While produce shippers have enjoyed a stable three-year run, that breathing room has officially evaporated, experts say. As peak harvest seasons in Florida and California converge with diesel prices sitting at $5.40 a gallon, refrigerated trucking capacity is poised to hit its tightest level in over a year.
Though a brief rate dip in late April may have given some shippers a false sense of security, Jonathon Swart, senior director of sales at BlueGrace Logistics, warns that it was merely a weather-related fluke — and the real market squeeze is hitting right now.
“To really understand April, you have to look at March first,” says Swart. “We saw seasonal volumes pick back up out of Southern and Central California, and that put real pressure on the market fast. Fuel costs were climbing, the nondomiciled CDL rules were kicking in and load-to-truck ratios hit their tightest point in three years. The market was already stretched.
“So, when rates dipped in late April, that was not the market telling you capacity opened up,” he continues. “That was weather. Wet conditions across the Southeast and parts of the Midwest pulled produce freight off the board for a few days. When tender volume drops, spot rates soften. But the underlying capacity picture did not change. Available trucks relative to loads are still at their tightest in over a year.”
Swart advises grower-packer-shippers to avoid budgeting off late-April numbers and look at the “real rate environment” seen in the first three weeks of April, plus the seasonal compression that hits when Florida and California are running at the same time.
“If you locked your summer freight assumptions to that [late-April] dip, you are going to be underbid or undercovered by mid-June,” he says.
Inspection Week Backlog
Federal inspection week earlier this month further constricted the freight market, says Swart, who adds that while inspection week always pulls some capacity off the road, the May 11 date for this year’s inspections was particularly bad timing.
“It [landed] right on top of peak Florida and the front edge of California. Those are the two windows where produce shippers have the least room for error on transit time,” he says. “And the carriers getting sidelined are not the big fleets. It is smaller operations and owner-operators, which is exactly the pool produce shippers lean on for surge capacity in May and June.”
Swart says the impact of federal inspection week lingers.
“Even when the inspection blitz wraps up, you have a backlog of loads chasing fewer compliant trucks for days after. On a tight harvest-to-DC [distribution center] window, that backlog keeps qualified refrigerated trucks in high demand longer than people expect,” he says. “Add the Montgomery vs. Caribe Transport Supreme Court ruling, add Memorial Day weekend disruption, and you have a series of events stacking on top of each other and eroding available capacity at exactly the wrong moment.”
Federal inspections week can be further complicated by a focus on cargo securement, which can be tricky for produce due to pallet weights and perishability, creating more of a compliance than capacity crunch — a reality shippers tend to miss, says Swart.
“There are trucks parked right now that physically exist and could be dispatched, but the owner will not put them under a load [during inspection week] because they are not confident the equipment, the paperwork or the cargo securement setup would pass during this enforcement window,” he says.
Cargo securement is particularly complicated for produce, adds Swart. Pallet weights vary, and perishability limits how aggressively shippers can strap or block. Load patterns also shift in transit as the trailer cools and product settles, and no one wants to risk a violation during inspection week.
Fuel Pressures Change the Power Dynamic
At $5.40 a gallon, the fuel surcharge math changes who is economically viable to haul for, says Swart.
“A typical long-haul reefer running at roughly 6 miles per gallon is collecting around $0.69 a mile in fuel surcharge just to break even on fuel costs,” he says. “When a lane is one-way deep into a region with no reload — Salinas heading back east or South Florida heading north — the carrier is absorbing deadhead miles at full fuel cost. That is no longer a low-margin lane. That is a money-losing lane.”
Swart says fuel spikes trigger a predictable chain of events, with large fleets tightening their networks and prioritizing shippers who offer turnarounds, paired backhauls or flexible reload windows.
“They are quietly deprioritizing accounts with chronic one-way lanes and dedicating their trucks to shippers who help them avoid empty miles,” he says. “Most of the shippers losing favor do not know it until their tenders stop getting accepted.”
Small and midsize carriers are in an even tighter spot, says Swart.
“The capital needed just to keep trucks on the road increases sharply during a fuel spike. And when you factor in that California diesel is running significantly above the national average, some carriers in that region are looking at close to double the fuel costs they had three months ago,” he says. “That pressure forces decisions about which shippers are worth serving.”
The ‘Hidden Risk’ on Shippers’ Books
With refrigerated rates up 5% year over year, produce shippers need to take a critical look at their carrier strategy and have a backup plan, says Swart.
In this environment, he explains, “the single most important thing is verifying that you actually have backup carrier coverage, not just names on a routing guide.
“Single-primary lane coverage was the biggest hidden risk on most produce shippers’ books during the soft market,” he continues. “It was masked for three years because the primary could always cover. That world ended this quarter. Many analysts have been calling for 25% to 30% increases in spot markets, and that prediction has come to life over the last few weeks.”
Swart’s advice is to take your top 10 lanes by volume in and out of Florida and California and verify that you have a named secondary and tertiary carrier who has actually moved your freight recently — and not a carrier who is listed in your system but rather a carrier whose trucks have been under your loads.
“If you cannot produce that list, you do not have backup coverage,” he says. “By July you will be paying spot rates 30% to 50% above your contracted primary on lanes where you have no secondary. A real, executed tertiary program is worth the time to build right now.”
As to lead time, Swart says anything produce shippers can do to get tenders to carriers more than 48 hours out makes a real difference.
“In fresh produce, that feels almost impossible sometimes, but the shippers who get their tenders in first are the ones getting covered,” he says.
Swart puts the refrigerated spot ceiling for July in the range of 8% to 12% above where it is today.
“The upside case is higher if hurricane disruption hits Florida early or California has another heat event during stone fruit and grape peak,” he says. “We are not expecting a 2021-style spike because capacity is being added back into the market, but the build is going to lag demand by about 60 days. And that 60-day lag is the produce season.”
4 Tips for a Solid Freight Backup Strategy
Want to implement a backup strategy that actually works? Swart says to follow these four steps:
- Active, not nominal — Your secondary and tertiary carriers need to be running 10% to 15% of the lane already. That means rates are calibrated, they know the lane and the operational handshake is solved before you need them in a crunch.
- Geographic diversity, not just fleet diversity — Two carriers headquartered in the Southeast with overlapping driver pools is not redundancy when a hurricane hits Lakeland, Fla. You need carriers whose footprint and driver base are genuinely different.
- A pre-priced, pre-onboarded brokered tier for surge — Not a call-us-when-you-are-stuck relationship; a tier where the lane is already built, the carrier mix is vetted and the rate is not being renegotiated at the moment you need it most.
- Visibility into your carriers’ capacity health — Shrinking driver count, declining tender acceptance, slipping on-time performance are leading indicators of a service failure. You should see those signals before the failure happens, not after.
Most produce shippers have the first piece in some form, says Swart, adding, “Very few have all four. The ones who do are the ones that stay covered through disruption.”
3 Steps Produce Shippers Need to Take Today
When asked where he sees the ceiling for refrigerated spot rates by July and what produce companies should be doing now, Swart offered the following advice.
As tender volumes inevitably roar back for the summer harvest, unprepared produce companies risk being left at the dock. To survive the accelerating capacity crunch, shippers must act immediately, says Swart, who offers three strategies produce companies need to implement right now to protect their supply chains:
- Lock contracted capacity on top lanes through August at this quarter’s rates, not next quarter’s — The window to do that at current pricing is closing.
- Build a spot-rate tolerance into your produce P&L — Assume 10% to 15% above contracted and budget for it, so when the gap appears, you are not forced to refuse loads.
- Get tight on shipper-of-choice fundamentals — These include dwell time, detention payout speed and appointment flexibility. In a tight market, those are the difference between getting trucks at contract rate and getting nothing at any rate.
“Show carriers you can coordinate all the moving pieces, and you will be prioritized over shippers who cannot,” says Swart. “The shippers who do these three things now will not be scrambling in July. The ones who wait will be.”
