Weather, planting delays have resulted in capacity, rate and volume swings
To farmers, the weather can be their friend. It can also be their foe. Too much rain. Not enough rain. Too much sun. Not enough sun. You get the picture.
Weather is to farmers like diesel fuel is to truckers. As costly as it may be, without it, work doesn’t get done. Weather, though, is also a critical eliminate for truckers and trucking companies that haul agricultural products. Trucking operations that move the nation’s grain, wheat, produce and other bulk agricultural products are equally impacted by the weather. If a crop is late arriving, trucks sit idle. If there is too much or too little volume, shipping rates are moving like a porch swing on a windy day.
This type of volatility in weather and rates can impact trucking operations in other modes as well. For instance, the extremely wet winter in California delayed the planting of produce, leading some refrigerated haulers to shift trailer capacity to the dry van market in the area and in the process pulling loads from dry van carriers and helping keeping rates soft.
Many people picture long freight trains moving the nation’s grain, with hundreds of grain hoppers moving tons of the product. But, despite this image, the majority of agricultural products still move on trucks. According to a 2016 report from the USDA’s Grain Transportation Report, trucks carry 70% of the agricultural and food products, alcohols, fertilizers, lumber, wood products, paper, pulp and paperboard articles. In 2013, 65% of all U.S. grain was moved by truck – 78% of the domestic grain and 20% of export grain.
They say farm to fork, but without trucks, the farm never makes it to the stores, much less the fork. And that’s why ag haulers are so in tune with their shipping partners. When the farmers suffer from crop delays for any reason – trucking is affected.
For example, a later start to a crop season can manifest itself in a number of ways. Fewer products reach store shelves, and when they do they are usually more expensive because they are rushed to market, forcing increased transportation costs that are passed along to the consumer.
“California being the biggest produce at this time of year has had a number of things come together,” Jon Davis, meteorology team lead for weather-data provider Riskpulse, told FreightWaves. “This year [will likely] surpass the record year of 1982-83 as the [wettest on record]. For the most part, this has been a relief for most of the state.
“One implication for that is the new vegetable crop planting had to be delayed,” he adds. “Because of the delay getting that crop into the supply chain …the price of lettuce and some of the other vegetables has skyrocketed in recent weeks.”
The Star-Telegram reports that the price of iceberg lettuce grown in California is 6 times higher than it was in January; broccoli is 4 times higher.
“Supplies are tight, and prices have come way up,” Roland Fumasi, vice president and senior analyst with agricultural lender Rabobank, told the Star-Telegram. “Were going to see some relatively elevated prices and some price volatility … through the middle of [May].”
The problem is not unique to California, of course. Gro Intelligence, which tracks agricultural commodities, notes the weather issues facing the nation’s farmers.
“California is facing a deluge, parts of Florida and Georgia are facing a rainfall deficit, and farmers in the Midwest are looking at potential planting delays as a result of steady precipitation,” the firm wrote in a recent blog entry.
Truckers who haul agricultural products would be wise to track the intelligence that Gro reports. For instance, the company notes that measuring a planting season is best done on a five-year rolling average. As an example, Gro notes that U.S. corn planting is “roughly inline with last year and the 5-year average. However, the geographical distribution has been uneven with Texas making up for delays elsewhere.”
Adding weather analytics from a firm such as Riskpulse further adds context that can help ag haulers predict where their equipment will be needed, and maybe even when.
Riskpulse provides weather-based analytics up to 40 days out, giving supply chain participants the opportunity to better predict potential disruption due to weather.
“There are some short-term problems with the California rainfall,” Davis notes. “But the effect on long-term agricultural production will be highly beneficial for the industry in California and the west.
“For crops that are planted in the spring and grown over the summer, the rain is very beneficial because there is ample moisture,” he adds.
Based on this data, truckers could potentially see a bump in volumes later this year. Depending on available capacity, that could be good for rates. Ag hauling rates, regardless of the planting season, have been a bit depressed in recent years, thanks to another industry segment – oil and gas.
“For the longest time, there were a lot of the agricultural haulers who moved to the oil and gas fields [because rates were better],” Jared Flinn, CEO of Bulkloads.com, told FreightWaves. Bulkloads.com is a load board dedicated to bulk commodities. “After 2014 [and the oil and gas industry collapse], the ag haulers came back and created oversupply [of capacity].”
Another impact to the ag industry has been declining exports. Flinn notes that at one point the U.S. exported close to 70% of its grain products, but that number is now below 40%.
“In general with agricultural commodities, we were exporting a lot of products,” Flinn says. “Over the past few years we’ve had record harvests, but there is no marketplace for them. The U.S. is sitting on massive amounts of grain because there is no export demand.”
That is also true around the globe. A series of record harvests in recent years in markets such as Europe and Brazil, not to mention the U.S., have resulted in lower commodity prices because of oversupply. With prices expected to remain low, food processors have little incentive to buy product, reports the Wall Street Journal, and farmers have little incentive to sell. With less product moving, trucking firms are also feeling the pinch in terms of rates. The good news, the Journal reports, is that farmers may have to start moving product soon as more record crops are expected, particularly in Brazil.
Two trends are setting up that may help ag haulers to start seeing better rates. First is a trend typically seen this time of year.
“We have a lot of truckers who are also farmers and right now they are taking their trucks off the road to tend to the farms, so that’s been good for [reducing available capacity],” Flinn notes.
The second is that the oil and gas industries are picking up in the U.S. and truck capacity is starting to flow back into those fields, removing some additional capacity from the ag market.
According to Flinn, though, ag haulers, while very loyal to the industry, have to be prepared to deal with the ups and downs of the industry.
“Over the last six to eight months, rates have been down and we’ve seen some [truckers] switch to other types of equipment,” he says. “We’ve seen a lot switch to flatbed hauling because the housing market is doing well. But, a lot of these guys, if they get to choose, will pull a hopper bottom [trailer].”
Because like farmers who are at home on the farm, ag haulers are usually drawn back to their first love.