|Thursday Aug 21, 2014 - 8 Farmers File Fraud Lawsuit Against Grain Company
8 Farmers File Fraud Lawsuit Against Turner Grain
by Mark Friedman on Wednesday, Aug. 20, 2014 12:50 pm
Soybean grains loaded on a truck. (Photo by Shutterstock)
A group of farmers on Monday sued Turner Grain Merchandising Inc. for fraud, saying they haven’t been paid for grains they sold to the Brinkley company.
The eight farmers, who have fields in Monroe, Phillips and Lee counties, said in a lawsuit filed in Lee County Circuit Court that they had commodities contracts to sell grain to Turner. They said Turner either hadn’t paid them for their products or that checks they received from the company didn’t clear.
Meanwhile, Turner had sold the grain to a third party, the lawsuit said.
The Lee County lawsuit isn’t the only legal action involving Turner. On Tuesday, Bruce Oakley Inc. of North Little Rock filed an interpleader in U.S. District Court in Little Rock asking a judge to decide what to do with the $360,000 it owes Turner.
The lawsuits are the first against Turner and its related entities since word of the company’s financial troubles began circulating last week. Sources have told Arkansas Business that the company appears to be close to filing for bankruptcy protection, leaving the farmers with whom it does business worried about breached contracts and possible losses.
Officials from Turner Grain have not answered repeated requests for interviews. The company had not filed for bankruptcy protection as of Wednesday morning.
Lee County Lawsuit
The farmers in the Lee County lawsuit operate under the names of High Roads Farms, Foran Farming, Greenleaf Farms, Roger Wilkison Farms, David and Lalain Wilkison Farms. Their lawsuit supplies almost no other details about what happened, including how much money the farmers allegedly lost or when the allegations occurred. The farmers' attorneys, Louis Etoch of Helena and David Hodges of Little Rock, didn't return a call Wednesday morning.
Several entities related to Turner Grain are named as defendants, including Neauman Coleman & Co. of Brinkley, Turner Commodities Inc. of Dumas, Brinkley Truck Brokerage LLC of Brinkley, Agri-Petroleum Sales LLC and Agri-Business Properties LLC.
Jason Coleman and Dale Bartlett, who have an ownership interest in Turner Grain, are also named as defendants.
The 10-page lawsuit also alleges that the defendants "have transferred funds from one or more of the Defendants to the other Defendants, concerning property rights, belonging to the Plaintiffs."
The farmers want a restraining order placed against Turner Grain and the other defendants to prevent them from disposing of any assets.
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|Thursday Aug 21, 2014 - Supply chain is still the biggest hurdle for grain
Infrastructure constraints continue to be the biggest obstacle to grains sector efficiency gains, but a collective lack of will to implement change means the issue is still stagnating, according to a logistics specialist, according to The Land.
And things need to move on down the east coast and through South Australia away from port zones set essentially on state lines. Speaking at the Australian Grains Industry Conference (AGIC) earlier in the month, Luke Fraser of Jutarna Infrastructure said serious change to the supply chain would be needed to create efficiencies and bring down transport costs.
"We've got a system where freight costs can be up to 30% of the cost of production, according to Australian Export Grain Innovation Centre (AEGIC) figures, a creaky branch line system and a road network that is failing and underfunded," he said. Fraser believes the solution lies in cutting down the number of ports, getting them to work efficiently and filtering grain through to port via a system of mainline rail.
Interestingly, he said with the right investment in mainline capacity, it would be possible for grain from Central West NSW to go to port in Queensland or in South Australia, rather than having to snake its way through heavily populated and mountainous routes on the way to NSW grain ports.
He pointed to the lessons from Canada. "In Canada, the branch lines service major sites on the mainline rather than the port, and there is a focus on a handful of large ports. He said the port in Vancouver handled over 15 million tonnes of grain a year, dwarfing Australia's largest grain port, Fremantle. "With six grain terminals and the capacity to unload two-kilometre long trains, you really generated some economies of scale."
General manager of supply chains at GrainCorp, Matthew Warrington, agreed the rail network needed work through GrainCorp's network. "We've got storage capacity that is 2.4 times the average production, and port capacity 2.9 times the average export programme, but the problem is the bottlenecks created by inefficient rail systems." And he says it's costing growers big dollars.
"We reckon we're probably about $10 a tonne over the best practice price, which translates to $180 million a year in costs, based on an east coast crop of 18 million tonnes."
He said a transition to a system increasingly reliant on road was causing costs to rise.
"From 2004-06, around 90% of grain for export went by rail, that figure is down to 50% for 2012-13, so there's a lot more grain on the road." Part of the issue is the complex market. "We now have 17 owners of grain or more at a site, there are 15 exporters and 30 buyers doing domestic business, so managing the supply chain is a tricky task."
Warrington said GrainCorp's Project Regeneration, a $200 million supply chain upgrade, would implement some things similar to Mr Fraser's suggestions in terms of regional clusters. "We will have a series of sites feeding into a major site on rail, so there will be 34 clusters among the 180 sites we are retaining." The major, or primary sites as GrainCorp is dubbing them, will have an overhaul to allow for faster loading times. Upcountry, Fraser said industry had to accept some of the responsibility for funding improvements. "We could look at private or co-financed freight roads, it is something that would get things rolling, rather than simply waiting for government dollars which may never arrive." He said growers and grain handlers needed to recognise the situation and demand better, while he urged investors to get projects off and running without waiting for government support.
Source: The Land AU
by ALLABOUTFEED 20 Aug 2014
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|Wednesday Aug 20, 2014 - Culture of ‘cost-bashing’ remain a barrier to innovation in the supply chain?
By Zen Yaworsky
In the first of a two-part series, supply chain consultant Zen Yaworksy explains why 3PLs shouldn’t expect shippers to give them the oxygen to innovate anytime soon
Last week The Loadstar ran a post: “Shippers demand innovation from their favourite 3PLs, but will they pay for it?” Behind the post was a report from SCM World which broadly concluded that “buyers speak out of two sides of their mouth”; that they “want innovative solutions and strategic thinking, but in the end it all boils down to routes and rates”.
Having worked on both the shipper and 3PL side of the equation this notion got me thinking. The whole standoff that exists between buyer and service provider on this subject of innovation is potentially toxic, and while I have to agree with SCM World’s observations, I think there are some important issues that need to be explored if the relationship is to flourish and develop.
Since the financial crash of 2008, things have been difficult. Back then a lot of businesses went into shock and, like patients experiencing trauma, the blood was restricted to the essential supply of internal organs. The classic crisis behaviours came into play: cash became king, core business was to be protected, it was back to basics, suppliers had to ‘contribute’ through discounted invoices (usually with some punishing and bizarre backdating) and projects were abandoned across the board.
On the logistics side of things, this coincided with the start of the engineered overcapacity game that the shipping lines introduced, with the difficulties in warehousing due to the fall of consumer demand and with customer logistics executives becoming the punchbags of the financial director – slash costs, rip out developments and sub-contract the pain to the supply base.
Since then, and before the first signs of a recovery were apparent, the tender and RFP market quickened its pace and, although it is an overused generalisation, contracts were very often won and lost ‘on a nickel’.
In the retail industry timing has been particularly cruel for both the shipper and the 3PL, because in the six years since 2008 the development of the e-commerce logistics infrastructure through omnichannel capability has started to be defined and has ballooned. At a time when intelligent strategic thinking and innovation in the face of an emerging trend were screaming imperatives, shippers had cut their suppliers off at the knees and expected them not only to innovate but also to put “skin in the game”.
shippers and 3PLs
It was in this period that the relationship between shipper and 3PL took a turn for the worse. Before 2008 it was a fairly honest transactional relationship; after 2008 expectations became unreasonable.
It’s perhaps a good time to take stock.
These days there may be four fundamental things that need to be determined by any party in a shipper and 3PL (or forwarder) relationship:
Is there a need for anything more than a transactional relationship?
In the case of garment manufacturing supply, then at one end of the scale there is a relationship with a factory that can be based on cut, make, trim (CMT), where the factory assembles provided raw materials to a contracted standard – a highly commoditised deal. At the other end of the scale, the factory can play a part in garment design, bring new fabric processes to the table or offer services like flexible production scheduling. The wise buyer in dealing with this supplier will often trade a higher cost price for flexibility because it will deliver lower mark down charges. Both relationship types are important but each is differently costed and priced.
In logistics, and particularly in the freight element, the customer can often demand more than the CMT equivalent – reliability, speed of problem resolution, value for money – but in asking for it will not consider that there is a cost to the provision of such service. It’s as if the culture of ‘cost bashing’ that we created since 2008 is now the default, coupled perhaps with a suspicion that the 3PL is hiding a lot of profit down the back of the settee and so legitimising the approach.
The need for an active, innovative contribution from the 3PL is hard to determine. On many occasions there is a loosely defined requirement in a tender invitation for the 3PL to demonstrate the innovation that they can bring as a justification for a contract award. These sorts of requests can drive a 3PL nuts. The request often has no specification, it is a piece of undefined ‘consultancy’ the product of which is more than likely going to end up in a drawer. What, in many cases, the shipper is doing is chasing rates or routes, and then taking an unashamed opportunity to harvest some free IP.
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|Wednesday Aug 20, 2014 - WHY TRUCKING RATES COULD SOON BE ON THE RISE
I’m going to once again lean on FTR for its insight into the freight market and where rates might be headed. Jonathan Starks, director of transportation analysis with FTR, had some good news when commenting on the industry forecaster’s most recent Trucking Conditions Index. He suggested a rate increase is likely as we transition into the fall shipping season. Here’s why:
“The headline number of 4% for GDP growth in the second quarter is getting plenty of news but the real number for getting a sense of true demand in this economy is the Final Sales component of GDP. It stood at 2.3% in Q2, well above the -1% seen in Q1 but noticeably below the 3.5% it averaged during the second half of 2013.
“Truck freight continues to show steady increases and the capacity situation is unlikely to loosen up any time soon. These good developments are partially offset by slower than expected growth in contract rates. Spot market rates are still elevated, although they have shown normal moderation during the summer months. We expect to see both spot and contract rates continue to rise as we get into the fall shipping season.”
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|Tuesday Aug 19, 2014 - Bruce Oakley To Give Turner Grain Money To Judge
by Mark Friedman
A North Little Rock company said Monday that it plans to hand over the money it owes Turner Grain Merchandising Inc. of Brinkley to a judge to decide how to divide it among Turner's creditors.
"We have a small amount of [Turner's] money because they do deliver to us and sell to us, but we turned that all over to our legal department," David Choate, vice president of grain and barge operation for Bruce Oakley Inc. of North Little Rock, said. "Because we're not in a position to divvy out who [Turner] owes and who they don't owe."
Choate didn't say how much money will be placed in the trust.
The move comes as Turner appears to be on the verge of filing for bankruptcy protection, leaving the farmers with whom it does business worried about breached contracts and possible losses. It also has at least one elected official calling for a hearing on the matter by the state House Agriculture, Forestry & Economic Development Committee.
"We have had several farmers from the Midsouth call us -- wanted to know if we had any money of theirs that they could access, just kind of a state of panic," Choate told Arkansas Business on Monday.
Sources told Arkansas Business last week that the grain merchandiser is on the verge of filing for bankruptcy protection with company losses in the millions of dollars. Farmers who have done business with Turner might also be exposed to losses in the millions, sources have said.
Turner Grain President Dale Bartlett and Vice President Jason Coleman have not returned calls for comment.
Meanwhile, Little Rock attorney Donald K. Campbell III confirmed to Arkansas Business that a "small group" of Arkansas farmers has hired him to deal with the Turner fallout. But Campbell declined to provide more details on Monday.
The case of Turner Grain has raised more questions than answers.
Choate said farmers from as far away as Mississippi have called Oakley searching for money they say Turner owes them. Turner also has producers in Louisiana and Missouri. The amount of debt is "going to be pretty widespread when it all falls out," Choate said.
Incorporated in 2002, Turner Grain acts as a middleman between the farmer and the client who wants to buy the grain. It will buy the farmer’s supply and hold it until a customer wants to purchase it.
But Turner Grain is not a broker whose role is limited to taking a commission for matching sellers with buyers. Turner's business is referred to in the industry as a "principal" or "jobber," actually contracting to buy and taking possession of the farmer's grain and delivering it to the ultimate buyer.
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|Tuesday Aug 19, 2014 - Trucking bankruptcies to squeeze US shippers as freight demand rises
William B. Cassidy
Company by company, truck by truck, motor carrier bankruptcies threaten to sap freight capacity from an already tight truckload shipping market in the U.S. as freight demand rises.
As operating costs such as driver pay rise and federal regulations cut into productivity, hundreds of trucking companies are shutting their doors each quarter. Although most of these companies are small, collectively they are as large as a multi-billion-dollar motor carrier.
In the first quarter of 2014, for instance, 390 carriers with 10,650 tractors shut down, according to Avondale Partners, which has tracked trucking bankruptcies since 1990. In the 2013 fourth quarter, 335 carriers with 7,775 trucks went broke. Their combined fleet was bigger than that of Werner Enterprises, the third-largest U.S. truckload carrier, which operates 7,035 tractors.
And although last year’s 970 carrier bankruptcies were still far below the 3,065 trucking failures Avondale Partners reported for 2008, the number is steadily climbing from a low of less than 500 bankruptcies in 2012. Those 970 carriers operated more than 21,000 trucks. In comparison, the 13 public, large truckload carriers tracked by JOC.com operate about 60,000 tractors.
Even 1,000 carriers would represent only a small percentage of the active carrier base available to shippers, brokers and logistics operators, estimated to be above 150,000 companies. But as the wheels come off smaller carriers, shippers will have a harder time avoiding rate hikes.
Two carriers that participated in a small business panel at the SMC3 Jumpstart 2014 convention in Atlanta this January have filed for bankruptcy protection from creditors: New Century Transportation of New Jersey and Drug Transport/DTI Logistics of Georgia. New Century — the largest trucking company to declare bankruptcy in recent years — was shut down in June.
Drug Transport/DTI Logistics filed for Chapter 11 reorganization protection early this month, an indication it plans to rebuild. The less-than-truckload carrier was placed in receivership this month
Increasingly, smaller carriers have difficulty competing with larger competitors with greater scale and capability to absorb rising costs. “We have to work hard to identify customers that require the specialized level of service we can provide,” said Rick Lockwood, Jr., president of DTI, at the SMC3 event. “Our persona has to be a little bit different than our larger competitors.”
That includes making pickups at customer docks as late as midnight, he said. “In some cases, we’re really delivering same-day service within our small geographic footprint.”
Lenders, however, are getting tougher with marginal trucking companies. New Century, for example, shut down when an unnamed lender “unexpectedly declined” to fund ongoing operations. It tried to get alternative financing or sell the company, but to no avail.
Drug Transport/DTI Logistics entered receivership in early August after the company’s primary lender, Branch Banking and Trust, demanded payment of more than $7 million, according to a report in the Atlanta Business Chronicle. According to its bankruptcy filing, Drug Transport/DTI Logistics has about $1 million to $10 million in assets and up to $50 million in liabilities.
Unlike New Century, most of the trucking companies that fail are anonymous truckload operators, getting little or no mention in the media outside, perhaps, local newspapers. That’s because most carriers operate fewer than 10 trucks. On average, the 390 carriers that Avondale says went bankrupt in the first quarter had about 27 trucks each. These bankruptcies represent a steady trickle of truck capacity leaving the industry below most shippers’ line-of-sight.
In fact, the Avondale bankruptcy number is likely to under-represent the total loss of truck capacity to shippers each quarter, as owner-operators frustrated by rising costs may simply park their trucks and hang up their keys without filing for bankruptcy protection.
Donald Broughton, chief market analyst at Avondale Partners, blames tougher truck safety regulations in part for the rising bankruptcy numbers. At the CCJ Summer Symposium in June, the analyst said many of the truckers closing their doors were ordered by federal authorities to install electronic logging devices to better enforce hours of service rules. Those companies saw truck utilization drop, as drivers with fewer miles made less money and quit, and the carriers had to hire new drivers — at higher wages — to seat empty trucks, Broughton told CCJ.
Recruiting and retaining truck drivers is the biggest challenge facing truckload carriers and the leading check on over-the-road truck capacity. More trucking companies are thinking about expansion, but higher vehicle costs and the lack of available drivers are substantial roadblocks, according to GE Capital Transportation Finance.
And when large trucking companies such as U.S. Xpress Enterprises raise driver pay by as much as 13 percent, how can smaller competitors keep pace?
Contact William B. Cassidy at email@example.com and follow him on Twitter: @wbcassidy_joc.
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|Monday Aug 18, 2014 - Trucker reports $722,000 in profit
USA Truck Inc. on Thursday reported a net income of $722,000 for its second quarter, giving the company its first quarterly profit in three years.
The earnings for the second quarter of 2014 reversed the $1.4 million loss the Van Buren-based company posted for the same period in 2013.
"We reached an important milestone this quarter, crossing over to profitability while making good progress in implementing our turnaround plan," John Simone, president and chief executive officer, said Thursday during the company's conference call with investors and analysts.
"Our strong performance was driven by a 12.1 percent increase in base revenue, excluding fuel surcharge revenue," he said.
USA Truck had base revenue of $125 million for the second quarter, up from $111.5 million during the same period in 2013.
Total revenue for the quarter was $153.3 million, compared with $139.7 million last year.
USA Truck reported earnings per share of 7 cents for the period that ended June 30, compared with a loss of 14 cents per share a year ago. The company beat analysts estimates of a loss of 2 cents for the quarter.
The company said it spent about $2.2 million, or 13 cents per share, in legal fees, primarily from its battle against Knight Transportation's takeover plan.
Excluding those costs, adjusted earnings per share were 20 cents, beating Stephens Inc.'s estimates of 9 cents, analyst Brad Delco said.
Shares of USA Truck fell 8 cents to close Thursday at $18.50 on the Nasdaq stock exchange. The company released its earnings Thursday before markets opened.
USA Truck has struggled to post an operating profit since at least the second quarter of 2011 as the industry has faced a lot of challenges, Delco said.
"Supply and demand dynamics weren't favorable," he said, adding that "supply has been limited by the ability to attract drivers to the industry."
He said 8.1 percent of the company's trucks don't have a driver in the second quarter, compared with 5.6 percent in the same period last year.
"Although fixed costs were pressured during the quarter by elevated employee medical benefit plan costs, we achieved improvements in critical areas such as insurance and claims, fuel and maintenance costs," Simone said in a statement.
"We also took steps we believe will increase [the number of truck drivers,] which remains one of management's top priorities as the availability of qualified drivers continues to be problematic across the truckload industry," he said.
Business on 08/01/2014
Print Headline: Trucker reports $722,000 in profit
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|Monday Aug 18, 2014 - ONLINE GRAIN CONTRACTING NOW AVAILABLE EXCLUSIVELY THROUGH CARGILL
WINNIPEG - Aug. 18, 2014 When customers speak, Cargill listens.Cargills AgHorizons farm customers now have the ability to sign a grain delivery contract on-line- something that no other line grain company in Canada is currently offering.
Cargills unique positioning with our farm customers has allowed us the opportunity to better understand their needs, and what were hearing right now is that they want simplified solutions when it comes to signing grain contracts, said Fran Burr, assistant vice-president of marketing, Cargill Limited.
The first Canadian farmer to have the opportunity to move towards an electronic contact signing method was Ron Krahn, a long-time Cargill farm customer and co-owner of Providence Farms, Manitoba. For me, the most significant advantage to Cargills new e-signature is the time saving involved said Krahn.Being able to complete a contract after business hours and knowing the transaction is completed gives peace of mind, he added. I did our first e-signature in our farm office and it couldnt get more convenient than that.
The new online e-signature service offered exclusively by Cargill, will not only give its customers distinctive online business solutions by providing direct access to grain marketing experts, it will also allow producers the ability to sign agreements anytime, anywhere, eliminating the need for faxes and making business transactions with Cargill more effortless.
An improved overall experience for our customers is what were striving for, added Burr.Providing quicker access to various contract types, being more transparent about Cargills offerings and the ability to keep our producers instantly informed about the markets is how we can better meet their business needs and improve efficiencies.
To sign-up for the program, customers must simply get in touch with their local Cargill representative or location or by visiting www.cargillag.ca
Cargill employees have also committed to plant one tree for every e-signature registration that goes through in 2014.
# # #
Cargill provides food, agriculture, financial and industrial products and services to the world. Together with farmers, customers, governments and communities, we help people thrive by applying our insights and nearly 150 years of experience. We have 143,000 employees in 67 countries who are committed to feeding the world in a responsible way, reducing environmental impact and improving the communities where we live and work. For more information, visit Cargill.com and our News Center.
About Cargill in Canada
Headquartered in Winnipeg, Cargill Limited employs more than 8,000 people in Canada, from British Columbia to New Brunswick. In addition to its diverse agricultural businesses, Cargills Canadian interests include enterprises in the food, manufacturing, financial and risk management industries.
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|Monday Aug 18, 2014 - Turner Grain Appears Headed to Bankruptcy, Losses in Millions
by Arkansas Business Staff
Sources in the commodities industry told Arkansas Business late last week that Turner Grain Merchandising Inc. of Brinkley is on the verge of filing for bankruptcy protection. Two sources said the company's losses could be in the millions.
Meanwhile, Arkansas House Speaker Davy Carter, R-Cabot, on Friday sent a letter to state Rep. Matthew Shepherd, R-El Dorado, who is chairman of the House Agriculture, Forestry & Economic Development Committee, seeking help for state farmers who might be left with breached commodities contracts.
"Recently it has come to my attention that some of our Arkansas farmers may have been left holding breached commodities contracts executed by one or more commodities brokers in Arkansas," Carter wrote. "If this holds to be true, literally tens of millions of hard earned dollars that our farm families were expecting will have disappeared into the heavens."
More: Click here to read Carter's letter (PDF).
Arkansas Business attempted to reach officials at Turner Grain, including President Dale Bartlett and Vice President Jason Coleman, for a story in its Aug. 18 print edition. But they have not returned calls.
Incorporated in 2002, Turner Grain acts as a middle man between the farmer and the client who wants to buy the grain. It will buy the farmer’s supply and hold it until a customer wants to purchase it.
But holding grain can be risky because of swings in commodity prices.
On Saturday, the Arkansas Times talked to one farmer who held a contract with Turner and said he hadn't been paid. Another, a soybean farmer who spoke on condition of anonymity, said he stood to lose $500,000 if Turner can't pay at the agreed upon price. The farmer told the newspaper that he feared the company would have to go into bankruptcy.
"I can pretty much assure you this is a big deal," the farmer said.
One source told Arkansas Business that Turner Grain came out on the losing end when it hedged its bets against volatility in the market. The source said that when Turner tried to make up for losses, the losses only increased.
In his letter, Carter said this isn't the first time farmers have found themselves in such a situation, and that farmers need assurances that contracts made in good faith will be honored.
Carter asked that Shepherd's committee meet to discuss the matter and "identify possible solutions to this problem," include whether Arkansas can require commodities brokers to be bonded or maintain "other adequate insurance under the Commodity Futures Trading Commission Act" or other law.
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|Sunday Aug 17, 2014 - Bottom Line: Middle-man mania
I’ve spent a lot of time dealing with freight brokers, and in fact have been in the middle myself. I figured I knew the business. But as I prepared to moderate two industry events, I realized that this old dog has a lot to learn.
The first event took place last fall in our boardroom. I invited six industry leaders to sit down for a state of the union. These are all “first generation” brokers—baby-boomer entrepreneurs who have been breaking trails for an industry that didn’t exist 30 years ago.
This second event took place this past winter at a local hotel. I moderated a panel for the non-profit transportation association Delta Nu Alpha that featured the “next generation” in the freight brokering business. This is the under-40, Gen-Y crowd whose companies are sniffing up the rears of the lead dogs and starting to make fresh tracks of their own.
I learned a lot from my time with both groups. It’s knowledge worth passing along.
Things are eerily quiet on the M&A front. It’s rare to hear of a freight broker changing hands. Surprisingly, in spite of their age, baby boomers seem content to hang around. They don’t seem as interested in cashing out as I thought.
These freight brokers have made wheelbarrows full of cash in transportation and real estate. Many are sticking with it simply because they haven’t figured out a way to get the hell out.
All in the family
More and more freight brokers are being run by the kids. In one way, it’s the owner deferring the uncertainties of selling his business. In another, it’s also a great setup for president mom and dad. They can continue to pluck from the nest of the golden goose from their condo in Lauderdale and/or their cottage in Muskoka. Getting Junior a well-paying gig in a market where prospects aren’t bleak doesn’t hurt the math. Status quo is proving to be a-okay!
The next generation
Wow. Was I ever impressed by the next-generation studs that I interviewed. All of them were smart, engaging, and confident enough to be grilled by me unscripted and “on the record.” They are well educated and possess a set of skills that old bastards like us will never have. They also got their on-the-job training during the dark days of 2008. It’s made them formidable competitors for first-generation brokers and carriers alike.
Ten years ago a broker was a broker and a carrier was a carrier. Today the lines are blurred. Hybrid transportation companies have evolved and are using assets and non-assets to build dynamic transportation products.
Now, specialty brokers are popping up all over the place. They focus on a particular vertical market niche like flatbed, expedited, seasonal, or chemicals. They’ve been around for years but their presence is really increasing. In the US, research done by Carrier Direct shows that the “amount of LTL freight moving under blanket-wrapped programs by brokers has grown from US$575 million in 2007 to US$2.5 billion in 2012”—even though the market shrank by US$3 billion.
Culling in US
The US$75,000 surety bond requirement has helped cull the freight broker herd. According to James Lamb, president of the Association of Independent Property Brokers and Agents (AIPBA), “In December, there were 21,080 independent brokers. Today there are 12,996.” Losing 39% of the industry over a lousy 75-grand entrance fee almost floored me.
These stats also indicate how many brokers in Canada are on life support. If you apply the 10% Canada-to-USA rule, there are 2,108 freight brokers in Canada and 822 wouldn’t be able to write that cheque. It really makes you wonder how long the smallest can hang on for.
Rise of mega brokers
One reason the small guys are in trouble is because people with brains and dough are investing in the growing third-party space. Big brokers are being gobbled up and folded into mega-brokers with the scale and technology needed to survive (Adrian Gonzales, an industry pundit, suggests that one day computers could replace freight brokers, although a lot people don’t seem to buying into that theory).
During my research, one theme came through loud and clear: it’s a great time to be a freight broker. We’ll see how long that lasts. Someday, the dog-eat-dog environment at the top of the food chain is going to work its way to Canada. Until then, Mom and Pop Broker continue to hang in there, Junior has the reins, and his contemporaries are setting a fast pace in a capacity-short freight environment.
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