Truck Operating Costs and Returns

VI. Truck Operating Costs and Returns

The U.S. Department of Agriculture’s Market News Program (AMS) also reports the operating costs per mile for intercity fresh produce shipments.4 These data were assembled for the 1986-1996 period and are presented in Appendix Table 11. These costs were reported by three categories: (1) fixed costs, including interest on equipment, non-vehicle depreciation, management, overhead, insurance, and licenses; (2) various costs including vehicle depreciation and driver costs; and (3) operating costs, including fuel, maintenance, tires, and miscellaneous.

From these data it appears truck operating costs increase in the late fall and early winter (Appendix Table 11). On an annual average basis, it cost $1.34 per mile to operate a produce truck in 1996. Of this amount, 33.5 percent was for fixed costs, 34.9 percent for various costs, and 34.6 percent for operating costs.

Over the 11-year period the fixed costs (interest, maintenance, license, and insurance) have been increasing relative to total costs. The relative (percentage make up) composition that these costs make up of the total costs has changed over the 11-year study period.

Percent of total operating costs made up by cost type:

Year Fixed Various Operating Total

1986 23.66 37.99 38.35 100.00

1993 29.92 35.10 34.98 100.00

1994 30.22 35.42 34.36 100.00

1996 30.45 34.99 34.55 100.00

During the 11-year period, the various costs (driver’s pay and vehicle depreciation) have been decreasing relative to total costs, and the operating costs (fuel, maintenance, and tires) have been slowly decreasing as a part of the total costs of produce trucking. These same truck operating costs were aggregated on an annual basis (Appendix Table 12). Clearly, truck operating costs increased from 1986 to 1996; however, there is substantial variation in these costs from year to year (Appendix Table 12). The greatest variation was found in the "operating costs" (fuel, tires, and maintenance).

Net Returns Per Load

An indicator of the economic viability of an industry is the profitability of that industry. In this section attention was given to the net returns truckers received from hauling produce to the five major markets.

The average annual trucking rate per load was taken from Appendix Table 8 and divided by the number of miles to each market and the resultant figure was the "charges" shippers or receivers paid per mile (returns to truckers). The per-mile operating costs (Appendix Table 12) were subtracted from the per-mile charge. This resulted in the net returns per-mile received by produce truckers. The mileage to each market was obtained from the official "GOUSHA Truckers Road Atlas, 1992."

For central California, however, the mileage used was based on the miles from Los Angeles to the five markets. The returns per load were based on trucking rates reported by the Market News Fruit and Vegetable Program (AMS-USDA), report for central California shipments.

As an illustration, in 1996 the annual average truck rates for produce shipments from central California to Atlanta ranged from $2,400 to $3,100 per load (Appendix Table 8). The mid-point of this range is $2,750 per load. It was

assumed that the mileage from central California to Atlanta was 2,165 miles (actual Los Angeles to Atlanta mileage). The $2,750 was divided by the 2,165 miles to arrive at an average return of $1.27 per mile for hauling a load of produce from central California to Atlanta. From Appendix Table 12, the average cost per mile to haul a load of produce was $1.34. The net return to truckers for an average load in an average month in 1996 to Atlanta from central California was a loss of 7.4 cents per mile. This suggests that truckers are meeting their cash costs but not depreciation. It also illustrates why there is concern about the long-term supply of trucking services.

Based on the net returns to truckers using U.S.D.A. cost estimates, profitability of hauling varies with the destination. Some destinations are more profitable than others (Appendix Table 13). From the net return data, positive returns were received by truckers for loads hauled to Chicago in only two years of the 11 years (Appendix Table 13). It appears that Dallas and Denver hauls are the most profitable for central California loads.

This same calculation method was used to estimate net returns per mile from hauling a load of produce from Los Angeles to the major markets (Appendix Table 14). In 1996, the average Chicago and New York City loads were least profitable.

The net trucker returns were also calculated using mileages from San Francisco to the five major metropolitan markets (Appendix Table 15). In all years from 1986-1996, the net returns from San Francisco were all negative.

Generally, most California fresh produce loads originate from the central coast, central San Joaquin Valley, or Coachella-Imperial Valley; thus smaller volumes are moved from northern California. Obviously, the back-haul is imperative if a trucker is to be profitable for these loads, and Northern California truckers need to haul produce during the high-rate "peak" harvest seasons.

Cost Per Ton-mile

Cost per ton-mile is an important indicator in evaluating product transportation alternatives, packaging, markets served, and other marketing decisions.

Costs per ton-mile for fresh produce shipments from central California, Los Angeles, and San Francisco were calculated. These costs were calculated as a monthly range based on the truck load charge for produce shipped from these three origins to the five major markets used in this study.

The costs per ton-mile to ship fresh produce from central California to the five major markets is reported in Appendix Table 16. To calculate these costs by month, the truck rates to each market were taken from Appendix Table 8. This rate was divided by the mileage and the resultant figure was then divided by 20 tons.

As an example, in December 1996, the trucking charge per load ranged from $2,000 to $2,400 from central California to Atlanta (Appendix Table 8). These rates were divided by the miles to Atlanta, and the resultant figure was divided by 20 tons; therefore, the December 1996, per-ton-mile rate for produce trucking from central California to Atlanta ranged from $.046 to $.055.

Clearly the per-ton-mile rate to ship produce increases greatly in June, July, and August over previous and subsequent months (Appendix Table 16).

The per-ton-mile costs were also calculated for shipping produce from Los Angeles and San Francisco to the five major markets (Appendix Tables 17 and 18).

Costs per ton-mile vary widely seasonally, but also there is substantial variation annually. The data in Appendix Tables 16, 17, and 18 do not indicate definitive trends in cost per ton-mile to ship produce. For instance, the per-ton-mile cost range to ship produce from central California to Atlanta in December 1996 was identical to the per-ton-mile cost range of $.046 to $.055 to this market reported in December 1986.

{ CATI , also CAB , CFSNR , CIT , VERC }