By Cain Adams
Trinity Logistics/Longboard Logistics, Meridian, ID
Just when you think we are getting back to normal, a wrench of some sort gets thrown in the mix. For California, it is the AB5 law that deals with 1099 contract employees.
To be an independent contract carrier, the carrier has to pass the “ABC” test:
(A) is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact, and
(B) performs work that is outside the usual course of the hiring entity’s business, and
(C) is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
The U.S Supreme Court announced on June 30 that it denied the California Trucking Association’s petition for a hearing over the state’s Assembly Bill 5. (AB5 rule). We should start seeing the impacts in October of this year. But first, the cat and mouse games have to happen.
The Long Beach and Los Angeles drayage drivers were planning a work stoppage July 13 in support of the independent contractors affected by the ruling. These stops will be planned in the future, in a spiratic pattern, to cause disruption. We do not know how long this stoppage will last. This will back up the docks and impact delivery times.
In New Mexico, we see a tighter onion market than in past years. Trucks are easier to find this year over last. The tighter availability of New Mexico onions has been putting more pressure on California shippers. Delayed loading in New Mexico has been seen the last few weeks due to monsoon season and availability.
Freight pricing has stayed steady and declining out of New Mexico. As of July 13 the National Potato and Onion Report shows 869 fewer loads have shipped this year over last year but still shows New Mexico is the hot spot for onion shipments over other states. How long can New Mexico ship? Will there be a gap?
California may be done sooner than later, but we see hope on the horizon out of Washington. I was talking to one of my favorite customers this morning out of Washington, and he said the weather has been amazing and put size on the onions the last few weeks.
Other than Walla Walla Sweets, “Start to look at Aug. 1,” he says as a harvest date for Washington’s storage crop. Apples should start similarly, so reefer pricing may, at first, be pushed up but should settle back down. We don’t see anything in the future to say freight rates will go up.
Fuel should start to come down a bit, but we think rates will not go lower per mile. Trucks will just have a little more breathing room on their operating costs. Fuel has eaten up margins.
In the spot market, fuel has been a sore subject between brokers and carriers. Brokers get load lists with freight expectations. They then compete with each other to hit those rates. The lowest wins the freight. The market is loose all over. Even California has seen lower than average rates on long-haul loads going east.
Seasonality and market corrections are taking place, returning to pre-pandemic levels. Returning back to normal market behavior is throwing carriers off a bit. They were used to the high rates of 2021 and could be picky on the loads they took.
If fuel can get down a bit, we should see a softer landing this fall in the spot market and less risk of losing owner-operators due to higher costs and lower rates. Spot market decline is happening because we are oversupplied on the carrier side. Carriers are trying to hold onto contracts they priced last year. They were priced high, so some are having to reprice due to looser capacity. If China opens this fall, we may see things tighten up. We are watching to see if this happens.