KANSAS CITY — Rates to move freight by truck have risen amid a surge in demand to move larger amounts of certain food staples and medical relief supplies quickly due to the coronavirus (COVID-19) pandemic. Restrictions on travel have both helped and hindered those efforts, while logistics play a key role in limiting the chaos caused by COVID-19.
“We’ve traded speed for price,” said Jim Ritchie, president and chief executive officer of Redstone Logistics, a North American truckload brokerage, logistics management and supply chain consulting service based in the Kansas City area. “If you want to move something fast, you turn to trucks.”
He said rail freight demand has dropped off while orders for truck freight have seen a net increase amid a shift in orders.
Trucking rates have increased about 7% to 8% during the pandemic, Mr. Ritchie said, although fluctuations have been common. Much higher increases for “immediate freight” have been noted in some cases. He expects freight demand and rates will moderate in coming weeks whether or not new cases of COVID-19 have peaked and panic buying subsides.
“Constant replenishment will ease the fear” that has been behind panic buying of food staples and other items such as toilet paper, Mr. Ritchie said.
“Once people see things are getting replenished, they will stop buying more than they need,” he said.
Mr. Ritchie stressed that truck freight capacity has been adequate throughout the early stages of the pandemic as demand shifted to food staples and medical equipment from other consumer packaged goods (CPGs). He noted about a 50% decline in freight demand for nonessential CPGs. Empty store shelves of key grocery products and certain other items wasn’t because of a lack of trucks or trucks being unable to keep up with demand, he said. Delays generally occurred at the wholesale or distributor levels when products weren’t there to haul, although many food and essential CPG manufacturers (such as flour mills and toilet paper manufacturers) quickly responded by increasing production.
Reduced traffic in major cities due to stay-at-home directives has helped trucks navigate city streets and make deliveries more quickly, he said.
Mr. Ritchie anticipates a “bullwhip effect” on trucking demand, with the current surge transitioning into reduced demand in a few weeks or months that will be felt by the trucking industry.
The American Trucking Associations’ February for-hire truck tonnage index was up 2.6% from February 2019 after easing 0.3% in January.
“The trucking industry was in a fairly good place before economic impacts hit from the health crisis,” said Bob Costello, chief economist at the ATA. “Trucking volumes, early in the COVID-19 emergency, will be positive for consumer staples and other commodities before we see a slowdown as the economy contracts in the second quarter.”
The US Energy Information Administration said the average on-highway price paid for diesel fuel in the week ended March 30 was $2.59 per gallon, down 7¢ from a week earlier and down 49¢ from a year ago.
“Lower fuel prices have been a big plus,” Mr. Ritchie said.
Temporary regulatory relief from the US Department of Transportation has been beneficial for truckers and the trucking industry, Mr. Ritchie said.
As with trucks, some temporary regulatory relief also was given to railroads because of COVID-19, generally conditioned on the existence of workforce shortages and other constraints directly resulting from COVID-19 that could prevent railroads from completing mandated safety tests and inspections or other requirements on time.