With low availability and higher driver and truck costs, shipping costs skyrocketed in 2022
For as long as Erica Hill can remember, Union Pacific railroad has provided the nursery industry with a special commodity rate to move stock during the spring shipping season.
Until this year, that is.
“With container availability issues and with the rails already over maximum network capacity, for the first time, they did not issue a nursery stock pricing matrix for the season,” said the director of intermodal services at Independent Dispatch in Portland, Oregon. “It was a huge blow.”
Added to that, truck drivers had little incentive to pick up nursery stock given that they were making significantly more money moving containers off the ports, she said.
“The ports were so clogged,” she said, “and importers were paying such high prices to get the containers out of the piers that we had a very difficult time securing drivers to pick up nursery stock loads.
“At one point, I reached out to every single UIIA carrier (those contracted to work rail) and was offering a thousand dollars on top of regular rates to just pick up some nursery stock loads, and I got literally one response,” Hill said. “And that was a maybe, and then they reneged on me.
“I felt so bad for our nursery stock customers,”’ Hill said. “We have moved product for them for a long time, and the fact that we weren’t able to help them out as much as we usually can, particularly when it was a really big season for them, was terrible. It was terrible.”
On top of those issues, a driver shortage added to difficulties, Hill said.
“Drivers are in short supply right now everywhere, but particularly in Portland,” she said.
Also, she said, because of increased costs to move product by rail, Independent Dispatch was forced to dramatically raise rates it charged nurseries.
“It is different on each of the lanes,” she said, “but some were up 27–30%.”
Still, she said, intermodal was cheaper than moving product by truck. But, with rails at capacity, intermodal often wasn’t an option. And nurseries that for years have worked with Independent Dispatch turned to the spot market to try and find trucks to move product to market, Hill said.
“They were just trying to find any truck they could get and they were paying exorbitant prices,” Hill said. “They were struggling.”
‘A whole new game’
Transportation company executives interviewed for this story said a combination of forces pushed transportation prices skyward and had companies struggling to meet demand.
“It is a whole new game now,” said Dale Parra of Truck Transportation Services in Wilsonville, Oregon. “It doesn’t matter if you go to a nursery, a warehouse, or really, anywhere. There are less people to load stuff and unload and transport products. “It is a whole new world and who knows if the old world is going to come back.”
Parra said he advertises for drivers and uses word of mouth to try and lure people into the business, but that hasn’t helped ease his driver shortage.
“You just try to find more and more people that are interested, or try to talk more people into the business,” Parra said. “And it is tough. You get guys who will try it, and they might do a trip or two and say, ‘It isn’t for me.’ And the lifestyle is not for everybody. That is for sure.”
Fred de Boer of Mainland Floral Distributors in Aldergrove, British Columbia, Canada, said his struggle to get drivers is compounded by border crossing issues, specifically by a mandate issued by the Canadian government in January that all who enter Canada must be vaccinated against COVID. (This mandate expired October 1.)
“In our case, there (were) a number of drivers that no longer could go in and out of the United States after the vaccine mandate came in effect,” de Boer said.
Matthew Arendt, who deals mostly with cross-border goods movement at Mainland Floral, added: “We ask the nurseries where we load to send us the customs clearance documents and phytosanitary certificates in advance, before our truck even shows up to load. That way the broker can apply for release by the CFIA (Agriculture Canada) and get the shipment cleared in time. If a shipment is not set up, then the truck sits at the border, and with that comes the aggravation for the driver. I tell them we will pay you for the hours you are waiting, but the drivers don’t like sitting at the border.”
“It’s hard to get a driver in the first place,” de Boer said. “In our case it is even harder as we face multiple deterrents to be overcome. If we lose one driver today, we are screwed.”
De Boer said he upped the rates he pays drivers by about 20 percent to try and ensure they stay on. “I just said, ‘Look, we have to make sure we don’t lose a single driver, so we have to up the pay,’” he said. “And none of our guys have left.”
Another issue that is new to the industry, he said, is getting chassis.
“If you want to buy a new tractor-trailer today, you can’t,” he said. “You can’t even get a quote.
“I asked a dealer, ‘Hey, can you give me a price for a new 50-foot trailer,’ and he said, ‘I can put you on the list for summer 2023, but I can’t give you a price,’” de Boer said.
“So, I placed an order for three new truck chassis for delivery sometime next year,” he said. “I don’t know when I’m going to get them, and I also don’t know what I am going to pay. But at least I am on the list. If you don’t do that, you aren’t going to get anything.”
All of this directly affects nurseries that are trying to get product to market, transportation executives said, with the most immediate effect being increased costs.
De Boer said he raised his rates about 20 percent, both to absorb increased costs and to up what he pays drivers.
“When it became clear that the vaccine mandate was going to stay, we implemented a 20 percent increase,” de Boer said.
Parra said he raised his rates 20 to 25 percent in the spring before scaling back the increase back to 10 to 12 percent today.
The rate increase, he said, has had little effect on demand.
“I saw a couple of people maybe back away a little bit this spring, but overall, most freight customers accepted the increase in cost, because they were getting increases on other things, too,” Parra said. “It was just part of the norm back then.”
Transportation executives said nurseries can help themselves by being more attractive to drivers, something that comes with a lack of hassle, according to Hill.
“The more complicated they make it, the more difficult it is covering it, because the drivers are very picky right now, and they can be,” she said. “They can just go to the port and make a lot more money. So, the shippers have to be very, very truck friendly.”
Also, Russ Damyan, an agent for Freight Tec in Boise, Idaho, advised nurseries to shy away from taking the cheapest bid. “Don’t look for the cheapest person,” Damyan said. “If you go with the cheapest person, there are always significant problems.”
Looking forward, transportation executives said they believe the transportation outlook is improving.
“I am pretty optimistic about things right now,” Parra said. “I think with the oil price coming down and the fuel coming down and with other things settling down, I think we are going to be at this new normal for a while.
“Basically, where we are at now, I think is the new normal in terms of rates,” he said.
Hill, too, said there are encouraging signs in the transportation industry. For example, she noted that even though Union Pacific instituted a peak-season surcharge right out of the gate this year, the first time in her memory that happened before August, the railroad company also eliminated the surcharge during what would be the normal busy season.
As for the reduced rate provided UP during the spring, Hill said she has been asking UP executives if that will be reinstated next year, but has yet to get a response. “They are in a wait-and-see mode right now to see what this year is going to be like as far as capacity,” she said. “But things are changing for the better.
“Hopefully we are done with the worst of it,” Hill said. “I think we are,” she added. “But it was a nightmare. The 2022 nursery stock shipping season was the most challenging time for intermodal rail in recent history, in terms of availability of equipment and drivers.”