Posts Tagged “transportation 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.
It is a bit amusing watching the produce industry’s reaction to transportation rates and other issues.
Little thought is given to transportation – trucking or rail – until there are problems. Those problems almost always center first on what’s the cost of the truck? Find the cheapest truck available is pretty the industry’s unwritten motto.
This has typically been most true after demand for refrigerated equipment subsides entering the fall as produce volume is seasonally lower. It continues until around March or so when spring produce shipments are increasing and demand for equipment rises accordingly.
Since last year this has all changed. Another cycle in trucking has arrived. These cycles typically last maybe three to five years. The cycle that has ended saw rates for produce truckers remain pretty stagnant. A sluggish economy with stagnant wages did not present as many attractive employment opportunities.
That’s now in the rear view mirror as demand for trucks, and drivers is often outstripping supply. Now there’s near panic is some produce industry corners. Not only are freight rates substantially higher, but getting a truck at any cost is often a challenge.
Truck rates have recently backed off some, but spring is coming soon and we’ll see how long that trend lasts.
The federal mandate for electronic logbooks certainly isn’t going to help no one. Truckers currently are allotted 14 hours of operating time, but how often do they waste much of this time at loading and unloading docks? When multiple pickups and drops are involved, the problems is only compounded.
While truck rates have plunged from only a month ago, they are still much higher than a year ago.
Rates from the California desert are currently about $7,400 to New York City, off 15 percent from three weeks earlier. However, the current rate is still 20 percent above the same time a year ago.
For a load of apples out of the Yakima Valley in Washington state the gross freight rate is around $4,600 to Dallas, 20 percent below only a few weeks ago, but very similar to rates at the same time last year.
Rates from south and central Florida for tomatoes and veggies are mostly below $3000 now, which is 20 percent more that a year ago.