Truck rates may force shipping cost load to shift

06/11/2004 12:00:00 AM
Terry Scruton


The U.S. Department of Agriculture’s Market News has reported truck shortages in Florida and along the East Coast, and California could get hit before long.

(June 11) From new hours-of-service regulations to soaring fuel costs to bankruptcies and consolidation, 2004 has already been a bumpy ride for the trucking industry.

Depending on whom you ask, the worst may be yet to come.

Ken Kodish, chief executive officer of Lionheart Group, Pompano Beach, Fla., said finding trucks to ship loads from Florida has been tough and costly this year and shows no signs of getting better, especially with the Fourth of July coming up soon.

“From where we sit, there are fewer trucks available for holiday markets this year than there were last year,” he said. “And last year there were fewer than the year before. If Memorial Day is any indication of what the Fourth of July is going to be like, it’s going to go from nasty to downright desperate.”

SHORTAGES

The U.S. Department of Agriculture’s Market News has reported truck shortages in Florida and along the East Coast, and California could get hit before long.

Freight rates in those areas are up significantly from last year. The USDA reported the week of June 6 that the cost of shipping a load of citrus from California to New York averaged $5,500, up from $4,900 — or 12.2% — a year ago. North Carolina sweet potatoes were $1,500 for a load to New York, up from $1,350 — or 11.1% — the year before.

And fuel costs are only adding to those woes. While diesel costs have dropped as much as 15 cents in recent weeks, the average national price was still at $1.73 as of June 7. That’s up 31 cents — or 21.8% — from the same week in 2003.

Some shippers, however, say that this is just business as usual for this time of year.

Kevin Sikorski, eastern vegetable sales manager for L&M Cos. Inc., Raleigh, N.C., said truck shortages are to be expected between Memorial Day and the Fourth of July.

“It’s not anything new to the business that trucks become very short in the spring,” he said. “I think this year with the increased fuel costs and a flurry of product, there was some more demand for trucks.”

Sikorski said, however, that business has slowed since Memorial Day, and now that volume from Florida and Georgia has lightened and North and South Carolina deals have begun, he said the Fourth of July shouldn’t be as much of a problem.

“The product is more spread out,” he said. “I don’t think things will be as tight as they were in the month of May.”

In spite of this, some buyers, such as J&J Distributing Co., St. Paul, Minn., say that fuel costs have raised the price of some commodities, which in turn means that they have had to raise the cost to their customers.

John Jackson of JJ Marketing Inc., Salinas, Calif., said costs eventually have to be passed along to the consumer.

“Whatever added cost will be passed on to the consumer because that’s what (shippers) have to do,” he said.

MAY GET WORSE

Chuck Nelson, owner of Chuck’s Transport Inc., San Antonio, said shortages also could get worse for California shippers before too long.

“You’ve got carriers now that, if they aren’t getting a premium fuel surcharge to run that area, they won’t run there anymore,” he said.

Tony Forsythe, president of National Produce Consultants, Plano, Texas, said the biggest concern for the trucking industry is that smaller independent companies are going out of business.

“It’s reducing the number of options you have,” he said. “That business is going into bigger hands.”

Nelson agreed, adding that he doesn’t think the trucking industry will see rapid growth anytime soon.

“There’s no incentive for people to jump back into trucking,” he said. “Because, between fuel surcharges and everything else, there’s no profit margin left. In the last 46 months, roughly 25,000 carriers have closed their doors. The truck shortage is here, and, unless something major happens, it’s going to get worse before it gets better.”

OPTIONS

What that something major might be is up for debate. For example, few shippers who don’t use rail already are turning to it as a viable option. They say rail lacks the flexibility of trucking and isn’t equipped to move as many different commodities as trucks can.

Kodish suggested that regional load consolidation might be the answer, with trucks making fewer pickups and making more use of terminal markets.

Nelson said going back to terminal markets is a possibility, though it won’t happen any time soon. He said a more likely scenario is that those on the supply side who haven’t already bought trucks will do so.

“It’s going to force a lot of these produce guys back into the trucking deal,” he said. “A lot of them may have to look at buying a few of their own trucks. It’s forcing people to take another look at how they meet their own transportation needs.”

Forsythe said that too many companies have built facilities away from terminal markets for them to return now. He said a change in attitude toward trucking is what is needed most.

“This is going to make broadliners change their receiving policies and give produce a bit more of a higher priority,” he said. “These truckers over a period of time will start charging them money for sitting and waiting. When they start doing that, that will change the industry.”

Nelson agreed, adding that the entire industry is going to have to change the way it looks at trucking before long.

“You’re going to have to pay to play,” he said. “And if you don’t have good relationships with your carriers, don’t be surprised when you have to pay way more than your counterparts do.”



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