Despite grim forecasts earlier in the year, food shippers haven’t faced equipment or space shortages in any mode.
“This year hasn’t been as bad as I thought it would be,” said Richard Burden, director of transportation for Salinas, Calif.-based berry producer Naturipe Farms. “I was anticipating problems, but the carriers we are using have pretty much been able to come to the table with equipment.”
Refrigerated trucking capacity is tight, shippers and carriers agree, but no shortages have popped up. “The three trucking companies we use the most have been able to give us additional space over last year,” Burden said. “We’re probably going to grow by double-digits this year, so we definitely have increased loads and we didn’t really have trouble finding the trucks.”
The tightest capacity is in California, according to Marc Lundberg, head of refrigerated team service for truckload operator U.S. Xpress. “The harvest came in very early this year,” he said. “It started in April compared to last year when it really didn’t get started until June. That acceleration pushed the trucks out of the West.”
California’s capacity squeeze could tighten a little more in coming weeks because of renewed competition for trucks, Lundberg said. “The harvest has started in the Pacific Northwest, and we are expecting the volume to be relatively strong,” he said. The strong volume coming out of fields and groves in the Northwest is going to hurt shippers in California, because U.S. Xpress and other carriers had been deadheading trucks in the Northwest and (repositioning them) to California.
A longshore slowdown at the Port of Portland resulted in a number of loads being trucked from that region to the ports of Tacoma and Seattle, but the situation didn’t cause shortages, because there was excess capacity in the region ready to haul the fresh and frozen loads, Lundberg said.
He said rates have been strong in the western region because of capacity tightness. “It’s been consistent. We haven’t seen the kind of drop-off you sometimes get between seasons. We’re seeing strength in rates for both fresh and frozen markets.”
Contract rates for reefer trucking are about 7 to 10 percent higher than last year, but that’s balanced out by cheaper diesel and lower fuel surcharges, Burden said.
Despite the steady demand and rates, truck fleets aren’t surging, Lundberg said. “Most major fleets are holding fleet growth,” he said. “We are one of a few that are growing. We just started up about a year ago with 200 trailers; by the end of the year, we will have 250 and by the end of next year, we’ll have 450.”
Despite the company growth, U.S. Xpress is careful about equipment purchases, keeping operating ratios tight, he said. Because the $60,000 cost of refrigerated trailers is about three times the price of a dry trailer, U.S. Xpress has just 1.2 reefer trailers for every tractor in the refrigerated team service, compared with a 3-to 1 ratio for dry trailers to tractors in the fleet.
Shippers are still wary of shortages in the future, according to one shipper representative. “Right now, no deals are being lost,” said Dan Vache, vice president of supply chain management for the United Fresh Produce Association. “If you are willing to pay the price, you can get trucks now, but I think everyone realizes we could have a shortage at some point.”
He said more shippers understand they need to develop relationships with carriers and not just depend on the spot market.
Ocean equipment is also readily available. “This is a good year,” said Teresa Pittillo, president of Poseidon Forwarding, which specializes in refrigerated exports. “There are no shortages out of any port across the nation, and we can find equipment and slots. There may have been a hiccup here and there, but no real issues.”
Poseidon doesn’t book any rail service, but Pitillo said, “Once in a while, we get a call from a shipper that a load will be delayed a week because they didn’t get a railcar.”
She said ocean rates have remained stable. “The carriers tried to increase rates, but all the (general rate increases) fell apart. It’s been a good year: busy, consistent, rates stable, enough equipment and activity in every part of the world.”
She said the most significant business increase has been frozen protein shipments going to St. Petersburg, Russia.
Produce shippers are finding increased business opportunities in South Korea, following implementation of the U.S. free trade agreement in March. The type of produce going to South Korea and other parts of Asia right now is highly perishable and being shipped by air, according to Naturipe’s Burden. “Air cargo rates are high because we ship our blueberries at the same time cherries get exported,” he said.
The U.S.-South Korea free trade agreement has created new market opportunities along with higher rates, he said. “This is the first year Korea will allow U.S. blueberries to come in, but only those grown in Oregon,” Burden said. “At the same time, they dropped the import duties on cherries, so cherry exports are definitely higher. That means our blueberries are competing with California cherries for space.”
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