Produce Hauling Rates

Trucking rates have been sky-high lately, which is disrupting many supply chains. Produce transportation drastically change the cost per unit to the end consumer. Even worse, it can cost fresh produce companies thousands in unexpected expenses. Most company’s are trying to figure what the new standard is and when will it return to normal. Unfortunately, with so many new variables at play, it is hard to see where the end is. Fortunately, we can plan ahead to act accordingly. This will minimize any issues, surprises and delays that are harming your supply chain. Now, let’s look into a few key issues as to why trucking rates are so high.

Why Rates Have Been So High

There are three main reasons, or contributing factors, as to why the rates have jumped up so high. These are Capacity, Volume and Covid19. They all tie into one another, but we are going to try and touch on the specifics with each category.

Capacity

The entire freight industry went through a small recession last year. With this, rates were below average for most trucking companies, which put stress on their pocket books. A lot of carriers had to make the decision to close their doors and turn in their keys as they were not able to make ends meet. This helped to stabilize the demand for trucks with the supply of loads. That means we were at equilibrium during recession volumes. If things were to normalize, we would have a shortage of trucks and rates would naturally rise.

Volumes

Volumes went from being below average at the beginning of the year to all time highs in June, July and August. Mixing high volumes with less trucks created the perfect storm for hyper-inflation with trucking rates. Essentially, shippers had to bid for trucks since there were not enough to take all their loads. Normally, we see the opposite. This begs the question: Why did volumes jump so high?

Covid19

This Virus has impacted everything from our personal lives to the overall economy. It is not a shock that it played a role in the rising transportation costs this year. According to our data, the coronavirus caused a jump in volume that has held steady since March. We speculate that this is due to the threat of being closed/locked down. Shippers are trying to get their goods out the door because they are uncertain about the near future. What is surprising is how these volumes have held constant from March until now (August). A combination of imports, consumer consumption, and uncertainty have played a major role in keeping rates high and relatively stable.

Where are the Rates?

Rates are all over the place. They change based on location, distance, capacity, population density, weather, and many other smaller factors. Here is a short explanation on how Distance, Location and Capacity impact shipping rates:

Distance is a very important factor in price. Coast-to-coast shipments are cheaper per mile than local runs. It is important to remember, whether you are going a long way or running 50 miles down the road, you will still be paying for the drivers time.

Location is another factor that impacts the price. We get a lot of shipments that pick up in Wyoming, Colorado, Utah, and other states that do not have a very dense population. This can cause the rate to come up because drivers tend to be situated around bigger cities where loads are most likely to appear. We would essentially have to pay them to drive out and get the shipment (deadhead). This rule also applies to deliveries in remote areas. If you are 200+ miles away from a major city, be prepared to pay a little more than the usual rate.

Capacity is the final constraint to consider/understand. Drivers are constantly moving all over the country. When you have a surplus in one city, then the price goes down. The drivers will compete for loads. If you have a shortage of drivers in a city, then the price goes up because the driver will have their pick of the lot. The highest paying freight will be moved first.

Live Rates (Updated 12/15/2020)

Data From Fide Freight internal achieves and database.

Conclusion

Produce hauling rates are abnormally high, but if you plan ahead, then you might have a better chance at securing a truck at a moderate rate (when compared to industry averages).

If you have any questions or would like to get trucks lined up, Fide Freight will be more than happy to take that call. We are available when you need us and will work for you, not your money.

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