejections with produce loads.
There have been studies over the years including the recent one titled Comparison of Pallet Cover Systems to Maintain Strawberry Fruit Quality During Transport which provides some interesting information. For example, this research concludes that TransFresh Corp’s Tectrol process reduces fruit decay by increasing carbon dioxide (CO2) levels in pallets covered by bags.
With CO2 levels increased by 11 to 16 percent, Tectrol beats its competitors in the important area of decay in strawberries by up to seven percent following delivery and two days on the shelf.
So how does this translate into a reduction in claims and load rejections for the produce trucker, if there is less decay in product being transported?
“That’s an interesting equation,” states Rich Macleod of TransFresh Corp. , Salinas, CA. “No one will ever talk about that. No one gives us their data. We’ve never been able to prove that (fewer claims, rejected loads), because we get it (information) by hersay.”
Macleod says experienced drivers know if they pick up a load of strawberries covered with bags, they are confident there will be no problems with that load. The expert in controlled atmosphere loads has been told by retailers “…their strawberry program is much easier” since using Tectrol.
However, when he asks that customer for data relating to load rejection and claims for strawberries comparing shipments with and without CO2 infused bagged pallets, he hits a stone wall. Those receivers acknowledge the benefits of Tectrol, but refuse to provide any statistics.
(This is the last of a 6-part series featuring an interview with Rich Macleod, vice president, pallet division North America for TransFresh Corp., Salinas, CA. He has been with company since 1976, and has a masters degree in post harvest science from the University of California, Davis.)
The USA needs around 111,000 more drivers to move the nation’s freight, according to Doug Stobiber, vice president of produce transportation for L&M Transportation Services of Raleigh, NC. He was speaking at the produce industry’s largest gathering recently, the annual convention of the Production Marketing Association (PMA), held in Anaheim, CA
While Stoiber notes better pay and higher freight rates for drivers is important, he placed just as much emphasis on truckers being repected.
He points out there is a shortage of qualified drivers and it is only going to get worse, primarily because fewer younger drivers are entering the industry, combined with greater numbers of older truckers retiring. While the average age of the commerical driver is 48 years old, the ones under 30 years of age amount to less than 10 percent.
Current law requires commerical driver’s operating interstate be at least 21 years old. President Obama is in favor of permitting states to lower the age limit to 18 years old. While supporters of this proposal are looking at ways to increase the number of drivers with CDLs (commerical drivers license), opponents point out the high accident rate among teenage automobile drivers, saying they are too young and immature to drive a big rig.
Starting this year, the nation’s largest generation (baby boomers) are reaching 65 years of age. They are retiring at a rate of 10,000 each day.
Stoiber made some economic comparisions between hauling dry freight, compared to fresh produce. There are liabilities as a produce trucker. Those remain until the papers are signed and the receiver accepts the load. The use of a refrigeration unit on a trailer adds an additional $1,500 in costs to a coast-to-coast haul. Overall, there are fewer risks with dry freight. Even with all the economic factors involved in produce hauling, Stoiber emphasizes the need for the produce industry giving drivers more respect. This will go along way in attracting more drivers to haul produce.
“Truckers have been viewed as obstacles to doing business instead of partners in the supply chain,” Stoiber said.
He encouraged the audience to pay higher freight rates and to think in terms of price per consumer unit instead of $1,000 per load. It comes down to more than just a good freight rate. Loyalty and respect are very important to truckers, he said.
Stoiber also addressed issues brought forward by a group encourging better practices in dealing with produce truckers. The North American Produce Transportation Working Group (NAPTWA) earlier this year released guidelines for making fresh produce hauling more attractive. Tips range from decreasing detention time when loading and unloading, to allowing drivers to watch loading.
The best practices are regularly reviewed and updated as federal regulations and other factors change the way truckers are allowed to operate, said Stoiber, who is a member of NAPTWA. The best practices are free on the working group’s website at www.naptwg.org.