By Tim Linden
There is not a quick nor easy fix, but a trio of executives from C.H. Robinson recently predicted that the supply chain issues that have plagued the nation during the pandemic will ease some in 2022, especially in the latter half of the year.
The CHR experts—Steve Raetz, Director of Research and Market Intelligence; Christina Carroll, Vice President of LTL; and Alan Rowlett, Director of Global Operations—spoke during an hour-long webinar hosted by the company in early February. Raetz discussed the view from the 40,000-foot level and also covered domestic long-haul trucking, while Carroll addressed the situation for LTL (less than full loads), and Rowlett focused on overseas shipments via air and container ship.
Raetz said the good news is that the much-publicized shortage of drivers does appear to be easing. He noted that recent data from the U.S. Bureau of Labor Statistics revealed that December of 2021 had about 10,500 more trucking jobs than December of 2019. He explained that these statistics seem to show that the “trucking labor gap is in the rearview mirror.” (2021 was compared to 2019 rather than 2020 because the first year of the pandemic has proven to be a statistical anomaly and often data analysts are skipping it when making comparisons.)
Raetz said carriers, who have been focusing on attracting labor to the space, apparently have been successful, although it has come at a financial cost. Compensation for truckers has increased significantly. In fact, he said the carrier KLLM has reported having to give rookie drivers 30 percent more than their new hires were receiving in 2019.
The CHR executive added that the short-haul jobs are coming back at a much higher clip than the cross-country driving positions. In fact, he said the average length of haul was only 490 miles in Q3 of 2021 compared to 528 miles a year earlier. Raetz said the length of haul has been dropping for years as it was about 800 miles 20 years ago. Nonetheless, the 38-mile year-over-year drop was an unusually large decrease. The drop in length of haul over the past 20 years is mostly the result of supply chain redesigns, but the one-year seven percent drop shows that carriers are focusing on this driver lifestyle issue. Being away from home for days at a time has long been one of the major drawbacks of long-haul trucking. Unfortunately, is a very important and inescapable factor in a significant share of produce hauling.
As far as equipment is concerned, Raetz said there is expected to be about a three percent growth in tractors in 2022 and a 12 percent growth in trailers. Chassis, which are used to haul sea containers and other similar equipment, have been in a demand exceeds supply situation, which is one of the elements causing delays at the ports. Raetz said one major chassis manufacturer is bringing a new plant on board late in 2022, which he called a good sign and points to continued investment in the sector.
From that same overview perch, he said pricing of transportation is expected to continue to increase beyond historical norms through most of 2022. One of the major factors in freight pricing is, of course, demand. Raetz said that experts have estimated a three to four percent increase in truckload volume in 2022. “Another year of pretty good growth,” he observed. “We will have freight demand still in the marketplace if these forecasts are accurate.”
He said this growth in volume will continue to create a tension on supply and keep truck rates high. Raetz said the truckload pricing forecast estimates a six percent year-over-year growth in 2022. The good news is that this is significantly less than the rate increases of the past two years. Rates in 2021 were 35 percent greater than in 2020. The less-than-stellar news is that in December the experts estimated truck rates would increase four percent. In just two months, that forecast has gone up 50 percent to six percent. Raetz warned that it still may be too low.
The report about LTL service is not as relevant to produce hauls as the “driver” in that sector is often related to e-commerce and the package delivery process. For the most part, these are short distance or station to station hauls. This sector has dominated the increase in truck driver jobs, and it is most relevant to perishable cross-country hauling in that these employers can offer lifestyle benefits that truckers say they want—such as shorter hauls and less time away from home. These are advantages that local produce route haulers can compete against but not coast-to-coast carriers or shippers.
While the produce industry is largely dependent upon independent owner-operators who specialize in cross-country driving, that is an aging population and younger drivers seemingly have options they like better.
Carroll did report that the DRIVE Safe Act, which is designed to implement an apprentice program for drivers under the age of 21, has begun a three-year pilot program. The pilot program is available for 15,000 young drivers. If it is successful, it could open the door to a career as a truck driver for these potential employees before they head down another career path.
Discussing the ports and global freight situation, Rowlett revealed that, in 2021, the volume coming into the country through the top 10 U.S. ports was up 20 percent, which was a major cause of the port congestion. However, he said in the latter part of the year, volume actually dropped in some ports, such as Long Beach-Los Angeles, while it increased at some of the country’s smaller ports. That shifting created a reallocation of assets, such as chassis. Consequently, Rowlett said some of the current congestion at the larger ports is related to the lack of equipment on shore rather than the number of container ships waiting outside the harbor to unload. However, he said working through the logjam is a time-consuming process. Rowlett told the internet audience that it appears there will be little port relief in 2022.
One reason is the labor situation at the ports, which remains understaffed. The coronavirus created shortages and Rowlett said “ocean front labor remains volatile…remains strained.”
He added that 2022 could bring another challenge as the International Longshore & Warehouse Union contrct with West Coast employers expires on July 1 of this year. The ILWU and the Pacific Maritime Association have a history of contentious negotiations with lockouts and strikes, and there is no reason to suspect that agreeing to a contract will be any easier this time around. And one could certainly argue that the chronically congested ports will add another difficult dimension to the discussions.
Rowlett said no new capacity is expected in the ocean transportation sector with rates remaining flat or increasing only slightly.
The CHR expert touched on air freight only lightly as it is not expected to play an important role in 2022. He said that for the most part airliners are not expecting passenger travel to return to pre-pandemic levels this year. It is passenger planes that account for much of air cargo space and while air travel remains underused, compared to pre-pandemic times, cargo capacity will also be at the low end of the spectrum.
The speakers did discuss the Canadian trucking issue and the potential for that spilling over to the United States. For the past several weeks, Canadian truckers have been protesting Canada’s vaccine mandate, which requires cross-border truckers to have been vaccinated against the coronavirus. U.S. regulators enacted a similar rule in January for U.S.-based truckers. Raetz said the “foundational attributes” of the Canadian and U.S. trucking industries are dissimilar so he does not believe similar protests will erupt in the United States.
He noted that cross-border traffic is a very significant factor for Canadian truck drivers as 80 percent of that volume is carried by Canadian-flagged trucks, which amounts to a sizeable portion of Canada’s truck traffic. On the other hand, cross-border traffic is only a small portion of the volume carried by U.S. truck drivers who have many other options.
The speakers only spent a few minutes discussing strategies companies impacted by the logistics issues might employ. Concerning long haul loads, Raetz suggested utilizing digitally-enabled spot market services, be open to diversified modes and focus on building strong relationships with carriers. For container traffic, a similar strategy was suggested: build strong relationships with carriers, maximize container capacity and be flexible in considering different options.
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