Freight rates continue upward trend in 2014 - The Packer

Freight rates continue upward trend in 2014

03/21/2014 11:08:00 AM
Tom Burfield

Tom BurfieldWhile truck availability might be tight at times in some parts of the U.S. this spring and summer, shippers generally should be able to secure transportation for their loads, but at a higher price than last year, industry experts say.

“I don’t see a cliff that we’re about to go over on the horizon,” said Doug Stoiber, vice president, produce transportation operations for L&M Transportation Services, Raleigh, N.C.

“Trucking companies are managing to get qualified people in, get them trained and get them behind the wheel of their rigs,” he said. “I’m cautiously optimistic.”

2014 promises to be “interesting,” said Jeff Moore, vice president of sales, Midwest region for Lange Logistics, a division of Franklin, Tenn.-based Tom Lange Co.

“We see many changes and challenges that should create great opportunity for those companies that can adapt best and fastest,” he said.

Stricter regulations, higher fuel prices and adverse weather should make this a challenging year, he said.

Capacity likely will be tighter this year than last year, predicted Kenny Lund, vice president of support operations for Allen Lund Co., La Cañada Flintridge, Calif.

Lund said spring likely will be very active as trucks set out to restock parts of the country that were hard hit by winter storms.

That capacity crunch may not be felt as much in California because of drought conditions that have caused some growers to cut back on planting, he said. Also, a freeze this winter knocked out a large portion of the state’s citrus crop.

“There’s always a summer crunch,” Lund said, but this year the effect likely won’t be as pronounced as in the past.

Truck availability could be tight in Texas, though, thanks to heavy shipments crossing the border from Mexico.

And rates may continue to skyrocket in the Northeast as a result of an increase in imports coming out of ports in that region, Moore said.

“Rates have increased by as much as 50% during certain times of the year,” he said.

Fuel costs always are a concern, Moore said, but he added that they’ve been “somewhat manageable” thanks to contractual rates and fuel surcharges.

The good news is, more large fleets converting to compressed natural gas could have “a softening effect on diesel rates,” Stoiber said.

“I don’t see the diesel price spiking,” he said.

Regulations also have helped boost freight costs, Moore said, especially those imposed by the California Air Resources Board.

“(CARB) has required substantial investments for those trucking companies operating in California, which has increased costs and/or lowered the supply of trucks there,” he said.

Rising costs of health care and other costs of doing business also will bump up freight rates, Stoiber said, especially for produce shipments.

“A carrier who has a refrigerated trailer and wants to haul produce knows he is going to maximize his rate per mile,” he said. “But he’s taking on additional risk because of it.”

The frequency of claims for temperature abuse or problems like shifting loads are higher in produce than in more stable categories, he added.

Freight rates could increase about 6% on dry goods compared to last year, Lund said. And they could go up 6% to 10% on refrigerated products.

A driver shortage is becoming more likely as the economy picks up, Moore said.

“The softer economy over the last few years has kept it from being dire,” he said.

Stoiber believes the industry is “facing a bottleneck when it comes to getting people into the industry.”

Aging baby boomers are retiring, but federal law requires interstate drivers to be at least 18, he said. That means that high school graduates have to wait two or three years to obtain a commercial driver’s license. By then, many already have embarked on other careers.

Lund expects a driver shortage to continue in spite of high unemployment because people simply don’t want to drive a truck for a living.

Increasingly strict regulations and poor treatment of drivers are dissuading workers from seeking jobs in the trucking industry, he said.

A new rating system from Federal Motor Carriers Safety Association also will take a toll, Stoiber said.

“Trucking companies are being much more cautious about who they select, based on their background, driving record and any issues they may have had in the past,” he said.



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