Written by Richard Kenney, Sales Manager, Midwest
I have been fortunate over the last several years to be an attendee of the Food Shippers of America Annual Conference, most recently held in Palm Desert, California, in 2019. Since the pandemic, the annual conferences have been on hold. In 2021, the Food Shippers of America did have a virtual webcast event that featured Mr. Bob Costello, Chief Economist and Senior Vice President of International Trade Policy and Cross Border Operations of the American Trucking Association (ATA).
Costello opened the webcast with very positive comments on the economy changing in 2021 for the better. According to Costello, the good news is that, with the accelerating vaccine rollout and the potential new 2021 stimulus of approx. 1.9 trillion US dollars, his forecast for 2021 is a good economy that can last well into 2022. Costello gave an overview of the 2020 pandemic’s first year’s challenges to the US Economy. In April of 2020, a record-setting job loss of 22 million has in 2021 rebounded to about 12.5 million unemployed in March 2021. This current increase in employment should lead to a 6% US economic growth rate in 2021 and a 4% US economic growth rate in 2022, representing good growth in the US.
There are 3 key areas of the economy to accomplish growth: consumer, construction, and manufacturing. These three areas contribute to the food economy and the trucking economy. As more American’s receive the vaccine, expectations for travel and restaurant segments improving will lead to an additional 2 million jobs returning to the US Economy. More people working leads to increased spending, and both retail in-store and online sales will continue to be strong; a trend online pushed higher by pandemic infused need to shop online. Construction increases due to pent-up housing demand, and low mortgage rates, will lead to a 16% increase in new home sales in 2021. For trucking, this construction increase will suck up truck capacity in 2021. In manufacturing, 2021 will see 7.2% growth, with 2022 coming in 3.8% higher.
The Food Industry in 2021 will see new highs in sales, with a growth of 3.7% overall. Imports of food continue to rise in the USA, as seen in several segments. Export food products are down in 2021, partly due to ocean carriers shipping empty containers back to far east trading partners.
When reviewing inventory cycles in the United States, the Inventory to sales ratio will be very lean in 2021. Warehouses are missing needed components (technology chips) along with highly sought-after items. The online demand cycle is much quicker, as evidenced by expediting shipments’ need close to delivery points to ensure overnight to home deliveries. These Cycles indicate a good 2021 and 2022 in the United States Economy.
For the US Trucking Industry, Costello sees a very robust marketplace in 2021. Truckload for hire of all types (Vans, Reefers, Flat Beds, Tankers, etc.) covers 70 to 80 percent of the trucking market, and the “Spot” trucking market covers 20-25% of the trucking market. The “Spot” market grew 31`% in 2020, and strong “Spot” market growth is expected by the end of 2021. For 2021 as was the case in 2020, tight capacity will be the rule, with the flatbed and tank truck markets fairing the worst, while the van and reefer markets fair muck better. Intermodal will be strong since some “spillover” from other areas (van and reefer) occurs due to lack of capacity. For tanker trucking, the energy market has been bringing down totals due to lack of fuel use during the pandemic. On the LTL front, tonnage so far in 2021 is up over 20% due to spillover from van freight unable to get a truck (Capacity), along with double-digit growing e-commerce needs for a delivery vehicle.
The driver shortage is still a problem for 2021; due to a tight supply of driver candidates, lack of open driving schools in the US due to the pandemic, and young driver candidates not entering the driver pool. The Drug and Alcohol Clearing House has pushed 35,000 drivers out, while liability Insurance premiums force small trucking operators out or into mergers. Add to this Driver Demographics showing an average age of 52, many over 60, and a gender problem with only 6% of drivers being female vs. females making up 47% of the US workforce. The numbers for the future could be a challenge. The driver shortage is expected to be 105,000 by 2023 and possibly 160,000 by 2028. This could affect the economy and becomes an industry problem that will need solutions soon.
Costello ended by encouraging the Food Shippers of America to understand these challenges, leading to new growth opportunities in 2021. Autonomous trucks could be a solution, but not in the near term in Costello’s estimation. Collaboration within the industry and a need to be informed and act upon good information can lead to success in 2021.