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By Dean Croke, DAT Freight & Analytics
Late summer should be productive for refrigerated truckload carriers. Fruit and vegetable harvests are underway across most of the country and the hot weather expands the reefer market to include dry van loads that need protection from the heat.
This year, however, the opportunities are unseasonably cool.
Reefer load-post volumes on the spot market are about 5% lower than at this point in 2020, when we were emerging from COVID lockdowns. Reefer carrier equipment posts are at record highs for this time of year and 8% higher compared to this time in 2019, when the market was over-supplied with trucks. Demand for fresh produce is down in restaurants and other parts of the foodservice business; the bulk of the industry’s recovery has stemmed from higher prices as opposed to more foot-traffic.
Volumes down 35%
Reefer freight cycles go up and down, of course, but one factor will have a long-term impact on load volumes and the demand for refrigerated trucks: California’s historic drought.
The state’s Central Valley watershed accounts for about a quarter of all U.S. food production and more than half of the country’s fruits, vegetables, and nuts. California produce season normally soaks up so much capacity and is such a major driver of truckload rates and volumes on the spot market that any reduction in yields there will affect van and reefer carriers nearly everywhere. In most years, the national average spot reefer rate increases by 12 cents a mile during June, California’s peak month for fresh produce shipments. This year, the rate dropped by the same amount.
Truckload volumes of fruits and vegetables are down about 36% year to date compared to 2021. Tomatoes, lettuce, rice, oranges, berries, sweet cherries, and almonds are among the commodities with lower yields this year.
Fallow fields
Cuts to water rights have left California farmers so desperate they are allowing historic amounts of land to go unused. Last year, farmers let 395,100 acres of cropland go fallow, resulting in more than 14,000 lost farm jobs and $1.7 billion in revenue losses, according to the California Farm Water Coalition. The organization estimates this year will be worse, with 594,000 to 691,000 acres unused, as many as 25,800 lost jobs, and nearly $3.5 billion in economic losses.
In Northern California’s Redwood Valley, the headwaters of the west fork of the Russian River, this is the second year the area’s water district has
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not been able to provide water to its agricultural customers, says Mendocino County Farm Bureau Executive Director Devon Boer. Those who don’t have alternatives are choosing to reduce plantings of annual crops, thin fruit on permanent crops such as wine-grapes, or, if economically viable, haul water in.
Water rationing hits more than just fruit and vegetable growers. Farmers and ranchers unable to grow hay feed have reduced livestock herds to make it through the season. Virtually every aspect of the farm economy is affected, and the problem is only becoming more widespread.
According to the U.S. Drought Monitor, the entire state of California remains under drought conditions. More than 97% of the state and nearly 37 million people are living and working under conditions considered “severe.”
If drought isn’t bad enough, a new study by Science Advances shows climate change has doubled the chance of a “mega-flood” that would turn much of the Central Valley produce growing region into a vast inland sea, resulting in losses five times greater than the cost of Hurricane Katrina.
Truckers look elsewhere
While the fortunes of California producers are tied to their land, truckers who source loads on the spot market can look for opportunities elsewhere. Produce season is in full swing in the Midwest and Pacific Northwest, where apples, cabbage, celery, corn, bell peppers, potatoes, tomatoes, and watermelons are moving from fields to processors and distributors.
Truckers coming from outside the region should be prepared for competitive terms when they negotiate with brokers. In Michigan, trucks already are easy to find and rates are lower, says David Cook, who handles logistics and sales for Rice Lake Farms Packing in Grant, Mich. The bigger issue, he says, is rising costs overall due to the higher price of diesel. “Transportation continues to be a real issue in the produce industry,” Cook says.
Dean Croke is the principal analyst at DAT
Freight & Analytics, which operates the trucking industry’s largest load board network and the DAT iQ freight data analytics service. For more information, visit dat.com.
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