(CORRECTED, Sept. 7) SUN VALLEY, Idaho - Current transportation rates for Northwest potato shippers reflect sharply lower truck rates compared with two years ago, but the market may have hit bottom and could move higher by the end of 2017, one transportation expert said at the 2016 Idaho Grower Shippers Association convention.
Providing a roundup of factors affecting truck rates, John Stenderup, manager of grower-shipper transportation services for C.H. Robinson's Western region, said Aug. 31 that the transportation market was historically weak.
"It's a buyer's market, with depressed rates caused by an extended period of mild demand, adequate supply and limited regulatory influence and an overall lack of volatility," he said. However, like any cyclical business with ups and downs, he suggested transportation rates may have hit bottom.
He projected modest truck rate increases of 2% to 4% over the next year to 18 months, with movement likely toward the end of 2017.
He said about 49% of truckload capacity is employed within fleets of under 50 carriers. Stenderup said that sector is where the spot market is determined and where the produce industry generally operates.
Industry predictions last year projected 98% or 99% active truck utilization for 2016, he said, but those projections were wrong. The utilization is several percentage points lower than that.
"We were wrong," he said. "The market is soft (this year) and it's very clear," he said.
Statistics through June showed that refrigerated freight rates were more than 10% below the levels of mid-2014 in the Pacific Northwest, California and south Texas.
While the trucking industry expanded in September 2014 when rates were high and fuel prices plunged, recent statistics show the depressed market has shrunk demand for drivers and cut orders for trucks. Preliminary figures for July show a 50% decrease in new truck orders compared with a year ago, and trucking jobs openings have decreased by 11,500 since January compared with year-ago levels.
Orders for new trucks are the softest since 2009, and he said carriers cut 1,100 jobs in the last few months.
There is speculation the spot market has bottomed out, Stenderup said.
As trucking companies reduce supply of equipment and drivers, Stenderup said it is inevitable that prices will firm up and perhaps become volatile if a weather event like 2014's "Snowmaggedon" spikes demand for trucks.
He urged shippers to stay connected to transportation experts to help deal with changes in the truck supply and transportation rates.
"Stay in tune with market experts and understand where the stress is coming from, because it just takes one event to make things really go out of hand," he said. "Keep your partners close."
Note on correction: The orginal story incorrectly compared June truck rates to a year ago rather than 2014.