Over the next year or so, the general freight rates will likely go down a little or stay close to where they are as motor carriers try to strike the delicate balance between capacity and demand.
But, I feel like reefer shipping rates are about to move a good deal higher for a few reasons, but most importantly because of the FDA’s finalization of the Sanitary Food Transport regulations (as part of the Food Safety Modernization Act).
As the industry prepares to comply with the full slate of food safety mandates set by the FDA, motor carriers, freight forwarders and warehousemen in particular will see a substantial increase in their cost of regulatory compliance and in their cargo insurance premiums.
Cargo insurance rates for these goods will likely see a large increase as well because perishable freight continues to be a poorly performing class of business for most insurance carriers.
You see, each freight damage or loss claim involving perishable freight or commodities that require special temperature control is always going to be a higher than average exposure simply because of the nature of the goods.
Food products continue to be the most stolen commodity in the US because they aren’t protected as well as some other loads due to the lower per load values. Food products continue to be very easy to fence due to their easy re-marketability (everyone has to eat) and these products tend to be very hard to track.
Even if a load of refrigerated goods is stolen and recovered in a timely manner, the loads typically have no salvage value due to the shipper not wanting to re-introduce potentially dangerous goods into the marketplace (and who could blame them?).
Apart from the theft peril, any collision, fire, water or handling damage loss involving temp sensitive commodities tends to be much higher than average. Tack on the special perils of spoilage, change in or extremes in temperature, contamination, infestation, incorrect temp setting, lack of fuel in the reefer unit and mechanical or electrical breakdown of the reefer unit and you have a pretty ugly risk exposure profile for the commodity class.
I don’t have a crystal ball, but I suspect that these underlying issues will move to the forefront as the year gets underway. I’ll be interested to look back in a year to see if I was correct.
