By Cain Adams Trinity Logistics, Boise Idaho Office / Longboard Logistics, LLC
As we roll into March, I’m observing a shift in the freight industry with old contracts phasing out and new lower-priced contracts being explored. Spot market rates will become more aligned with lower contract rates. However, it’s crucial to be cautious about how low contract rates go, as too low may drive carriers to seek higher profits in the spot market and abandon the low-ball contracts. This then pushes the spot market higher. Currently, there’s still excess capacity, but the surge in Chapter 11 and restructuring bankruptcies indicates that smaller carriers with significant payments are exiting the scene, returning leased trailers and trucks, and in some cases, scaling down to a one-man operation. 2024 is shaping up to be a year of survival after the chaos of the COVID-19 pandemic, with a focus on achieving profitability rather than reckless expansion.
In the produce industry, particularly in California, a dry spell is needed for the state to re-enter the market effectively. The season may be shorter, pushing carriers to load more along the border in Nogales and Hatch locations. Wet weather could also keep prices higher, leading to more claims, especially for flatbeds.
Flatbeds, Conestogas, and Vented Vans are not only used when capacity gets tight but also to cut costs per bag delivered. These alternative rides take a lot of pressure off Reefer rates too. Imagine only being able to load reefers? What would the price look like? Much higher, I am sure. The price of a bag of onions, which used to range from $8.00 to $12.00 for 900 bags, may now see a hike to $30.00 to $50.00 per bag on an open deck. This raises questions about whether the flatbed has adequate insurance to cover the load and the potential for rejection due to various factors such as delays, weather damage, or quality issues. Controlled temperature units offer more protection and are less likely to face these claims in 2024.
The quality and availability of produce like onions significantly impact the cost per bag sold. A strange spring is anticipated, and I hope shippers protect carriers from claims to ensure their return for onion loads next year. Moreover, fewer insurance companies may cover onion loads, which could lead to increased transportation costs in the future. Claims tend to push rates up, and they seldom come back down.
I recently examined the Mexico crossings for March 5, 2024, and noticed a significant decrease in loads compared to the same period last year. American onions are holding their ground coming out of the Northwest. The Northwest has seen a remarkable increase in loads shipped this year. It’s worth researching what was in demand, hinting at products with fewer pesticides and higher store prices.
In the upcoming month, smaller sheds will wind down, while larger sheds will hold onto their product as long as possible to fulfill contracts.
More spot market demand may play out in the Northwest because of a lack of supply from Mexico. If Mexican onions come up to the border and get rejected for quality, I think less will make its way behind them. Mexico’s demand for onions is keeping their prices high in the country. There will not be a reason for them to send onions north. It may be a take it or leave it game down there. Less loads means carriers will be scrapping for loads and freight pricing will be lower this season.
We anticipate March weather to be a disruption along with nursery stock being a disruption. The weather makes the trucks think about going south rather than back into the Northwest. Moreover, the nursery orders pay more per mile due to the multi stops. Load boards get filled with nursery prices and trucks try to ask for the same rates on one pick one drop orders. We think the Northwest has a good 6 weeks to go. Rates should get more stable as the snow melts away. Right now, we are seeing rates in the $2.15 to $2.85 per mile range.
My office also thinks it is important to stay connected with the onion crops in Huron, Stockton, and Hollister, as weather will play a crucial role in yield and quality. With weather damage affecting other produce areas, more trucks will be available for onions, creating a tradeoff that needs to be monitored. With Mexico onions staying put, what will California itself pull? They too may keep more onions in their state. Freight will be lower for local deliveries so those who want that product may have to pay more to get it across the country. Keep an eye on this possibility along with Mexico crops that may strengthen in June.
Overall, it has been a great season for us. We’ve built strong relationships with trucks, shippers, and produce brokers. Trucks have been easy, lessening pressure on shippers. I’m optimistic about the onion season of 2024 and the promise of more stability in the freight markets for the end of 2024. While aiming for the greatest profits is not always feasible, striving for the best service is. Service demonstrates a commitment to care, which is key to a successful business. Keeping a tight grip on finances, maintaining high service standards, and keeping a can-do attitude in sight will bring great rewards.
Cheers and make stuff happen.
