Tim Linden -- The Produce News -- June 23, 2008
Truck rates from west to east are currently between $8,000 and $9,000, and it is possible that the peak of the season in July and August may bring a five- figure rate for the first time in history.
"We did see the rate move close to $10,000 a couple of weeks ago, but it backed off quickly," Bill Radoi, vice president of the produce division for Express Connection Inc., a truck broker operating from Ontario, CA, in the southern part of the state, told The Produce News. "I think it is possible that we could hit $10,000 this summer, but I think the average is still going to be around $8,000. Our customers just don't want to pay that much."
Joe Carion of Joe Carion & Associates Inc. in Salinas, CA, said that in his more than 30 years in the transportation business, he has never seen rates as high as they are now. "We are seeing rates near $9,000," he said. "It is very difficult to charge my customers that much."
But Mr. Carion said that a $9,000 rate this year is only about $1,500 more than it was last year, and virtually the entire increase is due to the higher cost of diesel fuel. A typical, relatively new semi-tractor trailer can average about five to six miles per gallon going cross country. For that trip, that trucker is going to use about 580-600 gallons of diesel, paying $2-$2.50 more per gallon for that fuel this year than last year, or an increased cost of about $1,300 in fuel alone.
"Fuel costs about 80-90 cents per mile, and it keeps going up," Mr. Carion said.
The cost of the fuel is not only raising the price of the trip, but it is causing a lot of problems for the truckers themselves, he said. "The trucker can't afford to fill up without an advance. They pull into a truck stop and it costs them $1,000 to fill the tank."
In years gone by, Mr. Carion said that he would occasionally give a trucker four $200 checks to get him through a cross-country trip. "If he asked for five, I probably wouldn't hire him again. Now they need $3,000-$4,000 just for fuel, and they may have a truck payment or need tires along the way. It is very expensive to run these trucks."
Mr. Radoi agreed that advancing truckers money for fuel is a very expensive part of the truck brokers job. "It takes a lot more money to run the company these days," he said.
Mr. Carion said that about the only thing a trucker can do to reduce his costs is lower his speed. "A lot more guys are doing that," he said.
A trucker might be able to get as much as six miles per gallon when traveling 60 miles per hour. Increase the speed to 70 mph or more, and fuel economy is going to drop to four miles per gallon.
"That's a significant difference," said Mr. Carion.
With truckers going slower, he said the days when one can load on Monday in California for a Friday delivery on the East Coast are coming to an end. "Maybe five days is possible, but no one wants to do it in four any longer."
Frank Correnti, general manager of JDS Refrigerated Transportation Inc. in Boston, specializes in securing loads in and out of Boston. "A year ago, diesel fuel was at $2.80. Now it's near $5, and the cost keeps going up."
He has to cover that added cost on his contract rates with fuel surcharges. What he charges depends on when the contract was written. "Some people are paying a surcharge of 50 cents per mile."
Mr. Correnti expects truck rates to continue to climb, but he said that they currently are no higher than last year on a load from Florida or Georgia to the Northeast.
"Right now, the spot market is between $4,000 and $4,500 from the Southeast to New York, but truckers aren't jumping at that rate," he told The Produce News June 17. "It's hard to find anybody to do that."
He agreed that extending advances or credit to a long-haul driver is difficult, but it is something many are requesting. "Truckers want advances, but our customers are taking longer to pay. Everyone is hurting."
Ken Gilliland, director of transportation for Western Growers Association, has heard of $10,000 truck rates from California to eastern Canada and $9,000 to Boston. While rail shipments might be able to offer some respite, the Midwest storms in mid-June flooded some railroad tracks and caused the Union Pacific Railroad to severely limit the number of shipments it would take for several weeks.
Mr. Gilliland said that normal shipments should resume by the end of the month, but rail rates are also high and the typical service is unreasonable for most commodities.
He said that typical service to New York is running 12-15 days with a railcar rate, and counting a fuel surcharge, costs close to $13,000. While that is significantly less on a per-carton basis than trucks, most produce items cannot tolerate the extended shipping time nor are they shipped in large enough volumes to fully utilize the size of the railcar, which has more than twice the capacity of a semi-trailer.
Intermodal service offers some opportunities, and Railex is also an option some shippers are looking at, although they need to be close to the company facilities to maximize the benefits.
Railex is a terminal-to-terminal service requiring a shipper to transport produce to and from the rail line's terminal at each end of the trip. Railex is planning to open a terminal in California later this year, but currently its only West Coast terminal is in the state of Washington. The firm does offer four- day delivery to its New York terminal from Washington.
Mr. Gilliland said that some California shippers tried to work out the logistics and discovered that the cost and time of loading and shipping to Washington and from New York resulted in little cost or time savings. He said that when the Delano, CA, terminal opens later in the year, shippers -- especially potato shippers -- will undoubtedly look at the situation again.
In the meantime, truck rates continue to climb with the $10,000 mark in sight. Mr. Correnti of JDS said that seems like an unbelievable price, "but if you would have asked me a year ago, I would have said that diesel fuel would not have climbed to $5."
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