Cold and heavy
Can rail win more of the market for moving refrigerated produce?
By Chris Dupin
Trucks dominate the movement of domestic refrigerated cargo, but a number of companies see a growing role for intermodal and rail reefer services.
Rail Logistics started a new double-stack refrigerated container service between Washington State and the Chicago area in April, and its promoters believe the intermodal business will see growing use of domestic, 53-foot reefer containers in years ahead to supplement reefer trailers moving on flat cars.
'The transportation industry as a whole is trying to find alternative methods of transportation in order to get their product to the consumption base,' said Paul Esposito, a senior vice president at RailEx.
'The truck market dominates the refrigerated product industry. The problem is, in a rising diesel market and with a lot of new legislation that has gone on, the trucking industry is losing drivers and capacity so it is setting itself up to where rates are going to be increasing.'
In 2006, the parent company of RailEx, produce distributor AMPCO Distribution Services Management, decided to launch a boxcar reefer service from California and the Pacific Northwest to a new terminal in New York.
It has been so successful that Esposito said the company is looking at opportunities to set up similar services to both the Southeast and the Midwest.
'Trucks dominate movements of fresh fruit and vegetables, livestock, meats and poultry, dairy products, and bakery and confectionary products,' noted a Study of Rural Transportation Issues, issued in April by the U.S. Department of Agriculture, in coordination with the U.S. Department of Transportation.
Trade magazine Refrigerated Transporter said the five largest refrigerated trucking companies ' C.R. England, Marten Transport, Stevens Transport, Greatwide Logistics and Frozen Food Express ' had revenues of more than $2.7 billion in 2009, accounting for about two-thirds of the revenue of the top 36 carriers.
'Commodities high in value or susceptible to deterioration or spoilage are more sensitive to handling procedures and to speed of delivery than less perishable commodities,' the USDA report said. So while railroads lend themselves to movement of bulk and lower-value products such as grain and soybeans, they are used much less heavily for moving reefer cargo.
Relying on 2002 data, the USDA estimated trucks supplied at least 81 percent of the ton-miles for moving fruit and vegetables, including potatoes; 97 percent for meat and poultry, 98 percent for dairy products; and 78 percent for processed vegetables, fruits and nuts.
In contrast, rail supplied 5 percent of the ton-miles for moving fruit and vegetables, including potatoes; 2 percent for meat and poultry; 1 percent for dairy products; and 13 percent for processed vegetables, fruits and nuts.
(Smaller shares were counted as 'multimodal moves,' and the study said the mode of transportation was unavailable for some shipments.)
'Intermodal service for refrigerated goods is not anything new,' said Dick Metzler, chief commercial officer of Greatwide. 'It has always been a factor in the marketplace. But there is a finite level of capacity. And it seems to lend itself either from a perception or reality point of view with shippers to certain kinds of refrigerated products. Carrots and potatoes are one thing; berries are another.'
Still, 'there are a range of new intermodal refrigerated services,' said Steve Weiby, vice president of intermodal at C.H. Robinson, the third-party logistics and produce sourcing company. 'Everyone is trying to work on different solutions to manage refrigerated capacity and take advantage of some of the technology changes that are going on in that world.
'There are a bunch of trends that point pretty positively to the possibility of container services. These include the improved quality of the assets. Insulation quality has improved and the ability to control the reefer,' he said. Newer reefer units use less fuel, which helps extend their range.
In addition, equipment for handling intermodal containers and trailers has improved, he said. That's important because with the high cost of refrigerated containers and trailers, companies are extremely sensitive to equipment being damaged.
Better and more reliable transit times by railroads have also made intermodal services more attractive, and some companies think they will be boosted by a long term rise in fuel prices and a reemergence of a truck driver shortage.
A new doublestack service from Quincy, Wash., to Cicero, Ill., dubbed Cold Train, was started in April by Overland Park, Kan.-based Rail Logistics, a company that has started a number of niche rail businesses since its founding in 1998.
'Shippers told us they wanted an expedited product other than rail boxcars,' said Chris Mnichowski, who along with Mike Lerner, is a managing member and co-owner of the company.
The company's entry into the doublestack business follows its first Cold Train offering with boxcars in 2004-2005. That was started under a contract with the Washington Department of Transportation's Washington Produce Pool to operate a fleet of 60 boxcars.
Washington's DOT decided to establish the pool because a shortage of refrigerated railcar left the state's growers with an inadequate supply during peak seasons, and because use of rail would minimize the added wear and tear on state roadways.
'The container program will probably grow faster than our boxcars. When you look at railroads and where the trend has been coming from, it has been toward intermodal,' Mnichowski said.
'The ability to provide double-stack container service, especially coming out of the Columbia Basin in Washington will be valuable,' he said. 'In another year or so, when trucking capacity gets tight again as it did in 2006 and 2007, customers will be glad that we set the service up. One intermodal train can move approximately 220 containers.'
But the company is starting small, with a total fleet of 71 domestic, 53-foot reefer containers and hoping to move a few containers each day. It plans to offer daily service, depending on customer demand.
'We are a small company, but there will be a niche for us,' Mnichowski said.
Another company experimenting with reefer containers is NFI of Vineland, N.J., which has ordered a half-dozen units.
'We believe that based on industry indicators, the next big conversion to intermodal will be refrigerated foods needing temperature control at various levels,' the company said. One of the reasons it is bullish on the prospects for intermodal reefer moves is a Nielsen Co. research report that found frozen food sales are growing at 3.1 percent annually as opposed to overall food sales at 0.7 percent.
Alliance Shippers in Englewood Cliffs, N.J., operates 1,600 reefer trailers that are used exclusively in intermodal service, accounting for about 20 percent to 23 percent of the company's $1 billion in annual revenue, said Ed Wright, vice president in charge of Alliance's refrigerated transportation business. The trailers are all equipped with two-way satellite communication so that workers at Alliance's operations center in Salinas, Calif. can track and adjust temperature.
The primary origin areas for its cargo are the San Joaquin and Salinas valleys in California and Pacific Northwest. It moves cargo from ramps out of Fresno, Stockton and San Bernadino as well as Portland, Seattle and Spokane, over the BNSF Railway to Chicago, then via CSX or Norfolk Southern to North Bergen, N.J., Boston and Philadelphia. It also has a service to Atlanta using a combination of BNSF and CSX.
But Wright is cautious about the outlook for use of containers for intermodal moves of produce. He said his firm purchased about 200 reefer containers about 15 years ago, but took them out of service after encountering a multitude of issues.
'They are extremely heavy. We can put 45,000 pounds on a trailer and have it scale legally. But you can only get about 39,000 pounds in a container,' he said. His company eventually converted them into dry containers.
'We are evaluating another equipment purchase right now and we are evaluating a 53-foot reefer container,' he said. 'But the roadblock we keep hitting is the weight and the reduced cargo that you can put in a container. We surveyed a lot of our customers, and even if you were to have some sort of pricing model, where on the cost-per-pallet basis it would be economical for you to use containers, the majority of our customers are still saying, 'our goal is to put more on a trailer, not less.' '
Wright said this is more of an issue with dense, heavy produce such as apples, pears, potatoes and citrus than lettuce or lighter produce.
There are economies in moving containers on double-stack trains, he said. 'Right now the economics we are hearing from the railroad don't equate to what we consider to be enough savings to be able to go to a customer and say, 'if you load a container, look at the economics here, it is going to be terrific.'
'We are in conversation with the Burlington Northern now and we are trying to find out what that number needs to be ' how much of a savings do you need to offer customers to make them want to load a container,' he said.
RailEx's Esposito said his company's boxcar service was set up to offer refrigerated product shippers a five-day transit time coast to coast, between terminals in Delano, Calif., and Wallula, Wash., and a terminal near Albany, N.Y.
The West Coast terminals are right off the mainline of the Union Pacific where cargo is loaded into boxcars, while the terminal in New York is about 10 miles west of CSX's classification in Selkirk.
'We've shipped lettuce, berries, spring mix ' commodities that up until three years ago people would not think of putting into a boxcar ' and we are hauling successfully,' he said. 'The question is whether there is enough savings to carry such high-risk commodities over such a long distance, since each railcar can hold the equivalent of three to four truck trailers.'
The company is looking at building terminals similar to its facility in Albany and running services from the West Coast into the Southeast and Midwest.