A friend of mine in the shipping business has comments on a trucking article he sent. Let’s tune in.
Truck Rates Abysmal, But Some lanes Active
Produce News reports Truck Rates Abysmal, But Some lanes Active
Two transportation brokers report that truck rates are extremely low without a lot of hope of overall improvement on the horizon. On the other hand, a San Joaquin Valley grape shipper said his rates have been climbing as he recently secured a load to Texas that was about 15 percent higher in mid-August than it was earlier in the month.
“Trucking is not a way to get rich right now,” said Mark Durfee, general manager of Giltner Logistics, based in Twin Falls, ID. “There are no earth-shattering rates out there. Oregon, Washington, Idaho and Utah are soft. The Southeast is soft. The Midwest is soft. You tell your California grape shipper to give me a call. I’ll find him a truck.”
Durfee added that “Southern California and Arizona are just wastelands right now if you are on the spot market. The rates are horrible.”
Yet Jared Lane, CEO of Grapeco Farms, based in Delano, CA, insists his rates have been climbing and as California grape shipments are expected to continue to increase for at least another month. He said truckers have the upper hand. “The rates are not as high as they were a couple of years ago, but they are increasing. The rate (to his Texas buyer) was $4,600 last week and this week it was $5,200,” he said on Aug. 16.
“Both statements can be true,” said John Stenderup, vice president of sales and marketing for Vektor Logistics, based in Monterey, CA. “This market is so incredibly depressed right now. We’re getting winter rates in the middle of summer, but there are still some lanes that can demand a higher rate.”
“The temperature-controlled space, which includes produce haulers, only represents about 15 percent of the overall (transportation) market,” Stenderup said. “Produce haulers have always been pretty resilient. There is a lot of seasonality in the produce space with truckers having to go in and out of the market as their normal traffic pattern.”
Consequently, he said these independent owner-operators tend to keep a watchful eye on their own costs and don’t get overextended. He expects they will be there when the market goes up.
“It’s not a matter of if, but when,” Stenderup said. “There will be an upcycle. “Right now, truckers are taking rates 15 to 25 percent below their costs. That can’t last forever. Rates will climb again and be in the $3 to $4 per mile range.”
Anecdotes From a Shipping Contact
Brad, who sent me the above article, offered his observations.
Normally it takes us 4-5 days to book a truck for direct shipments. Right now we’re able to get a truck within 24 hours. A couple weeks ago we had one in one hour, a full trucks, not LTL (Less Than Truckload).
Prices are down now 25-35 percent from a year ago or so. Prices are up a bit the last few weeks, mostly from Yellow/Holland shuttering.
RV trailers are also in the basement.
My contact friend ships liquid consumable chemicals to greenhouse and nursery operations for water treatment.
There will be an increase in shipping but will that happen before an industry shakedown with a huge number of bankruptcies? Before a full blown recession?
What will increase the demand for goods with housing in the gutter?
Existing-Home Sales Dip 2.2 Percent in July, Down 16 of Last 18 Months
Existing Home Sales Long Term
On August 22, I noted Existing-Home Sales Dip 2.2 Percent in July, Down 16 of Last 18 Months
Transaction Crash
Existing home sales have crashed to a level seen in the mid 1990s. Prices have not crashed but transactions have. Crashes are rare, but we are in one now, from a transaction perspective.
Many people on Twitter tell me there is no housing crash. The above chart proves otherwise. What they really mean is there is no housing price crash.
In many ways, a transaction crash alone is worse.
On a full blown price crash, the Fed would be more prone to cut rates. Instead, interest rates are more likely to stay high, perhaps even rise.
If people are not buying houses, they are not buying as much furniture, landscaping, paint, appliances, cabinets, and lawn mowers, etc., to the same extent if housing was strong.
This means truckers are not shipping as much goods as they would be otherwise.
As long as housing is in the gutter, demand for goods and services related to housing will remain in the gutter and so will demand for shipping those items.
“Existing home sales have crashed to a level seen in the mid 1990s. Prices have not crashed but transactions have. Crashes are rare, but we are in one now, from a transaction perspective.”
There is, I believe, an old stock market adage that says, “Price follows volume.” I believe that this applies to other asset classes with residental real estate being one of them only it would be called “transactions” not volume.
correct. houses are trading like penny stocks.
Very, very, very, very, big pennies.
Once EV trucks can be mass produced, it will greatly lower operational costs. EV trucks are way better than diesel trucks going up hills. And much safer going down hills. The brakes won’t overheat because they’ll rarely be needed. They also use a lot less energy going up and down hills.
Pepsi is taking them from Tesla as fast as they can make them. Partially because of incentives. Partially because of reduced costs. They’ve been using them for over a year now and have been working great. The drivers also praise them.
Nothing better for cost savings than hauling around a ton or two of extra load known as batteries. All the time. Empty or full.
The pandemic caused an enormous boom in goods and that boom has been fading for a year now but still has a way to go to get back to the trendline hence this weakness is likely to continue as consumers switch back to buying services instead of goods. Since this is a return to the trendline and not a reversal of the long-term trend itself it is probably not a sign that the economy is falling off a cliff. We did see a surge in the US Service Sector PMI starting in Jan 2023 that peaked out couple of months ago that could be seen as a conformation of the goods to service spending switch. In all I would say that the economy is softening but not crashing. The Fed will have no reason to lower rates because inflation is still sticky.
With a bit of expected bad luck Biden’s Inflation Reduction Act will kick spending and inflation back into high gear for the next few years. Maybe there will be increased productivity, maybe not. But there will be inflation and it won’t be 2%.
“If people are not buying houses, they are not buying as much furniture…”
Is that true? I wonder whether people put money in the house rather than trade up, for instance.
IKEA Is Using Driverless Trucks to Move Its Furniture in Texas
October 20, 2022
Thanks to its mild climate, expansive highway network, and lax regulations, Texas has become the country’s proving ground for driverless trucks. From cargo to produce, goods have been traveling the state’s highways partially driver-free (the trucks aim to use autonomous mode on highways, but safety drivers take over to navigate city streets) for a couple of years already. Now there’s another type of cargo traveling through Texas via autonomous trucks: furniture. This week Kodiak Robotics announced a partnership to transport IKEA products using a heavy-duty self-driving truck.
Kodiak has been moving furniture and other IKEA goods since August, but the companies carried out a testing period before making the agreement public. The route runs from an IKEA distribution center in Baytown, east of Houstin, to a store in Frisco, 290 miles away just north of Dallas. It’s mostly a straight shot on highway 45.
…
https://singularityhub.com/2022/10/20/ikea-is-using-driverless-trucks-to-move-its-furniture-in-texas/
““It’s not a matter of if, but when,” Stenderup said. “There will be an upcycle. “Right now, truckers are taking rates 15 to 25 percent below their costs. That can’t last forever. Rates will climb again and be in the $3 to $4 per mile range.”
——-
Driverless trucks will be able to make money at those rates.
Autonomous Trucks Will Be Cruising Down Highways Next Year, Startup Says
Vanessa Bates Ramirez
April 5, 2023
Self-driving cars get all the hype (or, they did before people realized they weren’t going to be ready by 2020…or 2022…or this year), but self-driving trucks are likely to hit the road first. Not only is the bulk of their driving done on highways, which is far simpler than navigating urban roads with all their obstacles; there’s been a shortage of truck drivers for years, and it doesn’t seem to be getting better, so there’s a market need for trucks that can drive themselves.
If one company’s plan plays out, trucks without drivers will be cruising down highways by next year. On Monday driverless hardware and software specialist Aurora Innovation announced that its Aurora Driver—a system of sensors, software, and a computer designed to give any vehicle self-driving capabilities—is “feature complete.” This means all the product’s technical capabilities are in place and it’s entering its final phase of development. The company is planning to launch the Driver commercially next year.
…
https://singularityhub.com/2023/04/05/autonomous-trucks-will-be-cruising-down-highways-next-year-startup-says/
Retail is under siege by “shrinkage” which is code for theft and in some cases organized theft. It’s only a matter of time before highway bandits & pirates start jacking big fat juicy driver free rigs carrying all sorts of precious cargo.
And then you’ll have hackers that try to cause mayhem for fun or profit. And after than you’ll have individuals trying to cause crashes for insurance purposes.
So I don’t think there will ever be a panacea of driver-less trucks transforming shipping into magical rainbows and unicorns full of profits.
And the driver less taxis in San Francisco are causing havoc.
https://www.cnn.com/2023/08/14/business/driverless-cars-san-francisco-cruise/index.html
You just like to hear yourself post nonsense, yes?
Cruise cars are having difficulties in SF and have been ordered to cut back their driving hours by 50% until they solve the problems. But what would you expect from the company that owns Cruise – GM? Meanwhile, Waymo has almost no problems.
The Cruise car that drove into the cement? A Porsche driver did the same thing a in SF a few years back.
And no one has died from autonomous cars in SF, something that can’t be claimed from human drivers.
The wimp/woke stores that hire security but won’t let them stop thieves deserve their losses. They will either have to put a stop to it or go out of business.
There was an incident at a local Home Depot some months back in a town about 30 miles south of SF. Guy loaded his coat up with tools and tried to walk out. Security confronted him. He dropped the stuff on the ground. Security tried to usher him back into the store to wait for the cops. The guy started fighting, grabbed the security guys baton and hit him in the face with it. The security cop then shot him in the buttocks. The guy has been in jail since then and the DA is looking to send the thief to jail for years.
I think you’ve seen too many mad max movies.
Perhaps the Federal Government will issue letters of marque to privileged truckers for some extra income.
Tesla has by far the best self driving and they don’t need crazy arrays with cameras on the roof. They have millions using it every day and they collect the data and feed it into their computers to make the software better. They aren’t rushing to be first when all they have to do is wait until it works so much better that their competitors will have no choice but to give up. It’s already safer than having a driver.
Saw a tweet from Steve Kirsch the other day. Said he got a new Tesla and drove home using the self driving feature. Was impressed with the car.
If it was true that it was already safer than a driver then it would be fully licensed by now. The fact that it’s not is proof that it’s not safer than a driver.
A friend of mine lent me his Tesla for a couple days while my car was getting repairs. I used the self driving feature and it’s OK, but not great. It’s perfectly fine on the highways but not so great in certain urban areas line where I live. Plenty of landscapers park on the road itself which is just 1 lane each way and as a human you know how to drive around that and recognize they are parked. The Telsa has no idea.
Anyway, I took a ride with him a couple weeks later and he said after the last update the self driving in his car was way worse so he wasn’t using it. He showed me and I was shocked it was veering off in the wrong lanes at the wrong time. Things it definitely was not doing with the prior software.
In other words, it’s miles from being safer than a driver and it’s not clear it ever will be. Telsa just doesn’t want the liability nor should they. Just leave it as driver assist and they are legally fine.
This is from a rich town where there are abundance of Teslas and Panzer Division sized landscaping crews cutting the grass where 50 years ago one would have payed some 14 year old kid on the block $5 cash to mow.
https://patch.com/illinois/burrridge/landscaper-parking-burr-ridge-problem-mayor
What do you mean by fully licensed?
Tesla collects data on everything and it shows drivers using self driving have accidents at a lower rate then with it non engaged.
What level of self driving were you using? Was it full self driving?
I’ve seen lots of videos with the cars driving fine in situations similar to what you describe. I didn’t pay for full self driving, so I can’t state that from personal experience.
It’s not intended to be used without a driver yet. But neither are the competitors. Contrary to them allowing it in a small section of San Francisco that failed. It’s still better than the competition.
You borrowed a friends Tesla for a couple of days and used self driving on city streets? You have a lot more balls than I do. After 2 days, I had no idea how to even engage it.
Mine can’t even stay in its lane reliably.
Maybe you need to have it looked at because I’ve never had an issue with that.
The apple harvest is about to start and the crop is up 25% from last year. That may help for a couple months.
The recession has already started… again!
Good article, Mish. Shipping is a lead indicator for sure….
Fed will notice in maybe, January?
Market is saturated with brokers and drivers; check out TikTok and IG for all those new truck drivers who don’t know any better also the military has a huge CDL program for Veterans where they pay for everything. Those Veterans don’t have a clue about rates and expenses they just get up and go.
No truckers are not “excepting” these rates, truckers have ZERO PROTECTION and are having these rates forced down thier throats! If there is one industry that should be regulated by the federal government it is trucking. Brokers and Mega Carriers are the scumbags of the transportation profession. #driverwithanMBA #millionmiledriver
Christopher, I’m not familiar with trucking and I’m confused by both Mish and your statements. Why does a trucker take rates forced down their throats? That is, what’s the forcing mechanism? And why would a trucker take a job at below cost?
Because if you don’t accept it, someone else will to keep their truck moving. It is yet another example of a race to the bottom, brought to us by the money elites.
It’s called a lease payment.
They make up for it in volume.
There is an economic cost of owning a truck even when it is idle.
of course those who NEED work have plenty
just have to be willing to ACC E P T it
wonder what those UNION Yellow folks feel today
yes. grand idea. sleepy joe, el trumpo, and schumer and AOC and mitch the bitch have the answers and will protect you.