Truck rate pressure builds toward Fourth of July

With tight trucks in mid-May and the likelihood of further escalation before the Fourth of July, sources said the rising spot market for trucks is pushing costs higher for shippers and placing a premium on straight loads that don’t require a trucker to make multiple stops for pickup or delivery.

The USDA reported that refrigerated truck rates for Salinas-Watsonville, Calif., vegetable shippers reached as high as $12,200 to Boston on May 11, up 10% from the previous week and up 24% since March 27. The USDA reported a shortage of truck availability to all destinations from Salinas-Watsonville.

Rate increases the week of May 10 ranged from 6% to 10%, the USDA said. The average price of diesel fuel for trucks was $3.19 per gallon on May 10, up 33% compared with $2.39 per gallon the same time a year ago.

Big demand, limited supply

“There’s 20 loads for every truck out there, which is driving rates up and making things difficult,” said Scott Heroux, sales manager at Phoenix, Ariz.-based Fresh Freight.

Truck carriers are demanding premiums, said Tom Riddle, senior manager of transportation for River Fresh Farms LLC, Salinas, Calif. “Trucking companies, especially on the West Coast, have been suppressed for so many years, and it really, in my opinion, (is) their last-ditch effort to try to push the markets and to continue to get paid,” he said.

Conditions aren’t likely to ease much before the Fourth of July, but could begin to back down after that, Riddle said. “There is light at the end of the tunnel, but unfortunately for the next six to eight weeks, it’s going to be fairly tumultuous,” Riddle said.

Riddle said he has heard of mid-May rates as high as $13,500 to Chelsea, Mass. That type of elevated truck rate, Riddle said, could be on the low to medium end of pricing during the last weeks of June heading into the Fourth of July. Increased shipments of grapes and stone fruit out of California by late May and early June will put a further strain on the market, he said.

“I would say that first week of June into July is going to be the peak of the rates.” he said. At the same time, Riddle said truck carriers should be cautious in passing up contracts and focusing only on the spot market. “If the market flips as quickly as I think it will, in late July or early August, there’s going to be a lot of (carriers) crawling back on bended knee to try to recoup some of those relationships that were lost,” he said.

What’s ahead

With some states beginning to ease social distancing regulations, Heroux said more business by restaurants could drive up demand for refrigerated truck deliveries even more. In addition, the fuel shortages on the East Coast were adding to challenges, he said.

The Colonial Pipeline, supplying about half of the fuel to the East Coast, was victim of a ransomware attack that idled its operations from May 7-13.

“They say the pipeline is back up and running, but it takes 12-16 days for the fuel to get from Texas all the way up to New York, so there’s probably going to be some shortages for probably the next couple of weeks,” Heroux said.

Quest for simple loads

The tight truck market has increased preferences by carriers for less complex jobs, Heroux said.

“The complexity of the loads has a lot of effect on what’s happening,” he said. “If you had somebody doing a one pick, one drop, it is a lot easier than somebody who wants you to pick up at seven different places.”

Drivers are declining “complicated” loads or refusing to go to shippers’ docks that are known to run late. “If you’ve got a driver sitting eight hours at a dock waiting to be loaded, where he could go somewhere and be loaded in and out in two hours, that’s all going to be taken into consideration,” he said. “Some of those more complicated loads end up going to the spot market.”

Shippers are being urged to bring the load complexity down to increase the chances of finding a truck.

Looking ahead, Heroux said that trucks will continue to be tight for the foreseeable future. “I think you’re going to see a more of a focus on consolidating loads,” he said. “Hopefully, what you’ll see is shippers looking out two or three weeks ahead and getting commitments from transportation companies to haul the products.”

The increased number of loads on the spot market is driving the market up, he said. “We’re seeing a lot of loads on the spot market that, six months ago, you didn’t see,” Heroux said. With every major carrier seeking to hire, driver shortages also add to the tight market, Heroux said.