Inflation, Low Rates Affecting Transportation Sector

Logistical technologies will see wider adoption due to FSMA.

Inflation and low rates are impacting the produce trucking sector, but hopes are for better sector economics as 2025 progresses.

Fred Plotsky, president of Cool Runnings, Kenosha, WI, says that carryover from the COVID-19 pandemic, when rates spiked and new drivers entered the market, continues to be a factor in depressing rates.

Although his business continues to do well, he says the reality is that rates have been “crushed,” which limits the trucks going to the West Coast from his home base in the Midwest, and that’s where he needs vehicles to pull produce back.

The circumstance hasn’t undermined Cool Runnings’ business by any means, he clarifies, it just makes getting things done a bit tougher.

“The rates are below cost for carriers, and it’s a matter of going out of business or losing money, but still working. It’s hard for them to make a living. It’s got to turn around sometime, but it’s been like this for two and a half years at least.”

INFLATION IMPACT

Inflation has also pressured the transportation sector. “All costs of equipment, insurance, and drivers are affected, as well as office staff,” says Marshall Kipp, founder and chief operating officer, Advanced Transportation Services, Visalia, CA.

Kenny Lund, executive vice president, Allen Lund Co., La Cañada, CA, agrees, noting inflation is the largest factor impacting transportation.

“I think 95% of the issue with transportation is inflation, and here’s why: People are spending about the same amount, but they bought 10% less stuff, so there were 10% less loads out on the road,” Lund says. “That doesn’t translate to a 10% drop in freight rates. That translates to a 30%, or we’ve seen since ’22, in some lanes, a 50% drop in freight rates.”

“Inflation has caused this freight recession, as some people call it,” Lund adds. “It’s just a freight slowdown. It hasn’t been a lack of spending, it’s been, ‘I can’t buy as much with the money I spent last year.’ I absolutely think that is the case.”

Kipp points to weather as having been problematic, but he added that technology helped the company cope.

“Both information and communication are key,” he says. “Taking action and using that info to produce positive results for customers and truckers.”

Breakthrough technology is turning the produce transportation scene on its head, Plotsky says. And it is the development of tracking and communications technology that allows Cool Runnings to do business more effectively.

However, despite technical advancements in tracking and tracing, Lund says it’s still hard to know what’s going on with a load of strawberries, so existing technology could use improvement, whether technical or in application.

“There are so many players in the industry, it’s hard to get them all on a system that makes sense and is fair,” he says.

At the same time, more effective technologies that support relationships and generate additional data in areas, such as carrier evaluations that can be effectively analyzed, are having a positive effect. Developing more sophisticated ways of improving the basic performance of the business, like artificial intelligence, can also boost transportation operations.

FSMA EFFECT

Brian Robertson, vice president of global in-transit sales at Copeland, St. Louis, MO, says the company’s business has been growing with the appreciation of in-transit visibility in the produce industry, both with retailers and suppliers.

He notes that visibility is a more urgent concern due to Section 204 of the Food and Drug Administration (FDA) Food Safety Modernization Act (FSMA) Food Traceability List regulation, which has been in effect for two years, but is approaching its implementation deadline in January 2026. The approach of the deadline is “further driving the adoption of technology to provide the necessary records in produce, including ready-to-eat salads, cheeses, shell eggs, as well as fruits and vegetables.”

“Copeland’s technology supports our customers in automating the standard operating procedures necessary under the regulation,” says Robertson.

As the FSMA deadline approaches, he adds, “helping our customers to supply produce identified in the Food Traceability List navigate the changes to their procedures will require our attention and necessitate integrating our technology to help automate their record-keeping. But the relationships and integrations we have across our customer base will position us well to be able to support them and meet the deadline.”

TECH IN DRIVER’S SEAT

Advanced Transportation Services’ Kipp agrees technology “has hugely helped drive transparency and efficiency.”

He adds technology that keeps information and communications ongoing as trucks move is an expectation of customers. So, firms in produce transportation need to have the capabilities, including on the human side of the equation, to meet customer demands.

“Customers demand transparency and live tracking, as well as status reports,” he says. “These customer demands can only be met with up-to-date technology, and the humans capable of using it to produce results,” says Kipp.

The question of AI’s effects is considered in almost everything, and Robertson notes the main AI effect his company sees “is the ability to extract meaningful information from the large datasets available. This is being used for time of arrival and on-time, in-full estimates, as well as demand forecasting at a more macro level.”

“In the end, AI benefits come down to enabling people involved to make better decisions, whether related to a single shipment, a specific growing season in a region, or the aggregate view of the maturity of a trade lane to bring produce to market in the best condition possible.”

Cool Runnings’ Plotsky warns, however, that technology, can only be effective for organizations that maintain an emphasis on relationships and communications that make the produce transportation system work. Sometimes, the latest thing is best, sometimes traditional methods are more effective, and companies need to use both.

“Nothing can replace a phone call,” he says.

Lund says he started with the company in IT, but acknowledges technology has to address primary needs. “I’ve always pushed that technology is a tool that helps build the relationship. If you’re not building the relationship with it, it will eventually go by the wayside.”

AI, while helping with backroom functions, is a couple of years away from having a major impact on produce transportation, as companies integrate it into more capabilities including in working with customers, he adds.

In a diverse, complex supply chain, especially in produce, relationships are still a critical issue with any transportation business.

“Relationships have been crucial to success with both customers and suppliers,” says Kipp. “While adjusting from the 2020 to 2022 COVID years, many customer relationships with transportation partners were tested. People that have been in this business for decades know that events happen that change the landscape, with increasing demand testing relationships,” he says.

Copeland has seen “significant change over the last few years in the collaboration between suppliers and retailers looking to improve on-time, in-full deliveries and reduce food waste. Where previously retailers had mandated technology, their suppliers are now looking at the same information provided by this technology to work together on improving their trade lanes, controlling the quality and the shelf life of their produce.”

As the produce transportation sector continues to evolve, Robertson says improved compressor technologies that drive efficiencies and reduce emissions will see wider adoption.

KEEP ON TRUCKING

Lund notes that availability has been good, especially with refrigerated transport, but seasonal considerations are still a driving force in produce transportation, rather than cyclical considerations. Still, how produce moves is changing, with major retailers wanting certain commodities on their shelves 12 months of the year, supporting international movement, whether from Mexico, Canada or further afield. Lund says the overall system, even though it uses diverse methods of movement and relies within the United States on a web of brokers and small-scale trucking operations, is terrifically capable.

Although the labor issue may not be as acute today as it has been in the recent past, Robertson says recent events underscore the labor market remains tough.

“For the importation of fruits and vegetables, particularly on the U.S. East Coast, the tentative contract agreement, among the International Longshoremen’s Association and the ports and shippers through the U.S. Maritime Alliance looks to have averted further action, following a three-day strike last fall,” he explains.

“But labor shortages, particularly in the inland distribution segment, continue to be a concern, with the industry working on ways to attract new entrants in a tight labor market. In the short term, we’ll see a further tightening of transportation capacity, putting pressure on pricing.”

“Labor shortages, particularly in the inland distribution segment, continue to be a concern, with the industry working on ways to attract new entrants in a tight labor market. In the short term, we’ll see a further tightening of transportation capacity, putting pressure on pricing.”
— Brian Robertson, Copeland, St. Louis, MO

Discussing driver availability, Lund says it’s more appropriate to talk in terms of churn rather than shortage, particularly in regards to big trucking companies. He says drivers start working for trucking companies and, when they learn the industry, many choose to go out on their own.

“Why did they get into the industry? Because they love the freedom,” says Lund. “They use that phrase, the freedom of the open road. When you work for a big company, they tell you when to eat, when to stop. You’re on those hours, and it’s so tight, and you feel confined. So, what do they do, they go out on their own.”

For now, Advanced Transportation Services’ Kipp says, capacity and demand are pretty much in balance. “Capacity, for the most part, is on par. It can vary day to day, but is mostly on par.”

From his perspective, Lund says capacity still is somewhat above demand, citing fairly flat demand in the holidays as evidence that rates are likely to remain low at least for the immediate future.

However, he notes Class A truck sales are gaining, in part because the latest class of trucks is more energy and maintenance cost-effective, but the change suggests trucking companies and independent truckers believe demand will be there. As a result, Lund says he expects high single-digit increases in rates as 2025 proceeds.

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Federal Policies and Tariffs Will Influence the Transportation Industry

Changes in U.S. federal policies may help the trucking sector.

“Hopefully, bringing manufacturing to the United States, products made in the USA, becomes the backhaul to get the trucks back to produce shipping areas,” says Marshall Kipp, founder and chief operating officer, Advanced Transportation Services, Visalia, CA.

Still, uncertainty around the issue of tariffs has businesses in the produce transportation sector trying to figure out how to adjust to potential consequences.

Kipp says, for the most part, if the federal government imposes high tariffs on imported products from Mexico and Canada, one result could be lower demand for transportation from the border crossings, mostly McAllen, TX, and Nogales, AZ.

Kenny Lund, executive vice president, Allen Lund Co., La Cañada, CA, says the Trump administration, while using rhetoric to establish negotiating positions, is unlikely to sustain major tariffs with Canada and Mexico due to the importance of the trade and because it wants to tamp down imports from China.

Still, tariffs have the potential to complicate the immediate future of produce transportation, Robertson points out.

“We’ve seen expansion by integrated growers moving into new growing areas, including cross-border into Mexico and further south,” he says. “This is part of an international trade that we also see in Europe and Asia. If additional tariffs were applied on cross-border trade into the U.S., we would anticipate a slowdown in these expansions for the U.S. market. And as we have seen previously in other geographical areas, we could expect produce to be diverted to other markets, depending on the level of tariffs introduced.”

Lund is hopeful that policy changes in Washington will result in lower fuel costs that will help balance the business scales in transportation.