Milling & Baking News - April 19, 2022 - 23

report. Rail freight rates for wheat in
April ranged from $3,658 to $7,290 per car
for unit trains and from $4,193 to $6,670
per car for shuttle trains. Fuel surcharges
are added to the freight rate per car and in
some cases added about 15¢ per bu to the
cost of shipping wheat. Total costs (freight
plus fuel surcharge) of shipping wheat
by rail ranged from 99¢ per bu for one of
the shortest routes (Grand Forks, ND, to
Duluth-Superior) to $1.97 per bu for one of
the longest routes (Wichita, Kan., to Los
Angeles), both for unit trains.
IMPROVEMENT IN TRUCK FREIGHT
The pandemic exposed weak spots of
an already distressed trucking industry
afflicted by labor shortages, low salaries,
and poor worker retention. After two years
of pandemic-related setbacks, the industry
is still managing waves of volatility, but data
indicate conditions are improving.
" We've been looking at all the stats in
the data and are starting to see real evidence
that demand is subsiding, and all
things point to a little bit of a relief, " said
Jim Ritchie, president and chief executive
officer of Redstone Logistics.
When the pandemic started, consumers
were managing an influx of income
due to stimulus payments and not buying
difficult-to-obtain or shuttered services,
resulting in more spending power. But
many products consumers had easy
access to purchase were items that needed
to be shipped and delivered, which added
pressure to a beleaguered distribution
system managing COVID mitigations and
labor shortages. As COVID regulations
relaxed, people started turning back to
spending money on services, Mr. Ritchie
said.
Another factor pressuring demand was
excess supplies. During the pandemic,
companies took to overstocking inventories
to safeguard against erratic delivery
schedules. But today, Mr. Ritchie said companies
aren't moving as many goods, and
the overstocked inventories have eased
pressure off supply lines.
Before the pandemic started, the American
Trucking Associations estimated
the industry was short nearly 61,000
truck drivers. In April 2020, a report
from the US Department of Labor showed
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the trucking industry lost almost an
additional 90,000 drivers. Fewer drivers
on the road to meet the surging demand
for delivered goods led to excessive surcharges
and delayed deliveries.
But for the past 12 months, Mr. Ritchie
said employment in the trucking industry
has been steadily climbing and now
has reached pre-pandemic levels. The
increased capacity to manage delivered
goods not only eased supply chain strain,
but it also cut distribution rates.
" One way to keep the added assets
DIESEL FUEL, US AVERAGE
(RETAIL, ON-HIGHWAY)
$3.00
$3.50
$4.00
$4.50
$5.00
$5.50
March 18, 2022 = $5.25
more capacity to deliver goods at a lower
rate, Mr. Ritchie said he does not expect
prices to return to pre-pandemic levels
mainly because of an overdue increase in
drivers' salaries.
" Over the last 25 years, we've seen how
salaries in other blue-collar industries
have maintained pace with inflation, but
driver wages hadn't, and that just exacerbated
the driver shortage, " he said.
According to the US Census Bureau,
full-time truck drivers in 2019 earned
a median salary of $43,252 annually.
This falls 8% below the average salary of
$47,016 for other occupations. And unlike
many other occupations, truck drivers
are bound by stringently enforced regulations,
which restrict their working hours
and limit their ability to receive overtime
pay. In 2020, the US Bureau of Labor Statistics
listed the median salary for truck
drivers at $47,130. Recently, Walmart on
a blog post announced it was investing
in its private fleet, and new truck drivers
had the opportunity to make up to
$110,000 during their first year.
With carriers increasing salaries and
May
2021
July Sept.
Nov.
Source: Energy Information Administration
(truck drivers) busy is to lower delivery
prices, " Mr. Ritchie said.
A year ago, the average rate on a contract
basis was $2.50 per mile. Last month,
that rate jumped to nearly $3 per mile.
But Mr. Ritchie said data indicates the rate
will drop close to 10% by summer and will
continue to fall, and price declines will be
noticed most in the spot market, which is
market-driven and generally sits above
the contract market at a 13% differential.
Shorter contract terms also have helped
carriers manage surging transportation
fees. Rather than using the standard
practice of locking in rates once a year,
Mr. Ritchie said companies have opted for
shorter terms of six months or even 90
days during volatile periods.
" This gives them the ability to get the
capacity they need so they can get the product
delivered without forcing them into the
spot market, which is 13% higher, " he said.
Even with more drivers providing
MILLING & BAKING NEWS 23
Jan. March
2022
other benefits packages to attract and sustain
their fleets, distribution prices may
come down in other areas, but it likely
won't come out of the raised salaries.
" Once you impact the wages of an individual,
you can't take that back as the market
drops, " Mr. Ritchie said.
Another feature keeping costs elevated
is the unpredictable price of crude oil. Mr.
Ritchie said he believes carriers are forced
to keep fees somewhat inflated to protect
against the wild swings of oil values.
Despite the volatile oil prices and the
continued difficulties from the pandemic,
the trucking industry looks to be bolstering
its weak spots. Fleets have added vehicles,
workers have been hired, salaries have
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Milling & Baking News - April 19, 2022

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