Milling & Baking News - May 8, 2018 - 21
truckers are paid more at their present
Mr. Klemp recommended shippers
make every effort they can to reduce
their exposure to the spot freight market by locking down contracts with
"really dependable carriers."
"The industry has really been struggling with capacity," he said.
There has been general downward
pressure on truck freight rates over the
past 25 years with only a couple of periods of strong economic growth, Mr.
Klemp said. Margins for carriers have
been very thin.
"Very anemic economic growth and
a little extra capacity kept driver supply and demand more in balance," Mr.
In recent months a combination of
several quarters of economic growth
that increased freight demand, along
with higher fuel costs, the E.L.D. mandate and the ongoing driver shortage
resulted in higher truck freight rates,
with spot rates up 20% to 30% in some
cases, Mr. Groschen said.
"Spot freight rates are higher than
anyone expected," Mr. Klemp said.
The Journal of Commerce (J.O.C.),
in reporting recent quarterly financial results for trucking companies,
said truckload contract rates climbed
from the mid-single digits to the lowdouble digits, while some shippers report increases as high as 20%.
"Thus far, we have not found a ceiling
for the increases as price inflation continues to gain momentum," Dave Yeager,
c.e.o. of Hub Group, said on an April 26
earnings call reported by the J.O.C.
David Jackson, c.e.o. of KnightSwift Transportation Holdings Inc.,
said in a conference call with analysts
in March that the lack of drivers had
caused a 6.7% drop from a year earlier in the number of Swift trucks on
the road in the fourth quarter. He said
price increases for contracted freight
could be in the high-single digit to
low-double digits in 2018.
The impact on commerce was rapid
and significant. A number of major
companies noted an impact on profits
as the result of higher shipping costs,
including General Mills, Inc., Kellogg
Co., Hershey Co., Tyson Foods Inc.,
McCormick & Co. and others.
Walmart, known for its strict delivery requirements, in April relaxed
its deadlines for deliveries (allowing
shipments to arrive earlier) in recognition that vendors had lost some control over shipment times.
Bloomberg Intelligence analyst Lee
Klaskow indicated that E.L.D.s may
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reduce long-haul trucking capacity
as much as 10%. Some trucking companies had boosted prices nearly 30%
for long-haul routes due to surging
demand, Bloomberg said. Although
sales of new trucks are up, many companies have been unable to add capacity due to the shortage of drivers.
And Mr. Groschen suggested ways
shippers could mitigate the impact of
higher rates and tighter truck freight
"Become a shipper of choice," Mr.
Groschen said. "When we meet with a
carrier, we ask them 'what can we do
to be easier to do business with?'"
Developing strategic relationships
are critical because carriers now have
choices and may decide not to do business with some shippers. He emphasized that shippers have consistent order lead times and minimize changes
to shipping orders. He also suggested
Mr. Klemp noted that railroads laid off
workers when coal shipments dropped
a few years ago and coal-fired electricity plants were phased out. Now those
railroads need workers.
The BNSF Railway and Union Pacific were offering signing bonuses up
to $25,000 for workers from Missouri to
Oregon, according to a recent article in
The Wall Street Journal. It was a shortage of engineers and other workers
that was said to have contributed to reduced service by some railroads in late
winter and early spring, after the worst
effects of winter weather were past.
"Freight volumes are rising on strong
economic growth and industrial expansion, and a shortage of available truck
capacity is pushing more shipments
onto rails," the Journal report said.
Labor issues were problematic
in other ways as well. Conductors
and locomotive engineers of the
that as rates go up that shippers can
use fewer trucks, minimizing lessthan-truck load shipments.
Mr. Groschen also said shippers
need to be aware of drivers' time under the E.L.D. mandate.
"Get them in and out quickly; be respectful of their time," he said.
Mr. Groschen noted that the law requires truck drivers to be 21 years old,
and that potential drivers may be lost
to other industries between the ages of
18 and 21.
In an effort to lure new drivers, some
carriers have offered sizable bonuses.
Covenant Transportation Group Inc.
chief financial officer Richard Cribbs
said in a Jan. 30 conference call that
Covenant was offering a $40,000 bonus
to convince more drivers to team up,
allowing one driver to keep the truck
moving while the other driver rests.
Canadian Pacific Railway currently
were "silently" voting on a contract
that staved off, at least temporarily,
a strike set for April 21. Union leadership has recommended the rank
and file reject the contract, and some
indicate a strike still is likely. Should
workers walk out, exports of Canadian durum to the United States, which
have been an important supplement
to domestic supply for months, could
quickly go away, as could rail shipments of oats and other products.
Railroads struggled much of the
winter with poor service, especially
across the northern tier of states where
severe weather frequently slowed
traffic or blocked tracks. Grain merchandisers noted frequent delays in
grain shipments. While service has
improved and rates have come down
from peak levels in the secondary market, rates still are high for the season.
The service was bad enough to
prompt outcries from the National
Grain and Feed Association and others
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Transportation and Distribution
Railroads also seeking more employees
Just like trucking companies, railroads
also are struggling to find workers.
Milling & Baking News
May 8, 2018 / 21