Demand for trucks boosts prices

Mateusz Perkowski/Capital Press R.J. Tancredi, in the foreground, supervises workers as they load nursery stock onto a truck at Alpha Nursery in Salem, Ore. Increased trucking activity has been reported by large transportation companies, which is a positive sign for the U.S. economy. However, reduced truck capacity is expected to result in higher freight prices for agricultural shippers like Alpha Nursery.

Official says growers will have to pay more for shipping

By MATEUSZ PERKOWSKI

Capital Press

Workers at the Alpha Nursery in Salem, Ore., have been striving to reach a delicate balance.

Outgoing trucks need to be packed as tightly as possible without damaging the fragile nursery stock that's heading to garden centers around the U.S.

"We need to maximize the truck, get as much product in there as we can," said the nursery's general manager, R.J. Tancredi. "It's quite an art to stack a truck."

Transportation capacity is becoming a concern for agricultural shippers like Alpha Nursery as the demand for trucks rises this spring.

Increased truck activity has recently been reported by major transportation companies like C.H. Robinson and J.B. Hunt -- a positive step for the U.S. economy but potentially disruptive for shippers.

"You're all fighting for the same truck," said Tancredi.

Not only is fuel more expensive, but trucking capacity has been strained by bankruptcies and financial troubles in the trucking industry, he said.

"I think the fleet sizes have dwindled," said Ken Gilliland, director of transportation and international trade for the Western Growers Association, which represents fruit and vegetable shippers from California.

Shippers aren't reporting major problems so far this spring, but the competition for trucks is likely to grow fiercer as fruit and vegetable crops from across the Northwest reach maturity, Gilliland said.

"It's volatile," he said. "It's a little unstable."

Fortunately, the availability of trucks typically improves along with the overall economy, Gilliland said.

As trucks bring more electronics, furniture and other goods to the West, there will be more empty trailer space to fill as they head back East, he said.

"You have to have a balance going both ways," Gilliland said.

However, imbalances can be tricky to smooth out, since it's expensive to relocate empty trucks across states and regions, he said.

Growers can expect to pay more for shipping than in 2009, when the recession had freed up capacity, Gilliland said.

"Certainly, we're going to see higher rates," he said. "I think it's the overall picture of availability of equipment."

Major trucking firms are counting on the continued increase in freight prices.

J.B. Hunt, an Arkansas-based transport firm, reported a 17 percent increase in revenues, to $845 million, during the first quarter of 2010, according to filings with the U.S. Securities and Exchange Commission.

"Spot market rates increased in the current quarter, another sign of improving transportation economics, which has historically led to improved contract rates," said Kirk Thompson, the firm's president and CEO, in a statement announcing quarterly financial results.

C.H. Robinson, another major transportation company, reported a 23 percent increase in revenue, to about $2 billion, during the first quarter of 2010, according to SEC filings.

Even so, the firm's profits declined by nearly 2 percent, to about $84 million.

C.H. Robinson is a third-party logistics firm that contracts with 47,000 transportation providers, so the company is prone to "compression" of profits, said the firm's CEO, John Wiehoff, during a recent conference call with analysts.

"Gross margin fluctuations are a part of our business model that we believe we are very capable of managing," he said. "But they're difficult to predict and they can have a significant impact on our results in the short term."

Truckload volumes managed by the company increased by more than 20 percent in the first quarter of 2010. However, the rates paid by contract customers tend to lag changes in the spot market, said the Chad Lindbloom, the company's chief financial officer.

"We are adjusting pricing up," he said.

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