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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Last year, Papa John’s alone sold more than 1 million pies to hungry football fans. That means more than 2 million pounds of cheese and 350,000 pounds of pepperoni were shipped through its 10 distribution centers, covering over 300,000 miles. PJ Food Service dispatched around 200 truckloads each day, six days a week, during weeks preceding the Super Bowl: that is twice more than they usually dispatch! As you can imagine this requires a huge effort to manage inventory, drivers and transportation equipment properly.

So exactly how much will need to get transported into supermarkets by Sunday ?

Finally if you decide skip work on Monday, remember you are amongst the 7 million others who plan on doing the same thing.  And if your stomach isn’t feeling that hot from all the food and drinks, just grab an anti- acid pill: sales are predicted to go up 20% the Monday after the game.

With all of that said, we are continuing to see market fluctuations throughout the country and on the “drop of a dime” conditions could flip drastically.  I have already noticed this week Load to Truck ratio’s rising from Monday to Wednesday in Major Markets such as Memphis and Cincinnati which potentially is a sign that things are starting to heat up.  Additionally, bad weather or the lack of it, has allowed capacity to remain somewhat stable without any “acts of God” taking place temporarily displacing it, resulting in rate increases.  We’ll continue to report on capacity trends throughout the US over the next few months, to determine what if any capacity/price shifts will happen in 2012.

At Open Mile, we saw the largest decrease in rates this past week out of the Columbus and Cincinnati Markets, with rates to the east coast decreasing close to 5% and shipments to the West Coast decreasing just over 3%.  This drop in price was surprising to see, because rates off of the East and West Coasts this past week experienced some of the largest drops in prices.  We also reached out to a few carriers to confirm market conditions, with one mid-size carrier out of Chicago telling us that they are basically just trying to “keep their trucks moving”, because conditions are about as slow as he’s ever seen.

While things are certainly stable right now a sudden ice storm on the East Coast or Midwest could certainly flip capacity very quickly.  We’ll continue to report on capacity trends throughout the US over the next few months, to determine what if any capacity/price shifts will happen in 2012.

We’ve said it before,  drivers are the missing link in today’s supply chain and carriers are doing everything in their power to fill that gap.  Twitter is overflowing with driver recruiting accounts, in fact if you don’t believe me just do a quick search under #trucking or #truckers and the first results will almost always be about motor carriers looking to hire new drivers. The results in trucking related groups on both linkedIn and Twitter are fairly similar.

Facebook is no longer just a place where you regal in tales of the past with old high school friends, it has become a potential tool for recruiters and carrier company’s to scope out talent and fill a much needed gap when it comes to the trucking industry.

In their entry, Freight Talk called out that in the 1st week of the month that Van rates remained stable, “while both flatbed and reefer rates rose 1.9%” in the 1st 7 days of the new year.  At Open Mile with a majority of our freight being moved on Dry Vans, we certainly noticed a ton of available capacity, with carrier rates actually dropping as opposed to remaining flat. Overall we saw rates drop about 2% on back-haul shipments from the East Coast to the Midwest and saw rates lower 4% to Northern California, which may be a result of “The Stockton market gaining some speed with a 4.6% uptick in rates.  Additionally, we have noticed uncharacteristically low Load to Truck Ratio’s on Transcore’s Hot State Index in the Midwest with less than 1 load available for every truck.  This is a market that has boasted ratio’s of 5+ loads per truck throughout much of the year, so it is very surprising to see capacity remain so readily available even in the 1st Quarter.  Additionally, we have noticed trends of only 1.5 load per truck in Memphis which also seems uncharacteristically low even for this time of year.

At Open Mile we still feel that it is a little to early in the year to predict where rates are going to go, but right now it appears that capacity is readily available.  There will most likely be some outside factors (HOS, Driver Regulation, CSA) that make capacity flip, but from everything we can see day to day on the floor along with the data we have gathered from Transcore, it seems pretty quiet out there right now.  We will continue to keep an eye on capacity trends throughout the US over the next few months, to determine what if any capacity/price shifts will happen in 2012.