Weather, Economy Reducing Reefer Freight

The lackluster economy, combined with widespread weather troubles that delayed and reduced produce shipments, have sharply reduced refrigerated freight so far this year,  industry experts have said.

Refrigerated shipments during June fell 14%, the largest monthly drop since April 2005, American Trucking Associations data show. Refrigerated volume dropped 7.7% in the first half of 2011, while total truckload freight, including reefer, rose 2.3%.

“We definitely felt the softness in the market in June,” said Prime Inc. CEO Robert Low, although volumes have improved in recent weeks. “The year got off to a good start, but in the last part of April and May, it slowed down noticeably.”

Low linked the softness to the economy, saying, “Our customers’ business is pretty flat. If we can get a little encouragement from the economy, things will be pretty good in the second half.”

Meanwhile, weather problems delayed fruit and vegetable planting in California — origin of half the produce grown in the United States — two brokers said. Excessive rain and heat also damaged crops in the Midwest, Southeast and Pacific Northwest.

ATA’s data fit “with what we have seen, heard and experienced,” said Kenny Lund, vice president of the Allen Lund Co., La Canada, Calif.

“This year, we had a very wet spring,” Lund said. “Crops couldn’t get planted. Right now, the produce is just fabulous, but the summer push is gone. Demand is still fairly flat year-to-year. We didn’t see the highs we expected.”

“We had a very late start, relative to last year,” said Rick Rattazzi, senior vice president for Johanson Transport Service, Fresno, Calif., a freight broker specializing in produce. “Everything was two to three weeks behind. That would somewhat address that 14% drop.”

Weather problems also hurt the apple crop in Washington, which forced brokers to move New York state apples to the West Coast, Rattazzi said.

Brian Evans, Arkansas division manager for Texas-based broker Addison Transportation, noted another market force: weak meat exports to Europe, which have depressed truckload demand.

ATA Chief Economist Bob Cos-tello expects a recovery.

“I think weather has hurt refrigerated freight as well as the economy, but I wouldn’t be surprised if in July reefer freight was solid,” he said.

Joe Rajkovacz, who hauled produce for two decades and now is director of regulatory affairs for the Owner-Operator Independent Drivers Association, agreed.

“We have had wet weather and significant [product] quality is-sues,” he said. “Guys I know who normally would have hauled almost truckload quantities of tree fruit were getting just a few pallets” from California.

C.H. Robinson Worldwide Inc., the largest freight broker, saw first-half revenue drop 13% in its produce-sourcing business — in part because Wal-Mart Stores Inc. canceled a contract.

Some major refrigerated fleets haven’t felt the decline.

“This year, in general, freight has been stronger than last year, and anecdotally, freight is up 5% in July,” said Chad England, chief operating officer for C.R. England Inc.

“We’re really not seeing a decline,” Jon Isaacson, CEO of Central Refrigerated Service Inc., said. “We actually are seeing the opposite. It’s been busy.”

Isaacson added, however, that the market “is not going crazy with people screaming for trucks.”

Frozen Food Express and Marten Transport, two fleets with publicly traded shares that specialize in refrigerated freight, disclosed first-half declines in miles run of 6% and 2%, respectively, in their second-quarter earnings reports.

David Schrader, senior vice president at TransCore, the load-matching service, said shippers’ posting of refrigerated loads rose 22% year-over-year in July. He noted that some refrigerated loads that typically move in June may have been pushed into July.

“I don’t believe this slowdown is the long-run trend for reefer,” Costello said. “We all need to eat. Remember that this was the group that fared the best during the recession, so one of the problems is that it has tougher year-over-year comparisons.”

Rattazzi noted that produce markets are “very active” right now, and that, overall, the firm’s business volumes this year are up, compared with 2010. He declined to give a percentage.

Rajkovacz disagreed.

“We are getting ready to hit the fall lull,” he said, as locally produced crops such as carrots and lettuce are sold directly to grocers and replace truck moves.

Lund also said truckers’ volumes are being affected by “a real trend toward buying local produce.”

He said that while refrigerated loads are down, the company is doing “pretty well” by selling other services such as dry freight and software.

Lund and Rajkovacz also highlighted the California Air Resources Board’s strict emissions standards for trailers and tractors.

CARB’s “standards are very difficult to meet and understand,” Lund said. “They won’t just fine the trucker — they will also fine the broker, the shipper and the driver if the trailer is noncompliant.”