In a recent episode (Episode 52) of the Meet Me for a Coffee podcast, the focus was squarely on the complex and time-sensitive world of produce logistics, especially as we head into peak season. We were joined by Adam DeGroot, who runs the DeGroot family of companies, including DeGroot's Vegetable Farms and DeGroot Logistics. Adam offered valuable insights into the current market, the unique challenges of transporting produce, and potential strategies for improvement.

The Current Produce Market Landscape

According to Adam, this time of year is his favorite. The Southwest and Southeast are in full swing. A significant factor over the last six to twelve months has been favorable growing conditions nationally, perhaps the most favorable in quite a while. This has resulted in stronger volumes of produce coming out, leading to lower commodity prices across the board on a wholesale basis for items like potatoes and sweet corn.

However, the reality for produce shippers is that while commodity prices are down, their operating costs are at all-time highs, with inputs like labor and seed creeping up annually. This puts pressure on shippers to find savings wherever possible, even as freight rates are starting to tick up, indicating a tightening capacity cycle.

Why Produce Freight is Different (and More Difficult)

Produce transportation is often referred to as "higher touch" or more difficult freight. Several factors contribute to this complexity:

• High Incidence of Claims: Produce is highly perishable, meaning more can go wrong during transit compared to other types of freight.
• Difficulty Forecasting Supply: Predicting exact shipping volumes even two to three weeks out is challenging. Factors like temperature and growing degree days heavily influence crop readiness. Weather events, such as heavy rains, can stop harvesting and immediately impact planned shipments, forcing buyers to find alternative sources on short notice. These "acts of God" can often disrupt plans.
• Cultural Practices: Historically, for some legitimate reasons, produce farms and shippers have often operated on a "first come, first serve" basis for loading. While there's a push for more pickup appointments, it requires significant internal planning. There can also be a cultural preference against paying industry-average detention, layover pay, or other accessories.
• Long Loading Times: It's not unusual to see loading times of six to eight hours or even more, sometimes round-the-clock, depending on the region and commodity. This is partly due to the process, as some produce is literally cut in the field that morning and shipped out that evening or day.
• Time Sensitivity & Short Lead Times: The need to harvest and ship produce rapidly makes it incredibly time-sensitive. Lead times of just 10 or 12 hours are common.

These nuances make pricing produce lanes challenging. Standard rating tools or public load board averages like DAT often don't reflect the true cost and risk involved. Data can be thinner in the rural areas where produce originates, and a three-day average is "a lifetime" in the fast-moving produce industry. Historical data, though often proprietary, tends to be the most reliable source for produce pricing.

Strategies for Shippers: Making Produce Freight More Palatable

Given these difficulties, what can shippers do to make their freight more attractive to carriers and potentially unlock savings?

• Focus on Time, Not Just Distance: While freight is often priced by distance, the real cost for carriers involves time – loading time, transit time, and delivery time. Shippers should focus on building loads to minimize the total time involved. For shorter hauls, optimizing appointment times for direct delivery can significantly reduce rates.
• Improve Facility Information & SOPs: For large shippers like retailers dealing with numerous third-party pickup locations they may not control or know well, organizing facility data is crucial. Having Standard Operating Procedures (SOPs) for check-in, appointment setting, and other procedures, along with detailed facility attributes (like overnight parking), can greatly help carriers and brokers. Adam's company is working on this with their Dock411 platform, which helps enrich facility data and build SOPs, overcoming the challenge of tribal knowledge scattered across different people.
• Leverage Data in Vendor Conversations: Shippers can use data, such as driver reviews collected on platforms like Dock441, to have more straightforward conversations with their vendors (the farms or packing sheds) about issues like detention. This data-driven approach makes it easier to implement corrective actions.
• Grade Facilities: Adam believes the industry sorely needs the concept of facility scores and needs to understand how this impacts pricing. Rewarding above-average shippers could incentivize better practices.
• Partner with Capable Providers: Not all logistics providers are built for the short lead times and after-hours/weekend orders common in produce. Shippers must work with brokers and carriers that are adequately staffed and experienced in handling this type of freight.

Investing in logistics capability is vital for produce shippers. If you're not better at managing your logistics than competitors, it can cost you sales, especially when customers require last-minute shipments.

Consolidation and Co-Mingling in Produce

Consolidation of produce loads is happening, partly driven by consolidation on the buyer side (fewer retailers, food service companies). It's more common through produce brokers or co-op models where multiple farms aggregate their sales. However, applying conventional LTL rules to produce is difficult. While innovation is occurring in this space (mentioning Fresh X as an example), the reality is that produce is a higher-margin department for retailers. The cost of running out of product in a distribution center or store is significantly higher than the cost of paying more for freight, even for shipping partial loads.

Looking Ahead: The Fourth of July Peak

With the Fourth of July approaching, often a summer peak for produce, what can the industry expect? Given the improved growing conditions, there's plenty of volume and crops are plentiful. However, Adam anticipates that while overall freight markets might seem looser compared to prior years, the average rates in produce-heavy regions will likely be a little tighter and slightly higher than average. The background narrative of a looser freight market shouldn't create a false sense of security, as local shortages and tight situations can still arise during the pre-holiday rush. To prepare, it might be useful to look at historical rate data from several years ago, prior to the market fluctuations of the last couple of years, to get a better sense of typical seasonal tightness.

It seems the produce logistics space is returning to a more traditional pattern of seasonality, requiring careful planning and understanding of its unique demands.

If you have more questions about produce logistics or want to connect with Adam about DeGroot Logistics or their tech tools like Dock411 and Freight SOS (focused on exception management), you can reach him on LinkedIn or via email (adam@degrootlogistics.com or adam@degrootfarms.com).

Thanks for joining us for this update on the dynamic world of produce logistics!