Hybrid Transit Systems
Farmers, ag businesses prepare for lean times
Wall Street traders aren't the only people facing the end of a boom cycle. The Agriculture Department yesterday said that it expects net farm income to fall 36 percent this year to its lowest level in nine years. The reversal in fortunes comes just two years after farmers posted a record profit of $123.7 billion; this year, farmers are projected to make a profit of $58.3 billion, down from $91 billion in 2014. With international demand weakening and experts expecting another bumper corn and soybean crop this fall, farmers are preparing for an extended downturn. "I think we have a couple tough years coming," Illinois farmer David Justison told the Wall Street Journal, adding that he and his fellow farmers have "pretty much stopped buying machinery." That's obviously bad news for Deere & Co., which just last week reported a 40 percent decrease in its third-quarter profit and revised lower its 2015 outlook due to softening sales. The Journal did note that there was a silver lining in the USDA report. Production expenses are expected to fall this year for the first time since 2009, largely thanks to cheap oil, but also because of lower prices for seeds, fertilizer and pesticides.
Slumping China economy could cause Iowa pain
If China's economic bellyache spoils its appetite for Iowa products, it won't be just farmers who feel the pain. Iowa State University ag economist Chad Hart told the Des Moines Register that China's slumping economy could hurt Iowa exports of all kinds, from skid loaders to pork to pasta. Those exports have tripled to about $1 billion over the past five years. China is the state's fourth largest export market and among its fastest-growing. However, not all forecasters are gloomy. Grant Kimberley, market development director for the Iowa Soybean Association, predicts Chinese demand for soybeans will remain strong. "They're still making approximately $115 a head profit in their hog industry," Mr. Kimberley said. "No one will quit buying soybeans to feed the hogs with that much profit in the industry."
What does this mean to you and the freight you book or go after?
Customer / Industries
Labor Day Focus – Long haul shipments, 1000 + miles.
With the drop in net farm income, the lack of purchasing machinery will continue. We will see shipment volumes shrinking from vendors who provide parts for the larger machines. Jessica and Ashley will need to understand the Deere vendors even deeper to stay in step with these changes and where to communicate the need for capacity on the Turf side of the business.
China's slumping economy could hurt Iowa exports of all kinds, from skid loaders to pork to pasta. Those exports have tripled to about $1 billion over the past five years. China is the state's 4th largest export market. Predictions include still a stronger demand for soybeans. With the hog industry booming, the soybeans will continue to be a huge hit for feed. Soybeans will be a focus of the feed commodity brokers. Ben and Jessica will need tune into the product types being shipped from the feed vendors. Joni will need to tap into Barilla to see how any current lanes to the coasts could be impacted by China’s economy.
Building supplies should continue to see a push through the end of fall. ABC Supply has several lanes still moving on a consistent basis, rates are competitive.
We have feedback from BPI that we outpriced ourselves. We are continuing our communication with BPI to get back in the door to assist with these.
Cooler weather and Labor Day weekend will push for the urgency of stock at the Sygma distribution centers for soup. Though the volumes might not increase significantly, revisions on ship dates will drive demand for shorter timeframes on notifications. Joni is tracking the Holiday week & weekend and all orders are committed to with a majority being pre-assigned to carriers already.
Mitsubishi is moving more metal out of the Baltimore port again. Joni is to research in depth with Marianna the reason for this change and how the industrial metals industry could be changing and what we can expect for future releases.
Focus from the CSRs is to recognize lanes in RPM pricing structure rather than All In rates. Understanding RPM will provide us with more confidence and higher turn-around times on spot opportunities. In order to see these results, all CSRs will need to be on board and contributing to the log.
Customer RFPs and Awards
We have not seen any Ice River Springs tenders yet. Their strategy is to work their way through their vendors one at a time to make sure that all are functioning through the TMS systems.
AEP – This is due Monday 8/31. We have approximately ¾ of the bid remaining.
Panera Q4 feedback is submitted.
According to DAT, in August, Van and Flatbed load availability declined, Reefer loads increased. Van rates declined slightly, while Reefer and Flat held steady.
We’re seeing the good carriers adapt to less load availability by pre-planning backhauls as early as possible. Hybrid’s key strategy moving into September will be to pre-plan as far out as possible. Continuing to build lanes and relationships so we may offer freight to known carriers will be critical to our success.
Local Capacity / Business
It’s a lot of the same thing as the recent past in that there should be plenty of power in Eastern Iowa and Western Illinois. I have talked to numerous local farmers/truckers and they co-ops are emptying their bins at a feverish pace the week of Aug 24-28. In fact, River Ag delivered 200,000 bushels of corn for a Penford contract; and that would supposedly empty out this particular co-op. A local trucker told me that River Ag hired 128 trucks to move this grain. This is a huge amount of local trucks that will be tied up with just this project for a week.
This area is expecting a bumper crop this fall and currently the corn and soybean crop is 5 days behind the 5-year average. With the current rains this week, the expected harvest date will be pushed back by another day or two; with corn harvest expecting to be pushed into the first week of October. This means plenty of power available in Eastern Iowa for the next 4 weeks.
In the DED group, we should have more power available to us than the last few weeks. The part time farmers will be looking for stuff to do, as grain bins are cleaned out and harvest has not started. We also are starting two new carriers the week of labor day. This means another 10+ loads in just those two carriers. Outbound Iowa needs to continue to stay in the 80-100 loads/week for the next 4 weeks or so.