Hurricane May Drive Higher Freight Costs

In natural disasters, distribution costs tend to jump as food processors scramble to get trucks and their drivers to show up at their facilities.

September 17, 2018

NEW YORK – The impact of Hurricane Florence on the mid-Atlantic region could force freight costs to rise again, which could be a problem for several food companies, according to a report published in Food Business News

Pending natural disasters tend to provide a net positive to processed food companies because consumers stock up on necessities, according to a report from Credit Suisse; however, distribution costs tend to jump as food processors scramble to get truck drivers to show up at their facilities.

“We will have a better sense in the next couple of weeks whether Florence causes spot prices for freight to spike and whether it will shape contract rates for next year,” Robert Moskow, research analyst with Credit Suisse, wrote in the report.

“[Some] companies responded to last year’s storm-related freight inflation by locking into contracts with a broader set of freight suppliers to help reduce their exposure to the spot markets going forward, but this doesn’t fully insulate them from market volatility,” he noted.

Campbell Soup Co. made plans to temporarily halt production at its Maxton, North Carolina, soup processing facility during the storm. The company also took steps to pre-ship some truckloads of product to major customers along the East Coast before freight lanes heading east were shut down.

NACS published a special “Convenience Matters” podcast on Friday to answer some key fueling-related questions that have been asked related to the impact of Florence.  NACS also has a link on its homepage to the Red Cross for those interested in making donations to support relief efforts.