Grower-Shippers Cautious about Delivered Price Contracts

Published online: Oct 19, 2018 Articles Tom Karst
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Source: The Packer 

Uncertainty around freight rates has caused some grower-shippers in Idaho to move away from quoting delivered prices for potato price contracts.

Sun-Glo of Idaho has elected not to take on the risk of volatile transportation markets by quoting delivered prices, said Jill Cox, sales manager and partner with Sun-Glo of Idaho Inc., Sugar City.

“The trucking companies refuse to give you a set rate because they don’t know what’s coming at them, and so grower-shippers can’t take on that risk,” she said.

“It definitely changed our business, that’s for sure,” she said. “This year I am quoting what I can control, which is my supply.”

Other shippers echoed that sentiment.

“We’ve got some customers, due to how they do business, that we may or may not see their business this year just simply because we are no longer doing a delivered price contract,” said Joe Esta, vice president at Wada Farms Marketing Group LLC, Idaho Falls, Idaho. Month-to-month contracts are more doable with transportation companies, but six month to one-year contracts are hard to find.

“You can’t get those kinds of commitments from the trucking industry right now and so we can’t we feel like we can’t give that to a customer,” he said. “We have very (few) delivered contracts that we’re willing to do.”

Flexibility is key to making things work, he said.

“We’ve written some (language) into contracts that say that if there’s extreme truck shortages or holiday overages, we’re not held captive to the same price,” he said.

One of the dynamics of the current truck rate environment is that retailers are trying to drive f.o.b. prices down to maintain delivered costs, said Steve Elfering, vice president of operations for Potandon Produce LLC, Idaho Falls, Idaho. That’s a tough pill for the shipping community to swallow, he said.

Ralph Schwartz, vice president of sales and category management for Potandon Produce LLC, said the company can offer a premium Idaho potato to buyers or source potatoes from 16 other states that Potandon markets supply from.

“Potandon is always exploring alternative shipping methods,” Schwartz said. 

While delivered prices are still offered, the company has the advantage of an in-house transportation department that is in constant contact with freight carriers to secure the required numbers of trucks needed.