Source: SCM-Operations.com

They also noted that lanes such as Atlanta up to the North East rose as much as 16%.  While we are not quite sure what is behind the spike in rates out of California, we do feel that produce season has began kicking into gear which is the main driver behind the rate increases that we have seen so far this month out of the South East.

Currently there are over 10 van loads posted per truck and 23 loads per truck for reefer freight posted in parts of Georgia, which is drastically up from the month before.  While this is resulting in a significant increase in outbound rates from these Southeastern markets, we are seeing rates drop drastically on shipments into these regions.  We saw our pricing out of the North East into the Atlanta market drop by over 10% in the first week of April and saw our pricing into Florida decrease by 15%.  As the month progresses, Open Mile will continue to keep an eye on market trends throughout the country.  We expect markets in the Southeastern, South Western, and Western regions to have the most significant increases as produce freight volume continues to increase.

One of the more interesting states they called out was, that of the 64 highest volume lanes, 41 experienced rate increases.  The lane that demonstrated the largest fluctuation was one that Open Mile moves daily, Philadelphia to Boston. This origin / destination combo experienced rate increases of “13 cents / 5.4%” according to Transcore.  While Transcore reported an uptick in pricing, Open Mile actually saw pricing within this market remain flat, presumably due to our extensive carrier network within the North East Region.

Open Mile will continue to keep an eye on how rates trend through next week as we approach the end of the First Quarter and reach the start of produce season where we are expecting rates to skyrocket out of the South East.

• We’re continuing to see moderate economic expansion driven by an improvement in the labor market,” mentioned Conrad DeQuadros, a senior economist at RDQ Economics LLC

• Trucking analyst, John G. Larkin, Managing director for transportation research at Stifel and Nicolaus expects “low and Steady” price increases over the next year as shippers begin to worry about available capacity.

• Gary Girotti Vice President of Chainalytics warned shippers that to be realistic about their pricing in the coming year “You can’t force the carrier to hold a rate to two or three years. Transportation networks change dramatically”.

While all signs point to positive outlook for the near future of the US economy a number looming threats could rapidly change the economic climate. A key factor which could rapidly overshadow any positive impact is the growing price of crude oil which could have repercussions felt throughout the supply chain… but that’s a topic a different blog post in a near future.

Trucking Infographics by TruckersReport

At Open Mile the one region that we are seeing an uptick in demand out of us the South East, primarily Georgia, South Carolina, and North Carolina.  Within the last week rates out of these markets have increased by about 5% and Load to Truck ratio’s have increased from 1.5 – 2.0 last week to 3 – 5.5 this week.  While we are not positive what is driving this increase we will keep an eye on market conditions in the South East, because as we enter the produce months, prices are sure to rise even more.  As we close out February and March kicks into full gear, Open Mile is optimistic that rates will begin to rise nationwide within the next few weeks.  Our prediction is that the end of the 1st Quarter and the start of produce season, will begin to drive prices up towards the end of March.

In 1962 President John Kennedy became the first president to send a transportation message to Congress demanding a strict reduction IN regulations of surface freight transportation. In November 1975 President Gerald Ford called for legislation to reduce trucking regulation as well. He followed that by appointing to the ICC several commissioners who favored competition in the truckload transportation industry. By the end of 1976, these commissioners were speaking out for a more competitive policy at the ICC, a position rarely articulated in the previous eight decades of transportation regulation.

The Motor Carrier Act (MCA) of 1980 only partially decontrolled trucking. But together with a liberal ICC, it substantially freed the industry. The MCA made it significantly easier for a trucker to secure a certificate of public convenience and necessity. The MCA also required the commission to eliminate most restrictions on commodities that could be carried, on the routes that motor carriers could use, and on the geographical region they could serve. The law authorized truckers to price freely within a zone of reasonableness, meaning that truckers could increase or decrease rates from current levels by 15 percent without challenge, and encouraged them to make independent rate filings with even larger price changes. De regulation was said to bring on better services and rates to shippers as truckers started restructuring routes, reducing empty return hauls, and provided simplified rate structures.  The MCA act also led to a boost in the number of licensed motor carriers. By 1990 the total number of licensed carriers exceeded forty thousand, considerably more than double the number authorized in 1980.

Trucking deregulation is far from finished  According to one study, abolishing all remaining federal controls would save shippers about $28 billion per year. A Department of Transportation study done by researchers at the University of Pennsylvania’s Wharton School estimated that abolishing state regulation would save another $5 billion to $12 billion.

Shipping flowers by the truckload comes with a number specific requirements that have to be respected to guarantee quality delivery.  Most fresh flowers are shipped using reefer trailers with strict reefer temperature requirements between 36 and 46 degrees Fahrenheit.  Other equipment requirements include things like resealed Dock Doors to prevent refrigerated air from escaping during loading and unloading.

Valentines Day also has a sweet spot for food shippers.  As  the state with the most chocolate manufacturing establishments in the nation, California has been busy over the last weeks as it experiences  a boom in demand for chocolate.  More than 35 million heart-shaped boxes of chocolate will be sold for Valentine’s Day leading to over $1 billion worth of chocolate purchased in the US. Chocolate aside, over 8 billion candy hearts will be produced and shipped! Valentines day is the 4^th busiest holiday for confectionery makes behind Halloween, Easter and  Christmas.

So what is driving up the prices of tires these days?

The cost of both natural rubber and synthetic rubber reached record highs in 2011. A few of the factors driving the cost increase are 1) raw rubber costs increased due to adverse weather in Asia in 2010 which led to a rubber shortage.  2) Ironically enough, rising costs in the transportation of chemicals required to manufacture both rubber and tires have increased. 3) The rising cost of carbon black. This particular increase is largely due to a drop in supply as  major manufacturer of carbon black dropped out of the business two or three years ago. Even if the price of rubber dropped today carriers would not feel the effects for 3-6 months because of how the rubber supply chain works.
When natural rubber is bought from Thailand, it comes over on a freighter to ports in the US. From there it’s loaded onto a truck and transported to various plants like Goodyear and Micheline, where it is put into raw material inventory.  From there it is made into an actual tire, which is put into a warehouse until it’s bought, the purchaser is invoiced and the money comes in. This whole process takes roughly two quarters to complete.
“A true price adjustment lag is being felt in the rubber supply chain: Say we’re buying natural rubber today and it’s lower than it was six months ago; it’s going to take five, six months for that to show up in our product cost,” Donn Kramer, Goodyear’s director of product marketing.

The high prices of rubber are being felt by fleet managers and some fleet owners have reported the increase to be as steep as 25%. In an effort to combat the rising costs fleet owners should be looking for ways to limit the effect of rising rubber costs to their businesses. Two ways tire manufacturers say they have taken steps to counter the price increases are: The development of low-rolling-resistance tires which improve fuel efficiency and are SmartWay certified. Also, another example of a technology that is being used to preserve to the life of a tire is DuraSeal. The casings of these tires will carry a seven-year unlimited retread warranty which aims to provide future buyers with an incentive to purchase the more expensive tires.
The price of tires is not predicted to go down anytime soon, the one thing that remains to be seen is how carriers decide to incorporate this cost in their general operating rates and  to what what level it will affect both shippers and consequently consumers.
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When reviewing the data this week, it is obvious that Memphis is one market that has really tightened up, based on a current Load to Truck ratio of 4.9 Loads for every Truck.  Columbus and Cincinnati are also two Midwest Markets where capacity has shifted in the past 7 days with Load to Truck ratio’s of over 3 loads per truck now vs. 1.5 load per truck last week.  My gut tells me that these increases in rate and overall volume is due to some end of the month volume that shippers looked to move late last week and into this week.  We certainly noticed an increase at Open Mile with overall volumes increasing by 30% the four day leading up to the end of January, simply due to an increase in demand from our existing customers.

As January closes out and February kicks into full gear, Open Mile is optimistic that rates will begin rising nationwide within the next few weeks.  We are starting to see capacity tighten up and be much more specific about the destination that they will accept loads to vs. a few weeks ago where carriers were simply looking to just keep their drivers moving.

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