5 Factors that Impact Reefer Freight Rates
A common load type involves a “reefer truck” designed for loads that need to be temperature controlled during the shipping process. These loads can include anything from refrigerated items like produce and other perishables to frozen foods or even medical supplies.
Because reefer trailers are more expensive to run and maintain, reefer load rates are generally higher than dry vans. But reefer freight rates can vary greatly depending on your location, the cargo you need to ship, and many other factors.
National average reefer freight rates
Reefer rates currently average $2.97 per mile at the national level, but this rate varies by region. In general, most shipping rates are trending upward these days.
Reefer load rates are highest in the Midwest and lowest in the Southeast. Trucking reefer rates often vary by the growing season in a given area. Demand is higher when there is more fresh produce that needs to be shipped from agricultural areas to different regions of the country. The same is true when there is more produce coming into the country from international destinations, which results in higher shipping rates.
Demand is just one of the factors impacting variances in the average reefer load rate overall.
The importance of accurately predicting reefer freight rates
The COVID-19 pandemic shook the shipping industry. As consumers stocked up on key items like frozen goods and produce, the demand for reefer shipping shot through the roof (as did costs).
There are a few important reasons to try to predict reefer freight rates. First, shippers need to be able to predict demand and rates with at least some accuracy to stabilize cash flow and determine shipping costs accurately ahead of time. One way to do this is to balance shipments between reefer and dry vans when it’s practical to do so, which can save a lot of money. For example, potatoes or other stable produce can be shipped short distances in dry vans, while other more perishable products like lettuce and spinach are still shipped via reefer truck. It can also enable shippers to time shipments for maximum savings in a crisis like COVID-19. For example, if a product is stable enough, it can be held at a warehouse until rates drop and more trucks are available. When demand is lower, rates are also lower.
Carriers also need to be able to predict rates and demand. To make smart decisions about purchasing or leasing equipment, you need to understand the current demand for a given shipping type, the potential future demand, and the likely profit margin on that shipping method.
Data also helps. The technology used in machine learning and artificial intelligence allows carriers, shippers, and others to predict reefer load rates with some accuracy. This is far from an exact science, though, so there is always some risk that rates will spike for unanticipated reasons. Conditions and supply and demand can change for several reasons, so it’s important to account for all the different influencing factors.
Here are five of those factors and how and why they impact reefer rates.
5 factors that impact reefer freight rates
To accurately forecast reefer rates and understand why they vary so greatly by season and location, you need to understand the data that influences those rates. The factors below are some of the main points that determine reefer shipping costs.
1. Delivery distance
No matter what you’re shipping, the distance you ship cargo always impacts the rates you’ll be charged. This is especially true for reefer rates. Not only are loads often temperature-sensitive, but they might also be time-sensitive.
The greater distance goods need to travel and the smaller the time window, the more the carrier must charge. This is where determining your reefer rates starts.
2. Freight weight
There are two aspects of freight weight when it comes to a reefer load. The first is simply the weight of your shipment. The higher the weight, the higher the cost, just as with any other form of shipping.
But you also need to factor in the density of your load. Density is how much space freight takes up in a trailer. For example, even if you only have a few very light pallets of produce, if those light pallets take up twice the space of other produce or reefer goods, the cost goes up. Think of shipping a pallet of potatoes vs. a pallet of Romaine lettuce. The lettuce will weigh a lot less, but the same weight in lettuce takes up more than twice the space of the potatoes.
When you’re arranging a shipment, keep in mind that weight and density are tied together.
3. Fuel costs
Shipment weight also impacts fuel costs. The more your reefer shipment weighs, the more fuel it takes to get it from place to place. Of course, the price of the fuel itself also has a large impact.
Diesel fuel costs and their associated taxes vary from state to state and region to region. This means that the “lane” — or area in which you need to ship — will determine the price the carrier pays for fuel. In general, as market fuel prices rise, so do shipping costs. As fuel prices go down, shipping costs follow.
Local rules and regulations also impact reefer load rates. While all load types are regulated in some way, produce and other perishable goods are often subject to additional state, local, and regional regulations. For example, some items cannot be shipped across state lines without an inspection certificate. Other cargo types must be shipped locally or only in certain areas.
The Food Safety Modernization Act has also had an impact. Monitoring and maintaining certain refrigeration temperatures for certain freight is vital. As a result, many reefer units are equipped with telematics that enable both carriers and shippers to monitor and control temperatures from a distance.
Also, new emissions and greenhouse gas regulations are continuously changing. Monitoring and controlling the environmental impact of reefer shipping to meet regulations can be both costly and time-consuming. The more regulations that emerge, the greater the impact they have on reefer rates.
5. Produce season
One of the biggest drivers for reefer shipping demand (and price) is produce season. When fresh produce ships in volume, particularly from agricultural areas like the Midwest and California’s Central Valley, the demand for refrigerated, time-sensitive shipping goes up accordingly.
As a result, so do freight rates. This demand shifts to different areas of the country depending on the season, usually with a lull in the winter months. Of course, growing (and therefore reefer shipping) seasons come regularly and can be predicted and planned for with some certainty.
From time to time, other factors will also impact reefer load rates, as illustrated by the demand fluctuations during the COVID-19 pandemic. Often carriers will shift part, if not all, of their capacity to reefer loads during peak seasons, impacting dry-van and other freight rates.
How do you find the best reefer freight rates?
Use a load board to find the best reefer rates.
Using a load board ensures you’re getting the most favorable rates in your area for refrigerated shipping. The Reefer Load Board on Truckstop is the perfect place to compare rates, schedules, and shipping speeds to find reefer freight.
If you’re looking for the best reefer load rates, request a free Truckstop demo. We’re here to help with all your reefer freight needs.
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