Why Do Grain Rates Always Seem So Cheap?
In my 20 years in the grain industry, I’ve probably heard this question hundreds of times: “Why are grain rates always so cheap?” There are plenty of misconceptions, and some in other trucking sectors even poke fun at grain hauling, noting how rates can sometimes be lower than in other areas of trucking. So, let’s break this down and see if there’s any truth to it—and if so, why.
We all know grain hauling experiences seasonal peaks and valleys due to factors like harvest demand, natural disasters, and export markets. These create significant disruptions in the grain-hauling landscape. If you’ve been in the industry, you’ve seen this firsthand. Back when I worked at Bartlett, I remember a time when we were trucking soft wheat from Kansas City to Wichita, then turning around and hauling hard wheat back to Kansas City. It seemed illogical—like moving grain in both directions. You might see similar patterns with corn or soybeans moving back and forth.
While seasonal demand is one factor, the grain sector has something else unique: farmers can add or remove capacity from the market. Of course, this applies to those who are commercially licensed (that’s a conversation for another post!). What happens is that some farmers, especially after harvest, will keep their trucks running during slower periods, like the winter months, to hold onto their labor. These farmers may run at lower rates—or even break-even costs—because they don’t rely on profit the same way a commercial trucking company does. This additional capacity can drive rates down.
Another reason grain rates seem cheaper than other commodities is the competition from railroads. Railroads were designed to haul large volumes of bulk commodities and are far more cost-effective when it comes to grain transport compared to other cargo, like lumber or cars. Rail is especially competitive over longer distances, generally making trucking uncompetitive beyond 200 miles. Of course, this isn’t true for all shipments, but it’s a general trend. Many grain facilities even prefer using rail because it reduces their labor costs. I used to have ongoing debates with grain merchandisers about using trucks, but rail often won out for long hauls.
Finally, one more factor that can drive grain rates down is the number of trucking companies that prefer to stay local. Many are willing to accept lower rates to be home every night, and I understand why. Years ago, I heard a successful trucking company owner say, “I’ve never seen a truck make money sitting in front of the house.” While that’s their perspective, the willingness to stay close to home keeps rates lower for short hauls.
Now, I don’t want to leave without offering a solution. Each business is different, but it’s important to focus on diversifying what you haul. Look for clients with specialty commodities like feed ingredients, organics, or pet food. These often pay more due to the time sensitivity involved. The rate might be higher, but keep in mind that your downtime could increase as well. Use local grain as part of your strategy—perhaps as a backhaul or a starting point—but don’t rely on it as your entire business, which many of our members have successfully done.
God Bless,
Jared