Jun

8

 My wife and I are making our way from Houston, TX to central OH and back over the next 2 weeks with our truck and fifth wheel trailer. Sunday was Houston to Dallas, yesterday was Dallas to Little Rock, today was Little Rock to Sikeston, MO. (I45, US380, I30, I40, I55). Because of time constraints and the size of our rig, we tend to stick to the interstates, but explore when we are unhooked. Just thought I would share some business/market related observations with the list.

1) Traffic composition. I typically drive 40-50K miles a year, mostly interstate, and would say I have a good feel for what traffic looks like. I've been struck by the composition of the traffic so far. It is very truck heavy, more like what I would expect for late night (midnight to 6 AM). I did some estimating and would say it is about 60-70% trucks, all apparently well laden (ie, no bouncing trailers). Good mix of flat, van, reefer and tank. So companies are ordering stuff and it is being delivered. There are enough loads that the trucks do not have to run empty. People are not traveling casually; in particular, the RV traffic is very light. I've been making reservations as we go, but no park has been full yet. Hotel/motel parking lots are vast waste lands. Think the travel industry is in for a rough summer.

2) Truck speed. Typically a good percentage of the trucks have the "hammer down" and are traveling well above the speed limit. Not so the last 3 days. My cruising speed with the trailer is 65MPH (or the speed limit which ever is less). I've yet to have a truck blow by me at 75MPH. And East Texas and Arkansas are prime speeding zones (flat and straight). A good number of the trucks are running 60-65, even when the limit is 70. Very unusual. My guess is that they are all looking for the sweet spot (RPM, engine, transmission combo) where they can milk the mileage allowance for an extra penny or two a mile. No more racing to be an hour early. The price of fuel is starting to cool the American racing tradition. This might have the effect of reducing demand considerably. Depending on the driver, you can vary from 6 to 10 MPG with a semi (I have 2 children who are/were drivers). So if a significant number are being incentivised to save fuel rather than deliver on time, it could have a major impact on diesel consumption. I'm also seeing a lot more trucks with under the trailer skirting and tight fenders over the tractor rear tires, which are both fuel saving devices. The under the trailer skirting almost all looks hand made (ie, semi pro body shop). Again, the truckers are facing tight enough margins that they are willing to sacrifice some load capacity as well as maneuverability (the skirting will hit the ground on railroads, etc) in order to gain a few pennies per mile. If this works, then the big fleet operators are either going to retrofit their trailer fleets or replace them.

3) Small town death While we drive mostly interstate, we do get off for food, fuel and sight seeing. Small town rural America is in deep trouble. Lots of empty stores. Many towns appear to have done some 'revitalization' or 'historic district' which all appear to be failing. Pretty banners, nice signage and empty store fronts sandwiched between antique shops, hair salons and second hand stores. The nicest building is usually the offices of the "economic development commission", or the bank. Was there Federal largess doled out in the last few years for this type of activity? If so, it has failed and appears to have dried up. While not strictly a "small town" North Little Rock has a beautiful riverfront trail and minor league baseball complex. The homeless seem to appreciate the nice grass to sleep on and the restrooms to cleanup in. One intersection appeared to have a section of bleachers for the homeless/pan-handlers to sit on. Not sure if the bleachers (one section 4 rows high) was provided by the city, or if the users had the gumption to haul it in from somewhere.

 4) Agriculture Crop planting is WAY behind. I already knew this since my brothers in central Ohio are just now planting corn, which should all be in the ground by May 15. I can just confirm it based on my own observations. The numbers say that they have already lost 25% of their yield potential by missing the optimum planting season. In years past, significant acres would be switched from corn to soybeans (which get planted later). I need to get the details from my brothers, but I think the government "price support/insurance" programs have become so lucrative, that it is better to plant the corn, harvest what you can and collect the difference from Uncle Sam. If this is true, then there will be extra payments due from the Treasury in the fall that are probably not accounted for anywhere. And in the great scheme of things, it is probably only a few billion (rounding error). Perhaps more importantly is what a 25% crop short fall will do to the world and domestic supply, demand and pricing. I am not really in tune with agriculture anymore, but it should make for an interesting commodities futures ride.

5) Outdoor advertising. Lamar (the most common name I see) and similar are in for a rough time. LOTS of empty billboards, or billboards touting the advantages of bill boards. Also a lot more of churches, hospitals, public service announcements, short term (gun show, event, concert). I take all these as indicators that the market is still very soft and that the billboard companies are dredging the pond looking for new customers, and adjusting the pricing to fit.

6) Replacing rest stops Texas, Arkansas and Missouri are all redoing rest areas. It seems to be driven by green/ecology forces. The new ones feature "eco friendly" designs, solar power, recycling toilets etc. Again, is there Federal largess involved? Or are the states just trying to save some operating costs by reworking old high maintenance rest stops into lower cost "green" ones? I doubt that this is a very consolidated market, probably lots of one off designs.

7) Arkansas Freeways. The state appears to be figuring out how to build smooth freeways. Though stretches of I40 still make you want to walk. And it is not potholes, they just did not understand how to lay 2 slabs of cement beside each other in a level fashion! I've been on gravel roads that were smoother than the remaining bad sections of Arkansas interstate.

Scott Brooks writes:

 If you pass thru Sikeston, MO again, you MUST stop at Lambert's Cafe (Home of "Throwed Rolls"). It's something that must be experienced at least once!

If you are passing anywhere near St. Louis on your way back, stop on by my house and I'll throw some pork steaks and venison (from my farm) on the grill and give you a real St. Louis treat!

And as always, all specs are always welcome to stay in my guest house anytime they're in St. Louis!

Rocky Humbert adds: 

Revisiting this post, a little bit of arithmetic puts point #2 into clear perspective, and allows one to calculate the optimal truck speed versus truck driver hourly earnings. The Kenworth Truck Company website says: "A general rule of thumb of thumb is that every mph increase over 50mph reduces fuel mileage by 0.1 mpg" See this paper.  

That means reducing the average MPH from 75mph to 55mph will increase the average fuel economy by 2mpg.

Let's assume that a typical day's journey is 500 miles. That means the journey will take 9.1 hours at a speed of 55mph or 6.7 hours at a speed of 75mph. And increasing one's fuel efficiency by 2mpg will burn approximately 16 less gallons of fuel. So, if diesel fuel costs $4/gallon, reducing the speed takes an extra 2.4 hours of driver time, but saves $64 in fuel. So the incremental driver time is worth $26.66/hour.But if fuel costs $4.5/gallon, reducing the speed takes an extra 2.4 hours of driver time, but saves $72 in fuel. So that's worth $30/hour.Everything else is ceteris paribus. Conclusion: if the trucker's salary is less than $50,000 per year (and most are, based on industry surveys), then it makes sense to drive slower…. and the pivot point is likely somewhere around $3.75/gal … which is EXACTLY the current national average diesel price.


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