Tight Capacity, Govt. Actions Push Produce Freight Rates Up

This story appears in the June 10 print edition of Transport Topics.

Produce shipments are being squeezed by capacity constraints and government actions, driving up rates as market demand builds toward the usual late-June peak, according to industry officials.

Dan Vache, vice president of supply chain management for the United Fresh Produce Association, told Transport Topics last week that the pre-July 4 holiday push as crops ripen nationwide “really puts a strain on trucking and freight. It will be interesting to see what happens when capacity has to be there for that push.”

Even before the peak hits, “rates are definitely higher than 2012, and they will increase,” said Richard Bauer, executive vice president of RWI Transportation in Wilder, Ky. He estimated that rates throughout the United States are already 8% to 10% above last year.

“The market looks pretty good off the West Coast,” said Ed Ruhe, vice president of operations for Classic Carriers of Versailles, Ohio. “Rates are up 10% over last year. I don’t think there is the capacity out there, either because of [the California Air Resources Board] or the driver shortage.”

Ruhe referenced CARB’s stepped-up enforcement of its rules, which also were a concern voiced by Bauer and Kenny Lund, vice president of support operations for broker Allen Lund Co., based in La Canada, Calif.

Earlier this year, the state, where 50% of all U.S. produce is grown, began to issue fines to out-of-state fleets — as well as shippers and brokers — if trucks lacked state-mandated emissions control equipment such as energy-efficient refrigeration units and tires.

“I don’t know how many guys will stop going to California” because of the rules, Bauer said. “We are coming into the meat of the season there, and we don’t know what to expect.”

“In effect, [CARB has] confiscated some of the capacity,” said Lund, who estimated that 50% of the U.S. heavy-truck fleet doesn’t meet his state standards.

Driver supply is a factor, too.

“The driver market is very, very tight,” said Dan Cory, a broker for Fortune Transportation Co. in Windom, Minn. “If demand was up even more, it would be even more of a struggle to find drivers.”

Cory said rates this year are generally similar to last year, but that doesn’t mean prices always are level.

“When people are looking for a truck at the last minute, they will pay a pretty excessive rate,” Cory said.

“Capacity has definitely been constrained,” said Kerry Byrne, executive vice president at Total Quality Logistics, based in Cincinnati. “Any spike in demand will dramatically impact the market.”

Mark Montague, an analyst for load board operator TransCore, said rates should top last year, based on fast-growing late May and early June demand.

Some crops in California — such as grapes — have started to move, up to two weeks earlier than usual, adding to demand, Montague said. Nationwide refrigerated freight rates rose 14 cents a mile, or about 10%, in May from April and are 3% higher year-to-year.

The Nogales, Ariz., border crossing is a hot spot, with 60% more loads on a year-over-year basis, Montague said.

Rates at Nogales to ship grapes to Chicago were about $5,050 per truck on June 4, 11% above year-ago levels, according to U.S. Department of Agriculture statistics.

Gary York, general manager for C.H. Robinson Worldwide in Salinas, Calif., said a shortage of inspectors at border crossings, particularly Nogales, “is causing some challenges that we haven’t seen in other years.”

“At these types of rates, getting delayed and having a day taken out of the [driving] rotation causes concerns for carriers that are trying to improve utilization,” York said.

Vache said delays result when trucks load in Mexico in the morning, reach the border in the afternoon and can’t cross it before a driver’s hours run out.

However, Teresa Small, a spokeswoman for U.S. Customs and Border Protection, disputed the delays, saying truck wait times were 15 minutes shorter than in April and May last year.

“This is a very interesting . . . period,” York said. “It’s pretty much a traditional season overall. This time of year is always going to be a challenge.”

Currently, USDA’s weekly truck freight rate report shows year-over-year prices increasing in many markets. For example, California carrots cost about $7,100 to ship to Atlanta on June 4, USDA said, compared with $6,600 a year ago.

York said last week’s Roadcheck enforcement blitz was a disruption, because it’s just after Memorial Day.

“Trucks can’t make their normal rotation,” York said, because the holiday idles trucking for a day. That forces fleets and customers to catch up during Roadcheck, when the added inspections slow carriers.

Bauer said Roadcheck causes complications because some owner-operators park their trucks.

A lack of weather issues also has helped to increase the overall produce crop in 2013.

“This year is getting back to a more normal weather pattern,” Vache said, compared with 2012, when cold weather ravaged Midwest apple crops. “There is not one commodity that has really been smacked by Mother Nature this year,” he said. “That is not typical.”