High freight rates drive food shippers to build their own logistics systems
Against the backdrop of high full-truckload and less-than-truckload rates, port congestion, and capacity shortages, food industry shippers are facing dual pressures of rising transportation costs and uncertain transit times. Some companies choose to bypass congested ports, while others begin to build or expand their own transportation fleets, while also mitigating the impact by strengthening communication and collaboration with upstream and downstream partners.
Taylor Collins is the co-founder of Roam Ranch. In the past, he shipped from his Texas ranch to retail customers across the U.S. with just two weeks' notice. But in recent months, that timeline has stretched significantly.
Over the past few quarters, a surge in freight volumeshas pushed up shipping rates, leaving shippers facing a difficult-to-navigate trucking market. Manufacturing problems have compounded the situation, with tractors, trailers, and replacement parts all in short supply.
"Rates are going up. That's the reality of the environment we're in right now," said Sarela Herrada, co-founder of Simpli, an ingredient company focused on vertical integration and ethical sourcing.
Spot rates for refrigerated trucks have surpassed $3 per mile, and contract rates have risen in tandem. Meanwhile, less-than-truckload (LTL) prices are above historical levels, and surging demand has ledsome carriers to refuse shipments。
Rising truckload and LTL rates
It's not just prices and capacity putting pressure on the supply chain—it's also reliability. Appointment slots at distribution centers are hard to lock in, and labor shortages are slowing loading and unloading at some warehouses.
"The main problem we're seeing in LTL is delays," said Justin Marx, CEO of Marx Imports, which imports specialty and premium meats. "Trucks are always late."
Delays can risk spoilage and create a ripple effect: if a trailer isn't unloaded on time, the truck may miss its next haul. Worse, due to poor data and visibility on shipment status, shippers often can't pinpoint the extent of the delay.
Traceability issues are especially acute in LTL, where freight may stop at multiple distribution centers and switch trucks along the way.
"We know the freight is out there," Collins said, "but we can't say exactly where it is. Even the trucking company can't say—they just know it's sitting in one of their warehouses waiting to be picked up."
Three strategies to cushion the blow
For many farmers and ranchers like Collins, trucking is nearly irreplaceable—which means either accepting the rates or not shipping at all.
While food suppliers and distributors can't avoid the trucking market, companies can still adopt strategies to mitigate the impact of market forces.
Shifting to less congested regions
Limoneira, a citrus-focused agricultural company, whose CEO Harold Edwardssaid on this month's earnings callthat the company "may lean toward shipping more freight to East Coast markets and using trucks to move it west to avoid congestion."
For many companies that have historically relied on Southern California and New York—the nation's largest ports—this is a shift. Simpli's Herrada said that traditionally, transit times from major ports were the shortest.
But right now, bringing goods into places like Baltimore and then trucking them to larger port areas like New York can actually be faster.
"To actually get your goods, you have to look at the big picture," Herrada said.
Building in-house logistics
Wisconsin-based Johnsonville Sausage plans to expand its own fleet to cope with capacity constraints.
It's not uncommon for large food producers, dairies, and grocers to run their own truck fleets, but it's typically not an area farmers and ranchers venture into.
"They're born to live off existing resources and minimize unnecessary equipment," said Curt Covington, senior director of institutional credit at AgAmerica.
Customer service is the top reason for owning a private fleet
Curt Reynolds, Johnsonville's logistics director, said the company will expand its own truck count from about 30 to 50 or 60 this year. Last year, it also launched a new logistics business, opening up backhaul refrigerated capacity on its routes to other food and beverage manufacturers.
Owning trucks is an asset-intensive investment, and supply chain issues in parts and manufacturing make running a private fleet even harder. But volatility in the freight market prompted Collins to decide to internalize some logistics at Roam Ranch.
Collins said the company is investing in refrigerated and frozen trucks and building its own delivery team, while also handling some distribution in central Texas.
"This is a direction we never envisioned," Collins said, "but this is our home, and we want to have a very strong presence here. We can no longer rely on third parties to make that happen."
Communicating with suppliers and customers
As with any obstacle in the supply chain, shippers don't have to face the challenge alone.
Johnsonville has worked with its grocery customers to streamline processes and understand pain points related to on-time, complete deliveries.
"What can we do as partners to solve the problem, rather than pointing fingers with fines?" Reynolds said.
"To actually get your goods, you have to look at the big picture."
Sarela Herrada
Co-founder of Simpli
Marx described his company's partnership with New Zealand's Silver Fern Farms, which supplies beef and venison. Over the years, the two have built a strong relationship, and Marx has always prioritized getting the farm's products to customers.
It's similar on the customer side—when shipments are delayed and supply may be disrupted, earning the trust of restaurant buyers is critical.
"This is one of the biggest solutions to the current supply chain mess," Marx said. "You have to have a relationship-oriented mindset, not a transaction-oriented one."