Dairy Processing - March/April 2023 - 48

SUPPLY CHAIN
Transportation globally, regardless of whether it's agricultural commodities
or retail, has been a dumpster fire. "
William Rooney, Kuehne & Nagel, Inc.
Energy Information Administration was $4.185 per gallon as
of March 20, down $0.949 per gallon from the previous year.
GasBuddy projected diesel prices for 2023 to average $4.12
a gallon with prices dipping below $4 in July before rising
back above the $4 mark in November.
The diesel fuel supply situation made national and social
media headlines in the later half of 2022 after the US Energy
Information Administration (EIA) reported inventories were
the lowest for any month since 2008 and were the lowest for
October specifically since the data series began in 1982.
Because of its use in the trucking and transportation
industry, diesel prices are critical to the economy because
they affect the cost of virtually all products.
Attention on prices has grown, including inaccurate
reports on social media in the latter part of 2022 which, at the
time, lead to fears that the US would run out of diesel fuel in
25 days.
" I'd argue that the frequently cited '25-day' timeline [was]
misleading at best, " said Robbie Fraser, manager of global
research and analytics, Schneider Electric, Louisville, Ky.
" That figure comes from the days of cover provided by the
amount of diesel in storage. The only way it becomes a
realistic timeline is if all refineries ceased operations, which of
course isn't realistic at all. If we look at data ... we're looking
closer to 9 to 12 months of supply. "
Distillate fuel oil inventories increased by 3 million barrels
in the six weeks between Oct. 7 and Nov. 18, according to
the EIA.
LOWER FREIGHT COSTS
The American Trucking Associations (ATA) said trucking
accounts for about 80% of total freight spending.
While more expensive per mile than other modes of
transportation due to smaller load volumes, trucks are
the key source of " quick " freight movement and the allimportant
" last mile. "
The forecasted recession in the later part of 2023 is likely
to help reduce freight demand and subsequently freight
rates as consumers buy less (although the relationship is far
more complicated than that). High freight costs were seen
as a major contributor to rising US inflation and now may
contribute to helping rein in inflation.
After months of climbing to new highs, freight prices
plunged at a record rate in December. Transportation costs as
measured by the Logistics Managers' Index (LMI) - a monthly
survey of supply chain leadership - dropped to a reading of
36.9 for the month, falling into contraction territory.
With warehouses already stocked for the holidays,
analysts say less freight was needed to move goods ahead
of Christmas. That weighed on transportation costs and the
LMI's transportation utilization gauge, which also contracted,
even as capacity loosened.
Amid faltering demand, trucking rates are decreasing. DAT
Freight & Analytics reported month-to-date spot dry van rates
at $2.42 per mile, down 68 cents year-over-year, while spot
reefer rates declined to $2.84 per mile, down 76 cents versus
prior-year levels. Following recent drops, analysts say freight
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Dairy Processing - March/April 2023

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