Visibility and road conditions are poor in Virginia and throughout the Southeastern U.S. this week. Photo: Virginia Dept. of Transportation
Van Rates Surge Between Snowstorms
Van rates continue to rise, and the national average line haul rate (excluding fuel) was up to $1.48 last week. Add an increase in the fuel surcharge, and brokers were paying an average of $1.97 for a truck last week. That's higher than June, and higher than last year's unprecedented, all-time high of $1.95 per mile in December. Demand now remains elevated into mid-February, which is typically the slowest month of all, and the extreme weather continues to be both widespread and unpredictable.
The Northeast and Southeast are buried in snow yet again this week, and the effect on trucking freight is likely to be pretty much the same as it's been for the past month or more. Spot market volume is up, rates are up, and the roads are a mess.
Last week, van rates were way up on key lanes that connect hubs in the three regions with the worst weather: the Midwest, Northeast and Southeast. On the lane from Columbus to Memphis, for example, vans got a 33¢ (19%) raise, to $2.03 per mile -- a rare occurrence outside the Christmas freight season.
More Freight Flows to the Spot Market
One of the outcomes of the weather-induced market pressure is a shift of freight from the contract market to the spot market. Shippers and their contracted carriers are struggling to fulfill all their scheduled hauls, as road conditions change from day to day.
Even if drivers manage to cover their routes as planned, their pick-up and drop-off points might be closed or understaffed because distribution center employees couldn't get to work. Missed appointments at the loading dock reduce productivity for drivers and equipment, further lousing up an already crazy dispatch schedule.
This wreaks havoc with the entire contract model, so shippers shift freight to 3PLs and freight brokers, who cover those loads by hiring carriers on a one-time, transactional basis. Sometimes the loads are covered through a commercial load board, and sometimes the intermediaries call on their own lists of core carriers. Even when the 3PL works with the same carriers all the time, however, the rate will not typically be based on a long-term contract, but on the current spot market value of the lane in question. Pressure builds on those rates when carriers face a high likelihood of delay, as they will price their services to compensate for lost productivity.
Flowers ♥ Reefers in Florida
Friday is Valentine's Day, and imported, fresh flowers have been arriving at sea ports and airports, where they are transferred to temperature-controlled warehouses and onto "reefer" vans for delivery to wholesale floral markets and other distribution centers across the country.
Miami Airport is the hottest venue for winter delivery of flowers, accounting for 85% to 90% of imported blooms, according to American Shipper Magazine. Last week, outbound reefer rates rose 4¢ (2.1%) from Miami and 12¢ (7.9%) Lakeland. Rates spiked in key lanes, including Miami to Atlanta, where rates rose 20¢ (13%) to $1.76 per mile including fuel. Atlanta's severe weather may have played a role in that sharp increase, but rates also rose 16¢ (12%) on the lane from Lakeland to L.A., where weather is not an issue.
Even with the uptick, Florida reefer rates are not exactly high; but at $1.86 per mile out of Miami and $1.57 from Lakeland, they're about 20¢ higher per mile than they were last year at this time. Outbound rates from those markets peak in April or May, and drop to their lowest point in October.
This year, those rates rose modestly in December and slid again through January until last week's unseasonable bump.Rates out of both markets are actually down over the most recent four-week period, by 7.3% and 8.6%, respectively. The winter citrus harvest plays a role, as well, but volume is down due to a combination of unusually cold weather and an insect-borne virus that causes trees to shed their "greening" fruit before it is fully ripe.