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April 20, 2016

Allen Lund Company Newsletter

Emergent Issues in Distribution and Transportation

In This Issue
Where Have the Rates Gone?

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Jenn Cole, Editor  
Allen Lund Company
Grand Rapids Office
(800) 641-5863 
Where Have the Rates Gone?

In the few years I have been working at Allen Lund, I have seen wild fluctuations in the rates common to our industry. From the outrageous rates trucks were demanding in 2014 to the low rates shippers are demanding today.  These are more than the typical seasonal swings we see as nursery and produce waxes and wanes, more so they seem to be caused by a fluctuation in the supply and demand of regulated freight and lower fuel prices.  We hear the phrases "buyer's market" and "seller's market" all the time describing the housing market.  For us in the transportation industry the phrase is the same only with carriers and shippers as the qualifiers.  Currently it is the shippers that are at the helm, and they are driving the cost of moving freight in their favor.

Shippers have the advantage due to several factors including fuel prices, freight tonnage, and a capacity surplus.  Drive by any gas station and it is clear that the price of diesel is significantly lower than it was three years ago.  Fuel surcharges for a majority of our customers have dropped nearly 70% since 2013, significantly affecting many of our rates. This has been driven by the dropping diesel fuel prices which in 2013 averaged around $3.90 per gallon and with the national average this week at $2.12 per gallon according to the DOE. Capacity and freight tonnage typically go hand in hand as another of the great deciders of transportation value.  While tonnage was up in February it was preceded by a weaker than average January.  Perhaps many shippers were playing catch-up helping to boost the numbers for February, however, even with the increase in tonnage, the capacity surplus remained, helping to keep freight costs down. Part of this may be due to the colder than average temperatures we are experiencing throughout the Midwest keeping many of the seasonal nursery loads at the greenhouses.  Still, I believe this is only part of the story.  Perhaps a weaker economy than we expected is to blame for much of the lack of freight.

So, where have the rates gone?  The answer is down, and the reasons seem to be pretty clear.  With the perfect storm of falling diesel prices, lower tonnage, and a capacity surplus it is no surprise that the cost of hauling goods has gone down. Perhaps the better question to ask is "Where are the rates going?"  Will we see the capacity tighten once nursery and produce really kick in gear justifying higher rates?  Will the capacity surplus be enough to stave off any truck shortages keeping rates fairly stable for the moment?  We will have to wait to find out!  Until then maybe we should also ask "Where have all the trucks come from?"



Matt Peterson
Dispatcher, Grand Rapids

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Matt Peterson has been with the Allen Lund Company since 2012.  He has an Associate's degree in Architecture from Grand Rapids Community College and Bachelors in Architecture from the University of Michigan.  His primary focus is Midwest regulated freight and assists in running our dedicated carrier trucks.
About Allen Lund Company: Specializing as a national third-party transportation broker with nationwide offices and over 400 employees, the Allen Lund Company works with shippers and carriers across the nation to arrange dry, refrigerated (specializing in produce), and flatbed freight; additionally, the Allen Lund Company has an international division, which is licensed by the FMC as an OTI-NVOCC #019872NF, and a logistics and software division, ALC Logistics.  

 

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