Seasonal demand is putting the squeeze on truckload capacity throughout the Sun Belt. One big source of demand is produce harvests. Rates soar for temperature-controlled "reefer" trailers, but some produce can be hauled in vented vans, as well. Plus, carriers with multiple trailer types will hitch up their reefers, removing van capacity from the road temporarily. Further, reefers are used to haul dry freight in the off-season, adding excess capacity that is not available during harvests.
Right now, reefers are hauling fruit and vegetables from ag markets across the Southern U.S., The exception is Southern Florida, where a prolonged growing season is winding down, and the road to Miami is once again a one-way trip, the typical situation for nine or ten months of every year. Produce season typically reverses the "polarity" of this lane, as inbound freight destined for population centers in South Florida temporarily takes a back seat to produce shipments from there to Atlanta and points north.
REEFER - Calfornia Produce Ripens Early
Produce is ripening now in California, including cherries and apricots, and some harvests are 1-2 weeks ahead of schedule. This does not mean that the season will end sooner. Instead, it may well last longer than usual. The Golden State is the source of as much as 80% of our domestically-grown produce, and much of the seasonal capacity is found on the spot market, so an extended growing season would have a big impact on this year's reefer rates. Added to the mix: the California Air Resources Board (CARB) has tightened its emissions standards for the transport refrigeration units (TRUs) so older-model reefers must be upgraded or traded in for compliant equipment, for even the smallest fleets. Shippers and brokers are also held responsible now if their carrier's TRU is found to be out of compliance. A prolonged growing season plus regulatory woes add even more pressure to reefer rates, so it could be a very hot summer
Outbound rates are rising from California, as seen in this example of the lane from Stockton to Portland. Rates still have a lot of headroom beyond the current 30-day average of $3.06 including fuel. Harvests -- and rates -- typically peak in June or July. Spot market rates are wildly variable by season, tracking the load-to-truck ratio as an indicator of demand and capacity, while the shipper contract rates (blue line) remain relatively steady throughout the year. Carriers may be tempted to shift available reefer capacity to the spot during the late spring and summer, to take advantage of the high rates. Backhaul rates are low, but triangular "trihaul" routes can yield a higher round-trip rate..
VAN - Houston, We Need Your Cargo
Outbound van rates from Houston have been rising steadily, and the lane rate from H-Town to Oklahoma City, usually a fairly quiet back haul, has hit a possible all-time high for the spot market.:This week, brokers and 3PLs are paying $1.93 per mile ($1.46 for the line haul plus $0.47 for fuel) which is 20¢ higher than the average rate for last month. (Those rates are circled in red, below, on the image of today's lane rate details from DAT RateView.) Tornado relief is at least partly responsible for the recent spike, as the Oklahoma City market includes the devastated community of Moore. Local stores need to re-stock with everything from DIY home-repair supplies to batteries, water and groceries.
The overall rate outbound from Houston is also trending up, along with the load-to-truck ratio, but it doesn't come close to last June's seasonal high of 5.9 or the 6.3 current average ratio for the state of Texas. That means that spot market rates are likely to continue rising through this month, due to typical seasonal pressure that will accelerate in the coming weeks. Meanwhile, the volume of van cargo from Houston to Oklahoma City will return to its seasonal norm, and tornado-related freight will transition to flatbed for heavy-duty construction equipment and materials.
All-time high rates are still being paid for van freight from Houston to Oklahoma City, likely due to relief and inventory re-stocking in suburban Moore, OK, where a giant tornado flattened entire neighborhoods in late May. Rates are not likely to drop substantially until July, as June is the normal peak season for that lane. Both the load-to-truck ratio and the spot market rate peaked in June last year, while contract rates peaked in January.
Categories: Rate Trend of the Week