“Made In Rural America” Export Initiative

Within the next nine months, President Obama plans to roll out a seven-step investment, education and promotional strategy to help U.S. rural farmers and business owners to export more goods to foreign nations. Last year, these businesses generated more than $140 billion dollars and the White House plans to increase this amount in a push to boost the nation’s economy. If the plan succeeds, 1% of Americans could become less reliant on food stamps.

“Made in Rural America” will put a spotlight on U.S. exports and, in turn, provide an economical boost that will start in rural areas and spread throughout industries such as transportation, healthcare, manufacturing, energy and more.

Sustained by a comprehensive strategy that connects rural businesses with investors, the initiative includes the following specific commitments:

  • Host five forums throughout rural areas that provides rural business owners with access to resources and information.
  • Host an “Investing in Rural America” conference that connects investors with rural business owners.
  • Training for local USDA staff in all 50 contiguous states.
  • Counseling rural business owners on how to connect with foreign buyers.
  • Promote rural-goods at trade shows and events.
  • Educate leaders throughout the nation on the importance of rural exports.
  • Extend the BusinessUSA online platform to allow rural business owners to connect with export and investment resources.

On Friday, the White House released a fact sheet that outlines the full strategy.

Limiting Drive Time & The Freight Shipper

How do the newly enforced Driver Time Restrictions affect you, the average freight shipper?

According to the U.S. Department of Transportation, the following changes to driver schedules will impact freight capacity and transit times:

“Truck drivers will be required to take a 30 minute rest break every 8 hours and will be able to restart their hours of service clock only once a week by not driving for a 34 hour stretch that includes two 1:00 a.m. to 5:00 a.m. periods.”

A good comparison on this topic can be drawn from the airline industry. Since restricting pilot and aircraft crew flight times and schedules, passengers have noticed not only an increase in the cost of flights but also a decrease in the amount of service. Cancelled flights, delays, reduced routes, etc. have plagued the industry. Some would argue that it’s made flying more safe and beneficial to the crew, which can hardly be a bad thing. However, due to budget restraints most airlines haven’t committed to maintaining a consistent level of service by hiring new crew members. Instead, cuts like the aforementioned have become a mainstay.

Taking that example illustrated to us by the airline industry is it not likely that the same reduction in service would occur in the freight and transportation industry? While I for one am a proponent of rewarding hard-working truck drivers, I can’t help but assume the position that regulations almost always create a gap in service. The intentions are usually good, but the drawbacks are sometimes not measurable for quite a length of time.

As a freight shipper, which of the following effects of new driver regulations will affect you the most?
pollcode.com Freight Shipping 

What Causes Your Freight Rates To Rise?

If you think the cost of fuel (specifically diesel) is the only driving factor behind freight rate increases, think again. There are countless variables to the rise in freight shipping costs. While the cost can be offset at the asset-based level by carriers, most shippers will have to come up with creative solutions to deal with the flux of freight rates.

Regardless whether the items are being shipped at the manufacturer level, distributor level or retail level, ground freight or long haul trucking is usually involved. Therefore, operational factors that affect the trucking industry have the most impact on general freight rate increases. The four main factors are fuel increases, labor costs, equipment prices and Federal restrictions.

Fuel Fluctuation

Fuel prices, like most commodities, are influenced purely by supply and demand. When the demand for fuel increases, so does the price. The  highest crude oil price struck in 2008, marking the most recent financial crisis. Since that time, the demand for crude oil decreased (due to a shrinking economy) and the price has leveled to pre-2008 prices. Keep in mind, any time a global or local disaster happens the cost of fuel skyrockets. These unforeseen disasters – whether natural or man-made – can cause a spike in freight rates at any time.

Labor Costs

Why would labor costs affect the fuel bottom line? Many different factors contribute to the rise in labor costs. We know the main cause is a shortage in drivers, but why is that the case? Issues like a high number of retiring drivers, recruitment and retention hurdles and Federal regulations that monitor driver schedules all affect labor costs, which ultimately impact freight rates.

Equipment Costs

New regulations that monitor carbon footprint and fuel usage have caused a need to modernize engines and trucking equipment. Since new equipment costs are now on average 40% more than they used to be, this cost gets tacked onto the freight rate. We can expect these costs to be a factor over the next 5 years, driving the cost of freight shipping skyward.

Federal Regulations

Beginning next month (July 2013), new regulations will limit drive time from 11 hours to 10 hours in a 24-hour period. While it doesn’t seem like that much of a break, it will certainly create the demand for more drivers and equipment.

One of the ways a shipper can combat rising freight rates is to always receive the best price available. Compare your freight rate from multiple carriers. Sometimes the national carrier you may use could be more expensive than a regional carrier for a shorter haul.