Trucking Transition Part 1

We are all familiar with the local movement. Buy close to home, know your grower, support your neighbors and so on. That is a noble concept and takes us all back to our parents’ and grandparents’ way of life. And there is absolutely nothing wrong with that.

Now let’s consider a ramification: transportation demand for equipment to move from California to the East Coast is down substantially this summer. Rates for the 3000 mile trip from Salinas, CA to New York, NY have been in the mid-$5000 range compared to over $8000 at the same time last year. Some say that the local availability of vegetable crops had decreased that demand, leaving plenty of capacity to haul the melons and berries from California.

Part of the cost reduction (about 1/3) can be attributed to low fuel prices. The remainder is supply and demand. Western Growers Association usually receives complaints this time of year from members who can’t find trucks to haul their crops to the East Coast. This year there have been no complaints. However, the unintended consequence of low rates could be forcing independent owner-operators out of the game. Their numbers have dwindled from 25% of produce loads down to an estimated 13% today.

The new regulations mandating hours of service reductions and electronic logs could also lengthen the cross country solo haul from five days to six. That is a direct impact on the bottom line which will in turn force raises in rates and reduction of supply of available trucks to move the crop at peak harvest. Any of this can be harmful to the movement of fresh commodities.