Milling & Baking News - October 9, 2018 - 22

Transportation and Distribution

Truck freight
rates continue
to escalate
©VIT - STOCK.ADOBE.COM

Railroad service plays catch-up
as large fall harvest advances

hortages of truck drivers and railroad workers continue to plague
the transportation industry and
contribute to rising freight costs for
shippers. Fuel prices are up sharply,
trade wars have complicated export
movement of grain (and other products), and harvest of huge corn and
soybean crops is underway. Meanwhile, Hurricane Florence briefly
snarled logistics along the East coast.
In a nutshell, so far in 2018, rail
grain carloads have been strong with
secondary rail freight rates up from a
year ago, barge grain movement has
been down from a year ago (due mainly to persistent high water levels and
lock repairs) but above the three-year
average with barge freight rates up
sharply, bulk grain ocean freight rates
have increased, and diesel fuel prices
are up 19% from a year ago, which has
boosted truck and rail fuel surcharges.
Hurricane Florence was devastating
to many areas along the mid-Atlantic
coast, shutting down ports, railroads
and interstate highways. Port and
terminal operations in the path of the
storm were operational by the end of
September while repairs on rail lines
and highways continued. The storm
had less of an impact on grain movement than did Hurricane Harvey a
year earlier because the Texas and
Louisiana Gulf region is a much more
important outlet for export grain.
But overall, most of the focus on the
transportation sector in 2018 has been,
and remains, on the trucking industry.
The mandate for the vast majority of
trucks to use electronic logging devices
22 / October 9, 2018

Milling & Baking News

(in place of paper "log books") on
Dec. 18, 2017, which was fully implemented as of April 1, 2018, brought to
light the simmering problem of a truck
driver shortage. While most of the initial chaos caused by E.L.D.s has since
subsided, the focus on truck freight
availability and costs continues.
Without a doubt, the lack of and the
cost of freight, especially truck freight,
has had an impact across the food chain.
Difficulty in securing truck freight has
been a burden from flour mills seeking
to deliver millfeed to feed mixers to the
"last mile" of delivering food and other
goods to retailers. The freight situation
affects both incoming ingredients as
well as shipments of finished products.
Major food manufacturers, including
Dean Foods, Tyson Foods, Del Monte,
Kellogg Co. and U.S. Foods, have cited
rising transportation costs as a drain on
earnings this year.
At the beginning of 2018, only one
truck was available for every 12 loads
that needed moved, the tightest ratio
since 2005, according to DAT Solutions,
L.L.C., an online truck freight marketplace and industry analyst. Spot truck
rates increased 20% from a year ago to
an average of $2.14 per mile in August,
the highest average on record for the
month, according to DAT.
Further, driver vacancies were a
record 296,311 in the second quarter,
according to FTR Transportation Intelligence, a transportation analyst and
consultancy.
Long-haul driver turnover (drivers
changing the company they work for
or the company they contract with)

remains around 90% on an annual basis, according to the American Trucking Associations (A.T.A.). In an effort
to attract and retain drivers, many
companies have boosted pay and offered referral and sign-on bonuses of
as much as $10,000.
Walmart, which historically has
had low driver turnover for its fleet
of about 6,500 trucks, plans to double
its spending on attracting and retaining drivers, including $1,500 referral
bonuses, reducing the "onboarding"
process to 30 days from 70 days and
running television ads, according to
Bloomberg. New drivers at Walmart
earn about $86,000 per year.
Despite the ongoing driver shortage and high freight rates, the worst
may be over amid indications that
the rate of increase in freight rates has
slowed, although the driver shortage
will persist. Spot market rates peaked
at record highs in June after increasing
for 15 consecutive months, according
to DAT. Contracted freight rates tend
to lag spot rates by a few weeks to a
few months. Spot truck freight rates in
June were up 29% from a year earlier,
with contracted rates up 19%. Still,
DAT expects spot rates to continue to
rise at single digits in 2019.
The A.T.A. Truck Tonnage Index also
declined in August, in part due to comparison with rising year-ago numbers.
"We should all expect smaller yearover-year gains going forward that we
witnessed over the last year," said Bob
Costello, A.T.A. chief economist.
And fuel prices continue to rise. After averaging well under $3 a gallon
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Milling & Baking News - October 9, 2018

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