Tight trucks, rising rates rattle supply chain

With coast-to-coast truck rates peaking at over $10,000 in early January, transportation costs are up a whopping 20% to 30% above a year ago in some shipping regions.

That spike could cause some tussles within the fresh produce supply chain over who will absorb the added costs.

At $8,400 from Yakima to Boston in early January, transportation charges added $8.40 per 40-pound carton of apples, compared to $7.40 per carton a year ago. Increased trucking costs were reflected in many shipping regions throughout the U.S. in early January.

The U.S. Department of Agriculture reported that truck rates in early January from California’s Imperial Valley to Boston for iceberg lettuce ranged from $8,300 to $8,600 per truckload, up more than 25% from $6,500 to $6,700 reported the same time a year ago and in 2016.

While roller coaster rates are not unusual based on supply and demand, some fear that the shortage may be linked drivers leaving the industry because of a new federal regulation requiring electronic logging devices in trucks to track hours of service. 

The major “bomb cyclone” winter storm in the Northeast in early January contributed to some truck rates quoted from California to East Coast that exceeded $10,000, said Ryan Beno, operations manager for Visalia, Calif.-based Advanced Transportation Services. Prices were driven higher because drivers were  reluctant to take a chance with the severe weather. 

One truck broker reports a driver shortage in Nogales could be linked to a crackdown on drivers who are licensed in Mexico but don’t have a U.S. drivers license.

Whatever the cause, higher truck rates aren’t welcomed by the supply chain, Beno said.

Typically, he said added costs seem to fall back on growers and shippers. Retail companies typically look at last year’s delivered prices and typically want to the current price to be in that same range.

“It is going to get hard for us and the shippers to drive that cost up and absorbed by the retail (segment),” Beno said. “We will have to see how that plays out and where rates go from here,” he said. “If I’m a shipper, I’m going to be very concerned about the rates I quote my customer and how that’s going to affect the bottom line,” he said.

On Jan. 8, he said that rates were beginning to dip slightly, but rates in early January were still 30% higher than a year ago.
In Nogales, Ariz., Alfonso Almeida, vice president with A to Z Truck Brokers, said he believes the biggest problem with tight trucks in that region is a driver shortage. Rates to Los Angeles from Nogales were $1,800 to $2,000 and higher in early January, compared with about $1,000 to $1,200 last year at the same time. He said rates were the highest he can remember from 25 years in the business.

“A lot of the drivers that were heavily produce were Mexican drivers and they had Mexican drivers licenses — now it is becoming an issue,” he said. Authorities were cracking down on drivers that were allowed to be in the U.S. but had Mexican drivers licenses, he said. 

“We have trucking companies around here where all the drivers were Mexican and all the trucks are parked,” he said Jan. 8. “There are not enough American drivers to cover the need.”

Almeida said the electronic logging device mandate could create more problems in about 60 days, after a 90-day temporary waiver for agricultural commodities ends.

In the weeks after the Dec. 18 electronic logging device mandate compliance date, Kenny Lund, vice president of support operations with La Cañada Flintridge, Calif.-based Allen Lund Co., said trucks have been tight.

“It should be easy to find trucks right now and it is still pretty hard,” he said Jan. 3. While he has not heard of any reports of enforcement of the ELD mandate, he said there are anecdotal reports that some drivers have quit the industry.

 For drivers using the electronic logging devices, Beno said there were complaints that the devices weren’t working correctly.

Truckers were using paper log books as backup because there are dead spots throughout the U.S. in cellular coverage that some of the devices depend on.

Mandate and more

When the ELD mandate is in full effect, Lund said he believes the regulation will create more friction between truckers and shippers during loading and unloading.

“Problems will show up on the loading dock and unloading dock then they run out of hours when they take too long,” he said.

Beno said that the Department of Transportation will have to fix the hours of service rules in order to allow drivers to account for delays in loading and unloading product. While high rates will attract some drivers, older drivers may elect to retire rather than deal with the technology.

Beno said trucking companies are seeking to retain employees in a very competitive environment. “If a guy was driving for me and he asked for 10 days off, I wouldn’t deny him, period,” Beno said.

John Sitko, with John Sitko Trucking Inc, Oak Harbor Wash., said he was hoping that the electronic logging device mandate would be delayed by a year, but so far that doesn’t seem likely. 

“I’ve been in the trucking business for 43 years, and it gets harder to stay in business and it gets harder to find drivers,” he said. “Will this add to the problem of finding drivers? Yes, somewhat, it will.”

Sitko said April 1 is the date that the Department of Transportation is expected to begin enforcing the ELD regulation and putting trucks out of service for violations.

Sitko hopes that when the Trump administration sees the turmoil it is causing with the regulation, they might take a second look at the regulation.

“The produce haulers and the haulers of stuff that is highly refrigerated need to have a little bit of leeway,” he said.

High rates may help solve the problem of high rates. 

“Truck rates are up — this is not time to leave the industry, this is a time you can make more money,” Lund said.