Division of Agricultural Sciences

UNIVERSITY OF CALIFORNIA

LONG-HAUL TRUCK TRANSPORTATION
OF CALIFORNIA FRESH FRUITS
AND VEGETABLES

Guy Black

CALIFORNIA AGRICULTURAL EXPERIMENT STATION
GIANNINI FOUNDATION OF AGRICULTURAL ECONOMICS

Mimeographed Report No. 174

ISO?

February 1955

SUMMARY

There is an ever-changing nationwide market for California fresh fruits and
vegetables, and part of the problem of marketing this produce is transporting it
to market. The problem is the annual movement to market of about 1*20,000 car-
loads a year. Of this, 210,000 must be moved to points east of the Mississippi;
and 100,000 must be distributed within the state of California, There is a well-
developed transportation system available to accomplish this task. It is, how-
ever, a constantly changing system, and agricultural marketers must be alert to
its changes as well as to the changing market for their produce.

Some considerations are especially important in fresh fruit and vegetable
transportation. It must be rapid enough to preserve the essential freshness of
the produce and to minimize the risk of price change while the produce is in
transit. Because fresh produce has a relatively low value per pound, the cost
of movement per pound must be relatively low. Transportation companies must ad-
just to meet a highly seasonal and quite irregular demand.

More and more, the transportation of produce is by motor truck. Short-haul
movement was taken over by trucking many years ago, but today the longer hauls
are more and mere frequently accomplished by trucks. This long-haul trucking is,
curiously, performed for the most part not by the large common carriers whose
names are landmarks on the highways but by small owner-operators or by small
fleets. Such operators have concentrated on hauling of agricultural commodities
because their transportation is exempt from many of the licensing and certifica-
tion requirements which the law requires common and contract carriers of general
commodities to meet. Just the cost of getting permits often are beyond the means
of truckers with limited economic resources.

The truckers who concentrate on hauling agricultural products in many re-
spects are a separate transportation industry. As a group they, and the agencies
associated with them, have much of the unsettled organisation characteristic of
a new industry because competition has not had time to organize them into an ef-
ficient pattern. Many details of inefficient organization can be seen.

The disorganized market for transportation by truck is one of the most im-
portant sources of inefficiency in the truck transportation of fresh fruits and
vegetables. This market is important because free entry, rate bargaining, and
rapid shifting of equipment from one route to another are all made possible by
exemption from most ICC regulations. Where regulatory agencies do not interfere,
these kinds of adjustments which take place in a well-organized market help

develop an efficient industry organization* However, this result depends on a
market throughout which there can be free and ready interchange of information
between shippers and true 'cars. Such a market has not developed in the agricul-
tural commodities trucking industry. Its absence means that truckers and ship-
pers must spend an inordinate amount of time and energy locating traffic or
trucks and bargaining on rates. Frequently, they do not find the "right" ship-
per or trucker. To a limited extent, truck brokers have served as coordinating
middlemen, but they have achieved only a limited development and have not been
altogether satisfactory. Also, their rates are very high.

Whether fresh fruits and vegetables should be shipped by truck or by rail
is a problem for both the shippers and the makers of transportation policy. In
general, trucks are cheaper for short hauls, and railroads are cheaper for long
hauls. The choice is complicated by the fact that, while railroad rates are
fixed, being regulated by the ICG, truckers are free to change whatever rates
they xjill. Truckers undercut rail rates when traffic is scarce and charge what
the market will bear when transportation equipment is scarce. Also, trucks have
advantages of extra speed, flexibility, and gentleness of ride which sometimes
are so important that they can charge even more than rail rates. Dealing with
railroads may have certain advantages to shippers also.

Of the shippers of fresh fruits and vegetables who have been using trucks,
many would prefer to rely primarily upon the railroads. It costs them money to
reorganize their plants and shipping platforms for truck use; the prompt loading
and unloading, upon which shippers insist, is frequently very irritating and
inconvenient. Relying on small, unknown, and underfinanced truckers has some
hazards which shippers would like to avoid and against which they are unable to
protect themselves adequately by insurance or any other means.

Trucking has a job to do and can do it better than it is being done at this
time. Research on many quite simple difficulties may lead to better efficiency.
Anything which helps the market for truck transportation do a better job of co-
ordinating supp]y and demand for truck services will help trucking do a more ef-
ficient job.

Shippers and truckers can do a better job if they are guided by a program
of training and education. For example, truckers should be made to realize that
such irresponsible behavior as failing to keep appointments — at present all too
common — can be very costly to shippers and may lead them to avoid using trucks
whenever possible.

iii

Better systems of insurance should not be overlooked. Credit-rating bu-
reaus can be invaluable. Brokers could improve coordination and might find the
organization of a truck transportation exchange invaluable, even though it would
entail a substantial reorganization of the way brokerage is conducted. The mar-
ket news services might consider disseminating information on trucking as well
as on fresh fruits and vegetables. Producers' concentration markets have been
valuable in connection with trucking in the East and particularly in the South-
east, and such markets may be a logical next development in California.

The impact of trucking on fresh fruit and vegetable marketing has been wide
and deep. The industry cannot accept a new system of transportation and leave
everything else as before. A change in transportation means new competition in
produce marketing because trucking means advantages for new firms, new ways of
doing business, and new geographic areas. Today, there is a revolution in prod-
uce marketing under way, the outcome of which cannot yet be seen; trucking has
played its part in getting this revolution under way.

There are many unsettled issues of public transportation policy whose fu-
ture course has significance for efficiency of agricultural truck transportation.
The special position of unprocessed agricultural commodities in the Motor Car-
rier Act, 1935, has had the broadest possible significance in the organization
of agricultural transportation and, indeed, has seriously affected railroads and
nonagricultural truck transportation. While the exemption is a long-established
part of governmental transportation policy, it is still under regular attack from
railroad and nonagricultural trucking interests. In recent years, the ICC has
tried s by a proposed new regulation on trip D.easing, to isolate the agricultural
haulers from the remainder of the trucking industry. Agricultural shippers have
been seriously concerned over the impact of the proposed regulation on costs of
their transportation. There is a conflict in policy and economic interest at
the root of the trip-lease controversy which can be resolved only by reference
to the broadest phases of economic policy.

TABLE OF CONTENTS

Chapter Page

SUMMARY i

I The Reasons for This Study 1

The Changing Transportation Picture 2

II Produce Industry Transportation Requirements . f?

Areas to Which It Must Be Moved .......... $

Seasonality of Movement ......... 7

Coordination of Transportation as Part of the Nationwide

Produce Marketing System ... .......... 7

Cost of Transportation .... ..... 9

Speed Requirements ». 10

Perishability as a Problem in Produce Transportation .... 10

Other Requirements .......... 11

Refrigeration Equipment ....... ....... 12

Heat Removal Requirements of Various Loads 13

Calculating Refrigeration Requirements Jli

Temperature Ranges ••• lU

Precooling , ....... 17

III Functional Description of Truck Transportation

of Fresh Fruits and Vegetables .... ....... 18

Equipment Used 18

Associated Facilities . ..... 19

Mechanics of Truck Movement ................. 20

Mixed Loads Popular 2$

What Produce Truckers Are Like 25

The Market for Truck Transportation of Produce ....... 27

IV Public Regulation and Truck Transportation

of Fresh Fruits and Vegetables ......... .. 30

How It Came About 30

Regulation as a Barrier to Interstate Commerce ....... 30

Classification of Motor Carriers ......... 32

The Exempt Interstate Carriers 33

Exempt Commodities . ........ 33

Consequences of the Exemption 3I4.

Chapter p age

V The Trip-Lease Controversy . , , 36

Economics of Exempt Trucking 36

Ex Parte No. MCU3 37

Why the ICC Is Concerned . . t 38

Effect of ICC Proposal on Produce Marketing 39

Effect on the Structure of the Trucking Industry Ill

VI Why Trucks Are Used Instead of Railroads ^2

What Users Said . U2

Trucking Is Most Effective in Smaller Markets . U3

Still Room for Improvement k3

Transit Time , , ifo

Rates ■ ». \x$

Determining Truck Rates a Problem •••••« U8

Comparing Truck and Rail ••• 50

Other Factors ...... Q ........ . 5l

Why Financial Responsibility Is a Problem ..... 5l

Brokers 1 Insurance Arrangements 52

VII Trucking Can Be More Useful 55

Transportation Efficiency .................. 55

How Brokers Have Helped , ., 57

Can Brokerage Be Improved? . » ........ 59

Other Means of Coordinating , 60

Market News Coverage of Trucking , 6l

Better Insurance . . ....... 62

Risk Reduction by Other Means ................ 62

Government Regulation and Marketing Efficiency ....... 63

VIII Better Ways of Assembling Loads for Truck Transportation ... 65

What Concentration Markets Can Do ....... 65

Where a California Concentration Market Might Be Located . « 67

The Wat sonvi lie -Salinas Area Possible ••• 67

The Stockton Area ...................... 69

Farther South , 69

Markets in Metropolitan Areas ■ c . . « 69

What Would Be Gained by a New Concentration Market? ..... 72

Who Might Develop a California Concentration Market ..... 73

Chapter Page

IX Trucking Hakes Marketing Dynamic 7J1

Competition in Transportation 7I1

The Transition in Produce Marketing 76

Ultimate Objectives ....... 78

List of Figures

Figure

1 Estimated Unloads of California Fresh Fruits and

Vegetables by Regions in Car lot Equivalents, 1951 6

2 Carload Shipments of California Fresh Fruits and
Vegetables by Crop Reporting Districts, Monthly, 1951

(thousands of carloads) 8

3 Approximate Rate of Evolution of Heat by Certain
Fresh Fruits and Vegetables When Stored at the

Temperatures Indicated . ..... 1$

h Outbound Truck Passings of Fresh Fruits and Vegetables

Through California Border Stations in Carload Equivalents,

1951, 1952, and 1953 21

5 Percentage Distribution of California Fruits and Vegetables
Transported Out of California by Truck, by Border Stations,

1950 . 23

6 Typical Movement of Motor Vehicles Carrying California
Fresh Fruit and Vegetables in Interstate Trade and

Coordination of Transportation by Shippers and Receivers ... 2k

7 Estimated Maximum Transit Times in Hours for Truckload
of Fresh Fruits and Vegetables Shipped from Central

California to United States Points I4.6

8 Total of Freight, Standard Refrigeration Salting Rates and
Federal Tax on Shipments of California Fresh Fruits and
Vegetables to United States Points, in Cents Per 31-Pound
Container, Summer, 1953 hi

9 General Pattern of Estimated Rates for Truck Transportation
of Peaches from California to United States Points as
Quoted by California Truck Transportation Brokers in Cents

Per Lug, Summer, 1952 k9

List of Tables

Tab le

1 Intercity Motor Vehicle Ton-Miles: Public and Private

Intercity Freight Traffic by Motor Carriers, 19UH-1952 .... 2

2 Illustration of Calculation of Refrigeration Requirements
of a Truckload of Thompson Seedless Grapes Transported for

60 Hours Under Typical Conditions ............... 16

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etoamvi&rpiH tto^fi^T'**^^ 1% : ^|Ml»i>if'D lo

l£W£ Page

3 Number of Commodities in Truckloads of Fresh Fruit and

Vegetable Outbound Through California Border Stations 25

h Monthly Rail Shipments of All Fresh Fruits and Vegetables

from Three California Counties, 1953 68

5 Monthly Rail Shipments of All Fresh Fruits and Vegetables

from Three California Counties, 1953 70

6 Monthly Rail Shipments of All Fresh Fruits and Vegetables

from Two Counties, 1953 • • . 71

LONG-HAUL TRUCK TRANSPORTATION OF CALIFORNIA FRESH FRUITS AND VEGETABLES

Guy Black^

I. The Reasons for This Study-

How long-haul truck transportation of California fresh fruits and vegetables

can be used more effectively is the concern of this study. It is hoped that it

will contribute to the produce industry's efficient use of transportation.— It
is hoped that this study will help solve the problems confronting the produce
industry in the use of the trucks at its disposal.

Growers, truckers, and the middlemen of the produce industry have a common
interest in trucking. There are many shortcomings to trucking as it exists to-
day, and both individual action and cooperation can make trucking more effective.
Long-haul trucking of produce has grown so fast that we have every reason to be-
lieve that it will continue to become more and more useful.

In the first part of this study, how trucking of California fresh fruits
and vegetables is done is examined in detail. Following this presentation, prob-
lem areas confronting shippers and others are searched out and examined. Then,
steps which have been taken to overcome these problems are considered. Proposals
for the future are examined in as much detail as readily available information
permits.

To be sure, action to improve produce transportation should always be based
on an understanding of the over-all transportation system and not merely truck
transportation. This study is of one phase of truck transportation only, and its
restricted scope means that, before drawing conclusions, you should learn a great
deal about other transportation.

Some limitations of this study have to do with local truck transportation
and long-haul rail transportation, neither of which are considered. Other limi-
tations come from the unavailability of much important data. To a large extent,

l/ Assistant Agricultural Economist in the Experiment Station and on the
Giannini Foundation. I wish to acknowledge with thanks the cooperation of mem-
bers of the fruit and vegetable marketing industry, the transportation industry,
and my colleagues in the universities and in government in making available the
information on which this publication is based and in helping me eliminate errors
and oversights. The editorial office of the College of Agriculture has been very
helpful.

2/ The term "produce" in this publication means fresh fruits and vegetables
only.

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public information on transportation is a by-product of public regulation, and
since interstate truck transportation of produce is exempt from most regulations,
our information is weak.

The Changing Transportation Picture

Today, the transportation industry is at midstream in a technological revolu-
tion produced by the substitution of trucks and highways for trains and rails.
How rapidly trucking has grown is shown in Table 1.

TABLE 1

Intercity Motor Vehicle Ton-Miles: Public and Private
Intercity Freight Traffic by Motor Carriers, 19kli-1952

Per cent of all intercity freight

Millions of

traffic — rail, highway, waterway,

Year

ton-miles

pipe line, and airway

19hh

58,OU7

5.33

19U5

66,6lU

6.39

19U6

81,676

9.01*

19U7

101,667

9.98

19U8

115,U67

11.05

19U9

12U,9U9

13.67

1950

170,l8U

16.06

1951

182,1*67

15.56

1952

181;, 106

16.21

Source: Interstate Commerce Commission. Bureau of Transport
Economics and Statistics. Intercity Ton -Miles, 1939-1952 ,
with Adjustment of Motor Vehicle Ton -Miles . (Statement No.
5kk, File No. 10-D-7, March, 195U, p. U. Estimated from
data from Bureau of Public Roads.)

What the future may be for trucks hauling fresh fruits and vegetables is
hard to guess. The increased business of long-haul trucking involving movement
of fresh fruits and vegetables was discussed in a recent ICC report:

"Freight is transported over the highways for long distances in sub-
stantial quantities, and such transportation is constantly increasing. . . .

"The average length of haul on the lines of individual class I
intercity motor carriers has increased from 177 miles in 19U5 to 218
miles in 191*9 > while the comparable railroad average decreased from
2I4.I miles to 229 miles. This does not measure the average distance
per shipment, as there is a substantial amount of joint-line freight.

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One transcontinental motor carrier having annual revenue of $16,000,000
and an average haul on its own lines of 1,573 miles, reports that 52
percent of its freight moves beyond its lines, and another carrier of
comparable size reports that 6l percent is interchange freight. . . .

"The longest hauls are between the Midwest and the west coast.
This is probably due partly to the fact that the rates of motor carriers
on transcontinental traffic are generally lower than the rates by rail,
but there is also a large volume of long-haul traffic by motor carriers
between northern points and southern points, where such rate differential
does not generally exist.

"... Frozen foods are increasingly being handled in mechanically
refrigerated trucks between points east of the Rocky Mountains. We have
pending applications for such service to the west coast, and some trans-
continental motor carriers are already furnishing such service, either
direct or by interchange.

"Fresh fruits and vegetables are hauled in large quantities up to
1,000 miles by trucks, largely exempt from our general jurisdiction,
except to the extent that they are leased to regulated carriers for the
return journey. Fresh meats and packing-house products are moved in
large volume, principally from the Midwest to the East, South, and the
West, by contract carriers or private trucks owned by meat packers.

"We have not compiled statistics as to the volume and distance
shipments of various commodities moved by motor carrier, but the evidence
introduced at the hearings on applications shows that long-haul trans-
portation by truck is increasing and is prof itable ."l/

In moving fresh fruits and vegetables to market, motor trucking has grown
at an irregular rate. During the 1920' s and early 1930' s, trucking took over
most short-haul transportation, the distribution of produce from central markets,
and a limited amount of long-haul movement. During the late 1930' s, there was
a slower rate of growth, the operating zone of trucks increased but little, and
in 19^1 the railroads were discovered to have regained some lost traffic— This
reversal of trend was reinforced during World War II by the diversion of trucks
to hauling military supplies and by wartime restrictions on motor vehicles. To-
day, trucks have recovered from the wartime decline and have reached new promi-
nence in produce hauling.

l/ U. S. Interstate Commerce Commission, 65th Annual Report, November 1, 1951.
Washington, Govt. Print. Off., 1952. pp. 55-56.

2/ U. S. Bureau of Agricultural Economics* Marketing and Transportation Situa-
tion . Washington, D. C, October, 1950. p. 2U.

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The lengths of haul for which trucking predominates has been increasing.
This was illustrated statistically by a Bureau of Agricultural Economics study
which gave truck share of total unloads of ten commodities in eight major prod-
uce markets by distance hauled in 1950 and 19l*l:— ^

Distance

1950

19U1

miles

per cent by truck

Under 100

100-2U9

250-U99

500-999

1,000 and over

All distances

One thing this table also shows is that trucks have been important for years.

In 1950, h9 per cent of the fresh fruits and vegetables at eight major markets

arrived by truck, but even in 19Ulj hh per cent of produce at the same eight mar-

kets arrived by truck.— '

A large group of truckers are specialists in hauling agricultural produce,

partly as a result of exemption of this class of commodities from the bulk of

ICC regulation. While it is known that their number has been increasing rapidly,

accurate counting is made especially difficult by their freedom from regulation

under the Motor Carrier Act, 1935. One authority said that there are about

i|0,000 interstate motor carriers specializing in the transportation of agricul-

tural commodities and fish.—' Another clue is the fact that the number of re-
frigerator trucks has increased tremendously. It has been estimated that, in 1950,
there were three to four times as many as there were just before World War II.— ^
This equipment is engaged mainly in hauling perishable agricultural commodities.

l/ Church, D. E., and J. R. Snitzler. Trucks Haul Increased Share of Fruit
and~~vege table Traffic . Washington, D. C, U. S. Bureau of Agricultural Eco-
nomics, April, 1953.

2/ Purcell, M. R. Length of Haul to Leading Markets by Motor Truck, 19^1 and
1950 . Washington, D. C, U. S. Bureau of Agricultural Economics, 1953. p. 3.

3/ Statement of John L. Rogers, Interstate Commerce Commission, before House
Committee on Interstate and Foreign Commerce, March, 1950.

h/ U. S. Bureau of Agricultural Economics, op. cit ., October, 1950. p. 25.

3 9siar.nT.o3 &isini9^ciL t eis

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II. Produce Industry Transportation Requirements

The California produce industry long ago became dependent upon a nationwide
system of distribution. The nation, in turn, depends on California agriculture.
Today, for example, 30 per cent of the tonnage and value of the 28 most impor-
tant vegetable crops of the United States comes from California.

In a typical recent year (I9£l), 273,337 carlots of California fresh fruits
and vegetables were shipped by rail, 37,h26 carload equivalents left the state
by truck, and 111,886 carlot equivalents were delivered to the three main prod-
uce markets in the state of California, mainly by truck .-^

Areas to Which It Must Be Moved

Data on interstate movement of California fresh fruits and vegetables by
truck, available for 1951 and later years because of a change in the method of
tabulating information of interstate passings, show that the West is a more im-
portant market for California fruit and vegetable growers than had previously
been supposed.

Because truck shipments are seldom diverted to other destinations once they
pass the California border stations, information on destinations collected at
the border stations is quite reliable. Railroad cars, on the other hand, are
quite frequently diverted so that waybill information at the time the cars leave
California is not a very useful indication of where those cars will eventually
be unloaded. Unfortunately, there is no complete source of information on these
unloads. Unloads of California produce in 10$ United States and Canadian cities
account for about four fifths of all the produce shipped out of the state. In
Figure 1 it is assumed that the remaining one fifth is distributed among states
in the same way as the four fifths which can be accounted for directly.

1/ See various annual reports of the U. S. Production and Marketing Adminis-
tration, Federal-State Market Mews Service, Sacramento, California. This totals
i|22,61i9 carloads or carload equivalents, but the figure is merely an approxima-
tion to the total for the following reasons. While carload shipment figures and
truck interstate passings are, for practical purposes, complete counts, truck
unloads are available only at Oakland, San Francisco, and Los Angeles. Undoubt-
edly, considerable quantities of produce are unloaded at such points as Sacra-
mento, Fresno, and the San Francisco farmers' market. Chain-store purchases
often by -pass the major markets, and there must be considerable gr owe r-to -whole -
saler-or-retailer deliveries throughout the state. Also, some double counting
occurs when produce is transshipped out of the counted markets by truck and,
therefore, is reported both as California truck unloads and as interstate ship-
ments. These two sources of error counteract each other to an extent, but it
may be presumed that the figure of U22,61+9 is low.

FIGURE 1

Estimated Unloads of California Fresh Fruits and Vegetables
by Regions in Car lot Equivalents, 1951

Source: Based on reports of the U. S. Production and Marketing Administration, Federal-State Market News
Service, Sacramento, California.

Combining what can be learned of interstate passings of California produce
by truck or rail, Figure 1 was constructed to show the geographic distribution of
California produce. It shows California's strong position in western markets.
California itself is the best market for its own fresh fruit and vegetable ship-
pers, being even more important than the populous Northeast and East North Central
areas. While these latter areas have a much greater population, their great dis-
tance reduces the advantage of California shippers relative to those nearer the
points of demand. Even though traditionally considered to be the main markets for
California produce, the Northeast and North Central United States account for 39
per cent of the sales of California shippers. In the South Central area, Texas
alone takes an estimated 21,^73 carloads out of the 38,U36 total for the entire
region. Export markets are of minor consequence although carlot shipments to
Canada exceed 10,000. Fifty-two per cent of California fresh fruits and vegetables
are delivered to markets west of the Mississippi. This is significant for motor
transportation because motor carriers make a strong showing in movement of Cali-
fornia produce in the area west of the Mississippi.

Seasonality of Movement

Transportation facilities must be able to meet peak seasonal needs which re-
quire more equipment than can be used on a year-round basis. The California sea-
sonal shipping pattern is illustrated in Figure 2. Interstate rail and truck
passings of produce are at their peak during the June-August period when, on the
average, over 1,100 carloads a day are shipped interstate. But for give off sea-
son months of the year, movement averages as low as !?00 carloads a day.

Peak demand for transportation of California produce corresponds closely to
the peak demand for movement elsewhere. United States carlot shipments of fruits
and vegetables from August-February run about 1,600 carloads per day but during
the spring and early summer may be 2,600 cars a day.

Coordination of Transportation as Part of the Nationwide Produce Marketing; System

One of the things required of the transportation facilities serving fresh
fruit and vegetable marketing is that they coordinate many rapidly changing sources
of supply with consumer demand all over the United States. For any one commodity,
this ordinarily means drawing from a succession of producing areas, each of which
supplies the market for a part of the over-all period during which the commodity
is available.

Take the arrival of strawberries at Chicago in 195>2. During January and Febru-
ary, a trickle arrived from Florida. This increased in March to 5>1 carloads. But
during March, Louisiana entered the market. Florida gradually dropped out so
Louisiana became the sole source of supply. In May, Illinois production became
important, and, in addition, supplies came in from California. Louisiana and the

riO «f« boil
ti&t >4*

FIGURE 2

Carload Shipments of California Fresh Fruits and Vegetables
by Crop Reporting Districts, Monthly, 19$1
(thousands of carloads)

Northern District

JFMAMJ JASOND

All California

JFMAMJJASOND

Source: Compiled from data of the U» 3«
Production and Marketing Administration,
Federal-State Market News Service,
Sacramento, California.

Imperial District

local producers had dropped out by June, but Michigan shipped 75 per cent of the
strawberries received at Chicago during that month. California kept sending
strawberries to market and from July-November was the only source of supply.

Another example is asparagus. California is an early producer and dominates
the eastern market until eastern production becomes available in quantity. This
drives down the eastern price so that California shippers can no longer stand the
transportation costs and divert their production to canning, freezing, and local
markets. The California season for shipping east opens when the California crop
becomes mature, and the date on which the eastern crops mature effectively brings
the California shipping season to a close.

Not one but many perishable commodities must be handled in this way — simul-
taneously. Some crops make major demands on transportation facilities. For a
short period each spring, half the potatoes being shipped in the United States
come from Kern County, California — a matter of up to SCO carloads a day. The
significance of these typically complex supply situations is that a transporta-
tion system is needed that will meet the needs of all of the. United States and
must be prepared to furnish transportation first from one area and then from
another. The perishability of the commodity and the rapidity with which the
geography of supply changes set produce marketing and transporting apart from
the marketing of products whose production and distribution from well-established
locations are fairly stable and predictable.

Cost of Transportation

Compared to their value per pound, fresh fruits and vegetables are rela-
tively heavy. For this reason, transportation costs can be an important indus-
try problem. One of the most fundamental means of overcoming high transportation
costs is, of course, to concentrate production as near to points of consumption
as is practicable, even when some increase in production cost is involved. How-
ever, the specialized cultural requirements of many fruits and vegetables mean
that they cannot be "market oriented" in this way. Many of the California fresh
fruits and vegetables that are shipped to eastern markets incur transportation
costs comparable to their price at point of shipment. The prices received by
California shippers for their produce are, therefore, greatly affected by the
level of transportation rates and also by the relative transportation costs of
other areas supplying the same consuming centers as does California. It is of
critical importance to California growers that the rates they pay not become high
compared with rates charged other areas. In the case of rail transportation,
California growers can protect themselves in ICC rate-determination hearings.

10.

However, in the case of unregulated truck transportation, the free play of the
market determines relative transportation charges. This might sometimes create
serious difficulties for California shippers; actually, however, recent develop-
ments in truck transportation appear to have been to the advantage of California
shippers .

Speed Requirements

Few other industries demand expedited handling with the persistence of the
fresh fruit and vegetable industry, yet, because cf the bulkiness of the product,
this must be low-cost transportation. Freshness on arrival can be a controlling
factor leading shippers to pay the extra charges involved in rapid transporta-
tion. Fresh strawberries have been shipped from California to Chicago by air
primarily because they w»uld arrive in superior condition. The cost of air
transportation generally precludes its use, however, and even railway express
is used «nly to a limited degree.

Speed is also important for another reason. Fresh fruit and vegetable
prices fluctuate frequently and rapidly. Aside from the problem of deteriora-
tion, there is always a chance of substantial economic loss through changes in
the value of inventories, including inventories of produce being transported. By
speeding up transportation, inventories can be reduced and the risk of loss
through change in price reduced thereby.

Truck transportation has permitted a higher speed of transit at little or
no increase in cost over rail rates. Frequently, truck shipments move as rapidly
as railway express shipment. It is feasible from the c«st p*int of view to use
truck shipment during the entire shipping season while express rail and air ship-
ments of fresh fruits are good business practice only in the early part of the
shipping season when the chances are that rapid price declines can be expected.
Once the period of relative price stability (typical of the midseason of any com-
modity) is reached, express and air are seldom used. The shorter transit time

and easier ride provided by express and air shipments would iroi:r-»ve p. educe

quality at all times, but the price risk is no longer as important.— 1

Perishability as a Problem in Produce Transportation

The perishability *f fresh fruits and vegetables is responsible for many
unique characteristics of their marketing. The most striking — although not

l/ It should also be noted that the keeping quality of immature fruit, most
common at the first of the season, is poorer than average.

T •'IPVO

11.

necessarily the most significant economically — is refrigeration. Perishability
has created the need for specially insulated equipment. The "reefer," a famil-
iar sight on all railroads, is a unit capable of maintaining the temperatures
and humidities required for produce quality. Railroads have developed techniques
for controlling temperature conditions at all times of year and will follow
rather explicit instructions on the part of shippers. Motor carriers, where long
hauls are involved, have developed comparably specialized equipment. Such trans-
portation improvements as greater speed, easier ride, and better temperature con-
trol are always being sought.

Perishability can be defined in terms of economic effect. It is the natural
tendency of a commodity so to change in character over a period of time, through
maturity, decay, dehydration, or other life process, that the effective demand
for or salability of that commodity is decreased — eventually to the point of non-
salability. Perishability of produce is increased by mechanical damage from jar-
ring, bumping, or crushing.

Even after harvest, fresh fruits and vegetables continue their life proc-
esses, some even reaching maturity after being picked. They continue the proc-
esses of respiration — oxidizing sugar and generating heat. The rate of respira-
tion increased with temperature and, in some cases, is affected by the degree of
ripeness. The quicker cooling can be accomplished after harvest, the sooner
these processes are slowed down and the better produce will be preserved. Some
vegetables and fruits, such as spinach, broccoli, strawberries, blackberries, and
figs, have especially high respiration rates. Cooling can be overdone, as prod-
uce also is injured by too low temperatures. Summer squash, tomatoes, cucumbers,
and sweet potatoes are liable to injury at temperatures no lower than 5>0° F.

Humidity as well as temperature is important. Produce high in moisture tends
to lose water by evaporation after harvest. This produces wilting and loss of
quality and weight. By maintaining a relative humidity of 85-95 per cent and by
keeping down temperature, this water loss can be minimized. Some produce is
waxed to reduce water loss, and wrapping also is sometimes of benefit. During
transportation, temperatures must be held relatively constant because changes in
temperature lead to condensation of moisture on produce and loss of quality.

Other Requirements

Some commodities cannot be stored or transported together for even a short
while. Apples will absorb undesirable odors from potatoes. Other combinations
which should be avoided are apples with celery, cabbage, or onions; celery with

— v£J.£0

onions j and citrus fruit with any of the strongly scented vegetables. Also,
ethylene gas, which is present in the exhaust fumes of gasoline engines and is
given off by some fruits, has a powerful ripening effect on some other fruits
and causes rapid deterioration of flowers.

Special care is required in packaging and loading fresh fruits and vege-
tables. Produce is easily damaged by rough handling. Yet, growers cannot bear
the cost of really expensive packaging. Containers must be reasonable in price,
designed and loaded to permit free circulation of cooling air during the trans-
portation period.

Most of the research on improved transportation of perishables has dealt
with rail transportation, and while, no doubt, the same information is generally
applicable to trucks, they have their special problems too. The motion of a
truck differs from that of a railroad car, for one thing. Generally, trucks give
an easier ride but, in the case of strawberries, some peculiarity in the motion
of truck has made it not practicable to substitute trucks for rail transit. New
types of running gear for trucks, such as air suspension "springs," may change
this situation.

The truck industry has not developed as elaborate techniques of refrigera-
tion nor the methods of enforcement of icing schedules which are railroad proce-
dure. However, there seems to be less need in trucking for many of the precau-
tions typical of railroads.

Refrigeration Equipment

Ice is the standard refrigeration material in produce transportation.
Trailers used for produce hauling are designed with bunkers in the nose, holding
up to 3,000 pounds of ice plus 10-2$ per cent of that weight of salt. In addi-
tion, snow or chopped ice may be blown in on top of loads to provide extra cool-
ing or to create the moist condition favorable to preservation of quality. Cir-
culating fans or air vents are used to circulate the cool air, and canvas ducts
are used to improve its distribution.

Dry ice can be used in place of "wet" ice, although it is more expensive and
not so widely available, and adequate control of temperature variation has been
hard to obtain. Its widespread use depends on development of satisfactory tem-
perature control and lower costs. Dry ice has the additional advantages of lower
weight and dryness which makes it easier on the truck equipment. WLth salty wet
ice, moisture corrodes the truck body and eventually gets into the insulation,
greatly reducing efficiency. Dry ice is widely used for frozen commodities where
temperature variation is not a problem, provided that the load is cold enough.

13.

Mechanical refrigeration is also common. Some mechanical refrigeration
units are small and merely supplement other means of cooling or delay the inevit-
able rise in temperature long enough for the truck to arrive at destination with-
out too much loss from deterioration. Other refrigeration units have a capacity
equal to four or five tons of ice and are capable of maintaining near zero tem-
perature for considerable periods of time. Such units are used with trailers in-
sulated to meet the stringent requirements of frozen foods, concentrated juices,
or meats. They more than meet the requirements for fresh fruits and vegetables.^

Heat Removal Requirements of Various Loads

Surprising as it may be, more refrigeration capacity may be required to hold
a load of produce at U0° F. than to hold a load of frozen food at 0° F. This is
because, at the temperatures at which produce is transported, the vital head of
the load may make important demands on the refrigeration system. For example,
in a trailer where a dry ice system could maintain a load of frozen food at 0° F.
with 3U0 pounds of dry ice per day because 25,000 pounds of lettuce at U0° F.
would release 15,990 Btu. of heat per ton per 2U-hour period, keeping a load of
lettuce at k0° F. would require 592 pounds of dry ice to compensate for the vital
heat released. Since 16? pounds would be required to overcome the trailer's
heat leakage at k0° F., 759 pounds would be used in contrast with the 3h0 pounds
required for a 0° F. load which released no vital heat.

The vital heat evolved by commodities is a highly significant factor in

refrigeration requirements and varies tremendously. Ten tons of peas, broccoli,

spinach, snap beans, lettuce, and sweet corn at 60° F. may produce enough heat

to melt one and a quarter or more tons of ice per day.— Some commodities, such as

l/ The U. S. Production and Marketing Administration has made a series of
tests of vehicle refrigeration units. See, for example, H. D. Johnson, and C. E.
Garver. T est of a Mechanical Unit Designed to Maintain Low Temperatures in Motor
Truck Transportation . (An interim report) Washington, D. C, U. S. Production
and Marketing Administration, March, 1953. Processed. See, also, Some Refrigera-
tion Tests of a Motor Truck -Trailer Equipped with One Type of Dry Ice System of
Refrigeration . April, 1953. Processed. There are many other tests which have
been reported by this agency.

.2/ For a tabulation of heat of respiration of various commodities and an ex-
cellent and brief discussion of the problem of storing perishables, see D. H.
Rose, R. C. Wright, and I. M. Whitman. The Commercial Storage of Fruits, Vege-
tables, and Florists Stocks . Washington, Govt. Print. Off., 19U9. (U. S. Dept.
of Agr. Circ. 2?8, revised.)

;> f row

1U.

grapes, evolve heat at a low rate. At temperatures in the low UO's, Emperor
grapes evolve no more than 35 Btu. per ton per hour. Figure 3 shows how the
amount of heat, evolved by certain fruits and vegetables, changes with tempera-
ture.

Calculating Refrigeration Requirements

Table 2 shows how to calculate total heat to be removed, using Thompson
Seedless grapes as an example, and how to convert refrigeration requirements into
tons of ice required.— ^ It is evident from the requirements that a fairly small
mechanical refrigeration unit would be satisfactory for transporting precooled
grapes.

However, in the case of 12 tons of lettuce loaded at U0° F. into the same
truck for the same trip, the total demand would be for removal of 12,300 Btu. per
hour — enough to melt 2.6 tons of ice during the same 60-hour trip. Since it is
not considered advisable to operate mechanical refrigeration equipment continu-
ously with no reserve capacity, only the largest mechanical units now available
could handle a load of lettuce at the same temperature at which a smaller unit
could handle a load of grapes.

Data of the same sort indicate the vital importance of precooling commodi-
ties with a high rate of evolving heat. If the same 12 tons of lettuce were
loaded at 60° F., the heat removal requirement would be 27,500 Btu. per hour,
and it is doubtful that any mechanical refrigeration unit now in common usage
could remove this heat, plus the sensible heat in the lettuce van and containers,
at a rate sufficient to prevent severe spoilage.

Temperature Ranges

For extended storage periods and optimum results, conditions under which

produce can be stored are rather narrowly defined. "Variations of 2° or 3 F.

above or below the desired temperature are in most cases too large.' 1 - Since

l/ Table 2 is patterned after ¥. T. Pentzer. Refrigeration of Fruits and
Vegetables in Transit . Davis, 1953. PP. U1-U8. (Association of American Rail-
roads, Proceedings of Conference on Transportation of Perishables at Davis, Cali-
fornia, February 5-7, 1953). The information on refrigeration requirements in
this section must not be used as a guide for actual commercial operations and are
only illustrative. Shippers of produce are advised to consult refrigeration ex-
perts for information on their own shipping problems.

2/ Rose, D. H., R. C. Wright, and I. M. Whiteman, op. cit ., p. 3.

15.

FIGURE 3

Approximate Rate of Evolution of Heat by Certain
Fresh Fruits and Vegetables When Stored at
the Temperatures Indicated

2,500

Temperature, degrees Fahrenheit

Source* Based on D. H. Rose, et al. The Commercial Storage
of Fruits, vegetables, and Florists""Stocks . Washington,
Govt. Print. Off., 19U9, pp. 7-9. (U. S. Dept. of Agr»
Circ. 278)

16.

TABLE 2

Illustration of Calculation of Refrigeration Requirements of a Truckload of
Thompson Seedless Grapes Transported for 60 Hours Under Typical Conditions

ASSUMPTIONS:

LEAKAGE OF TRAILER :

HEAT OF RESPIRATION:
HEAT FROM BLOWER:
TOTAL HEAT PER HOUR:

Cargo of 1,125 lugs of Thompson Seedless
grapes weighing 15.73 tons.

Cargo loaded and maintained at an average
temperature of U3 F.

Outside average temperature 83° F.

Trailer measures 35 x 8 x 85 feet with 3
inches of fiberglas insulation (1,291
square feet of outside surface).

Heat of respiration of Thompson Seedless
grapes at U3° F. is ii3.8 Btu. per ton per
hour.

Heat conductance of wall section of trailer
is .083 Btu. per square foot per hour.

Door leakage of trailer amounts to 15 Per
cent.

Blowers in trailer produce 500 Btu. of
heat per hour.

Walls

1,291 x .083 x UO = U,286 Btu. per hour.
Doors

U,286 x .15 = 6U3
1*3.8 x 15.73 = 689

500

6,118 Btu. per hour.

TOTAL ICE MELTED IN 60 HOURS (TONS): 6,118 x 60 0

Ihh x 2,000 ~ U£ Z

ons

RESERVE ICE REQUIREMENTS:
TOTAL ICE REQUIREMENTS:

Estimated .5 tons.
1-3 A tons.

17.

produce being transported is not generally intended to be stored for any exten-
sive period of time, refrigeration requirements are less severe than those for
cold-storage plants. A recent publication giving permissible temperature ranges
for a period of air transportation up to 1*8 hours is available.—^ These data
are generally applicable to truck movement also.

Pre cooling

One of the important developments in refrigeration of produce loads has
been pre cooling which first appeared before 1910 and was extensively adopted in
the citrus industry at that time. Widespread use elsewhere did not develop until
the late 1920's.— Precooling is especially important in truck shipment since
truck refrigeration units are often just barely adequate and trucks are often
loaded in ways which result in poor air circulation. Precooling has the advantage
of quickly removing field heat thereby quickly reducing the respiration rate.
Keeping quality is improved and the amount of refrigeration necessary in transit
is reduced. Better control and uniformity of temperature are possible when prod-
uce is precooled. Precooling may be done in separate rooms, by hydrocooling, or
in transportation equipment, especially rail refrigerator cars. When done in
cars, forced air circulation and external mechanical refrigeration are used to
provide more efficient cooling than is possible from bunkers of ice. Air is cir-
culated in reverse of the direction of normal flow during transit as a means of
compensating for the temperature gradient resulting from convection and blower
induced air circulation during transit.

The truck operator cannot afford the delay of having his equipment standing
idle while attached to an external source of refrigeration for precooling. He is,
therefore, greatly helped by having adequate plant precooling facilities. Gen-
erally, those shippers who use trucks have installed precooling rooms in their
packing sheds. One recent development at small packing plants which previously
had no precooling facilities (because they precooled within refrigerator cars)
has been to use old rail refrigerator cars set up on blocks as precooling rooms.

l/ Claypool, L. L., L. L. Morris, ¥. T. Pentzer, and W. R. Barger. Air Trans-
portation of Fruits, Vegetables, and Cut Flowers; Temperature and Humidity Re-
quirements and Perishable Nature . Beltsville, Maryland, U. S. Bureau of Plant
Industry, Soils, and Agricultural Engineering and Calif. Agr. Exp. Sta. H. T. &
S. Office Report No. 2^8, October 15, 1951.

2/ Ande rson, Oscar E. Refrigeration in America . Princeton, New Jersey,
Princeton University Press, 1953, PP. 153-155 and 251-252.

IB.

III. Functional Description of Truck Transportation
of Fresh Fruits and Vegetables

Equipment Used

For long-distance transportation of fresh fruits and vegetables, the operat-
ing costs of very large units are lower than the costs of smaller units by such
a margin that only large-scale equipment is used.

Equipment is not standardized. Specifications depend largely on the owner's
ideas. They are influenced by his financial position, the types of hauling he
expects to do, and most important, the legal requirements of the various states
regarding height, width, length, and weight. Requirements vary from state to
state, although less than formerly due to influences of the recommended minimum
standards of the American Association of State Highway officials.

Truckers choose their rigs according to where they wish to operate. A
trucker may select equipment of Derhaps limited length because it is legal in
the states with the most restrictive laws. Alternatively, he may choose equip-
ment which is larger and more economical to operate but which can be operated
in fewer states.— ^ It is paradoxical that the effect of dimensional restrictions
of various state laws is such that the larger equipment, which achieves its
greatest economy on the longer hauls, is more restricted in area of operation.
While trucks can be at least 60 feet long in the 11 most western states, the

laws make it impractical to operate equipment over US> feet long in the large

population centers of the Midwest, South, and East.-

Long-haul truck units almost invariably consist of a four- or six-wheel
truck- tractor unit hauling a van body semitrailer. Sometimes an additional full

1/ Hillman, J. S., and J. D. Rowell. Barri er s to Interstate Movement of Agri-
cultural Products by Motor Vehicle in the 11 Western Sta tes. Tucion, 1953. U7p.
(AriiL. Agr. Exp. Sta, Bui. 21*8) See also Watch Your Weight , (current edition)
Truck- Trailer Manufacturers Association, Inc. Washington, D. C. 2p.

2/ Long-wheel base tractors are used to meet the requirements of various state
laws" which incorporate formulas involving the concentr ation of weight on the high-
way. By spreading out the axles, the maximum permissible load in a unit is in-
creased. Some tractors have a movable "fifth wheel" to legthen or shorten the
over-all combination and thereby meet various combinations of load and over-all
length requirements.

19.

trailer (or semitrailer with dolly), and sometimes a larger truck hauling a full
trailer is used. The truck- tractor and semitrailer combination is preferred for
its maneuverability and the advantages of having a detachable power unit.

Van bodies with insulated walls, roofs, and floors are essential for long
hauling of perishables. There is some variation in types of insulation, but spun
glass is by far the most common. The thickness varies according to the tempera-
tures to be maintained and the capacity of the refrigeration system. Three inches
of insulation is probably the most popular and is considered suitable for loads
carried at l|0°-60° F,, but 6 inches is common for units which haul frozen fruits,
vegetables, and concentrated juices,

A typical semitrailer van, as used on the Pacific Coast, having 3 inches of
insulation all round and ice bunkers, might have the following dimensions:

Such a unit combined with truck- tractor might have an over-all length of
from U5-53 feet, depending on the design of the truck- tractor ,

Associated Facilities

Efficient truck operation requires loading docks at pickup and delivery
points. Terminals are needed where assembly, distribution, or transshipment are
common. There are a few terminals for assembly of truckloads and less-than-
truck- load- lot shipments in California, such as at the old produce market in
Stockton, where one trucker specializes in assembling small lots of produce from
many shippers and delivering it to various commission houses in Los Angeles,
Such operations are far more common in the truck crop areas of the East than
they are in California, Lack of such facilities is a common problem among the
truckers serving the produce industry; only a few of the shippers or receivers
are well equipped. Some of the large shippers by truck in the Los Angeles area
have developed elaborate assembly and loading facilities for transshipment of
produce received from the Central Valley, There are no union truck terminals
specializing in refrigerated produce.

length (outside)

width (outside)

length (inside)

width (inside)

height (inside)

weight (empty)
payload

35 feet

7 feet, 11-3/U inches
33 feet

7 feet, 2 inches

7 feet, 2-1/2 inches
10,^00 pounds
U2,000 pounds

1,706 cubic feet

volume (payload)

20.

Although it affects the quality of produce for it to undergo the temperature
changes involved in transferring it from one refrigerated truck to a loading dock
and then to another refrigerated truck, it is not uncommon for produce to be
trucked into Los Angeles from the Central Valley and there assembled into mixed
loads for shipment out of state. Upon arrival at southern or midwestern points,
such produce is, of course, reloaded into delivery trucks which may sometimes be
refrigerated units. Some service wholesalers use insulated hampers to protect
small quantities of produce during the last stage of its journey to retail stores.

Mechanics of Truck Movement

Figure h shows where California's fruits and vegetables are shipped by truck.
These shipments are almost entirely by refrigerator vans which, on the average,
hold somewhat in excess of the equivalent of a minimum or "usual" rail carload.^

The trucks assemble their loads from packing sheds, cold-storage warehouses,
or terminal markets. Trade sources estimate that about three fifths of truck-
loads originate at Valley points. Los Angeles, the main point for assembling
loads to fill out-of-state orders and for transshipments, is estimated to be the
point of origin for about one third of all loads.

Very frequently, truckers will pick up their load at a number of scattered
points rather than having the entire cargo assembled with smaller vehicles to
be loaded at one point. The truckers' willingness and ability to pick up loads
this way is among his important competitive advantages over railroads.

Brokers or the main offices of shipping organizations, in contact with
packers or units of their own organization, inform truckers where and when to
pick up the load. Mien the truck has been loaded, the trucker obtains the usual
bill of lading. He can also get an inspection certificate from an inspector of
the Bureau of Plant Quarantine, California Department of Agriculture, certifying
compliance with standardization regulations. Arranging for this certificate at
the point of loading prevents the delay and inconvenience of border inspection
later. Almost all trucks carrying produce have certificates of previous inspections

1/ The Federal-State Market News Service, Sacramento, California, made a special
calculation of interstate passings in trucks for the week of July 2$-31, 1953, and
discovered that, according to their standard conversions, the 1,U77 trucks carried
an average of 1.19 carloads per truck. Letter from Kermit Olson, Sacramento, Cali-
fornia, August, 1953.

FIGURE h

Outbound Truck Passings of Fresh Fruits and Vegetables Through California
Border Stations in Carload Equivalents, 1951, 1952, and 1953

- 1952

Total 44,646 5 1,155 55,513 533~I953

Source t Calculated from data of the U» S# Production and Marketing Administration, Federal-State Market News
Service, Sacramento, California.

22.

when they reach the border .-^ There are 16 "ports of entry" in California at

which outgoing produce is inspected. Figure § shows the relative use of the

various stations by truckers.

About one third of all loads involve pickups at three or more points.

These pickup points commonly are widely scattered, a substantial proportion

(estimated at one fourth) of multiple pickups being made at points separated

by more than 200 miles.— Responsibility for loading is shared by shipper and
driver. The trucker is also concerned with icing and precooling arrangements.
For regular icing of the load, he must proceed to an ice plant unless he has a
mechanical refrigerator unit and does not plan to use top ice.

While en route, the driver may be required to place daily "check calls" to
the receiver to give him an idea of time of arrival and to reassure him that noth-
ing has gone wrong. Upon arrival, truckers deliver the produce to the receivers
and collect transportation charges and the cost of refrigeration less an advance.
Frequently, the trucker is obliged to settle any damage claims on the spot,

A typical trip cycle of a hauler of exempt commodities is pictured in Fig-
ure 6. This may vary considerably. While most truckers operate on regular
routes, others roam widely. They seldom have ICC operating authority for any
kind of trasportation but operate under lease to authorized carriers or private
haulers when they are hauling nonexempt commodities.

Produce truckers accept a general responsibility to maintain an adequately
low temperature of their cargo and replenish ice or maintain the refrigeration
equipment at their own discretion. Generally, it is understood that ice bills
or refrigeration charges are to be added to other transportation charges. This
arrangement is considered to be sound since it minimizes any incentive on the
part of the trucker to skimp on refrigeration.

1/ In the period January- October, 1903, only 1,185 out of U6,99$ outbound
trucks carrying fruits and vegetables obtained their certificates of compliance
at the border stations. The majority obtained them at point of loading. Let-
ter from L. J. Lefebvre, California Bureau of Plant Quarantine.

2/ The estimates quoted in this section are based on confidential information
supplied by a number of large shippers and brokers who cooperated by making some
of their records available for analysis. The information was not tabulated be-
cause of noncomparability of records of various concerns. However, it is believed
that the estimates, derived from examining the records, are accurate general indi-
cations.

23.

FIGURE 5

Percentage Distribution of California Fruits and tegetables Transported
Out of California by Truck, by Border Stations, 195>0

Smith ,
Rivtr f* /
.14

,Hornbrook

nffQWOOO i ^ 23
Highway .30 \ ' DorrU 28.05

Tuleloke

.58

•

Alturat
.11

Peavine .12

Truektt 6,07

Stattline .15

Sacramento

Coleville .03

, Stockton

San Francisco f\\POaklond

Benton 2.2

Watsonvilt*

Fresno

(I Oil

Bakertf ield

Yermo
11.14

In 5.i3

'Daggett

Lot
Angelelj

Parker

2.33

Blyths
16.65

Sources U. S» Production and Marketing
Administration, Federal-State Market
News Service, Sacramento, California.

San Diego

El Cintro

Yuma
22.8

FIGURE 6

Typical Movement of Motor Vehicles Carrying California Fresh Fruit and Vegetables in Interstate Trade

and Coordination of Transportation by Shippers and Receivers

CARRYING FRESH PRODUCE
CARRYING MEAT, ETC.
EMP TY

TELEPHONE COMMUNICATION

SERVICE
WHOLESALE
CITY A

SERVICE
WHOLESALE
CITY B

SERVICE
WHOLESALE
CITY C

Shipper or
buyer coordinates
orders to make up
a truck load. Order
f .o.b. from shipper

Trucker places
"Check call"
daily after
second day

PACKING

PLANT

COLD STOR-
AGE WHSE.

Buyer deals with trucker
or packer

MIDWESTERN
MEAT
PACKER

Shipper instructs trucker
about loading arra n ge men ts

Trucker or
packer may
deal with
produce buyer

Trucker calls
when ready
for load

LOS ANGELES PRODUCE
MARKET

Shipper has facilities
in Los Angeles Market

WEST COAST MEAT
HANDLING AGENCY

Note: Meat is typical
example of what might
be carried.

25.

Mi xed Loads Popular

Data on composition of mixed loads show that these shipments are popular
and varied. The Los Angeles market in particular specializes in assembling the
extremely mixed "drug store" type of cargoes. Where large quantities of a few
kinds of produce are wanted as, for example, half a cargo of grapes and half a
cargo of peaches, the trucker is more likely to travel to the pack sheds where
the produce was prepared for market.

Mixed loads are more important in the southern part of the state. At the
southern ports of entry, Uk»3 per cent of the loads of produce leaving the state
had, in three surveys combined, five or more items, while for the state as a
whole, only 3li,5 per cent of the loads contained five or more items.

TABLE 3

Number of Commodities in Truckloads of Fresh Fruit and
Vegetable Outbound Through California Border Stations^/

Period

Number of
trucks

Per cent of trucks carrying specified
number of commodities

One
commodity

Two to four
commodities

Five or more
commodities

Total

March 9-15, 1953

887

100

April 13-19, 1953

1,011

100

July 25-31, 1953

1,177

100

a/ Complete enumeration for period stated.

Source. Compiled by U, S. Federal-State Market News Service, Sacramento,
California,

Mixed loads are almost invariably assembled by one shipper. Very few inter-
state truckers of agricultural commodities are acting as itinerant merchants to-
day, although this manner of operation was important in the 1930 's^ or accept less-
than- truck load quantities. The trucker's usual role is to follow the instruc-
tions of one shipper who may assemble the full load from several sources and who
makes a single contract with the trucker,

Fhat Produce Truckers Are Like

There is no information available on xtfhich to base a statistical descrip-
tion of truckers who serve the produce industry. They are mainly an unstudied

26.

group about whom no organization gathers much data. It appears that the majority
of them are either owner-operators or are small concerns. Most typical, probably,
are the small fleets of trucks which bring meat, eggs, or dairy products to the
West Coast. Although the seasonal pattern of inmovement of meat does not coin-
cide perfectly with the seasonal pattern of outmovement of California fresh
fruits and vegetables, these two movements have permitted haulers to obtain an
adequate load factor .-^ Generally speaking, because they have refrigerated
types of vans, the exempt haulers concentrate on cargoes requiring refrigera-
tion. They cannot make as much money hauling other exempt commodities, although
quite a lot of this is done too. Dried fruit being sent out of California is a
popular cargo of the type not requiring refrigeration. Many other truckers are
privat« haulers or independent operators under lease to meat packers or with
other long-term arrangements for movement of westbound cargo. Some have ICC
contract carrier permits. Their arrangements for eastbound cargoes are likely
to be more irregular because of the seasonal nature of fruit and vegetable pro-
duction.

Seme truckers have been able to operate at a high level of efficiency be-
cause of their success in making stable business arrangements. The most stable
arrangements for eastbound movement are those made with the chain wholesale or-
ganizations who ship regularly from integrated produce buying office in Califor-
nia to warehouses where distribution to retailers takes place. Because of the
frequent proximity of midwestern meat packers to these warehouses, truckers haul-
ing meat can make regularly scheduled arrangements. This is a great business ad-
vantage, of course, and truckers who have made such connections usually show
greater than average financial strength, business responsibility, and rate of
growth .

Few of the really large trucking concerns do much produce transportation.
Several have had some experience, and there is a certain amount of interest on
their part; but in general, the seasonality of the traffic, the technical prob-
lems and equipment needs for hauling perishables, and the unsettling effect of
uncontrolled competition from small independents have caused them to stick to
other transportation. That competition from the independents is the most signifi-
cant factor is suggested by the larger conern's interest in hauling frozen foods
and meat where the technical problems are similar but competition is controlled
by ICC regulation.

1/ This is according to trade reports. There are no data on the monthly ship-
ments into California of fresh meat.

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27.

In several ways, the methods of operating of the large organizations would
interfere with their giving as effective service to the produce industry as can
be obtained from the independents. For example, a system of division points and
the adherence to rigid time schedules which is almost essential for large opera-
tors probably means longer times en route. Also, the larger organizations tend
to shun shipments to points off their regular routes since their operation re-
volves around facilities and managerial staffs, a bases of operation along their
usual routes. On the other hand, there are important ways in which the larger
trucking organizations can render a more effective service.

The Market for Truck Transportation of Produce

Truck shipments are almost entirely f .o.b. and are carried out in accord-
and with the receivers' or buyers' instructions. The receiver may undertake
the responsibility of providing the truck. He may have made arrangements with
a near-by midwestern trucker or he may contact a truck broker when he wishes to
place his order for a truck. Shippers are unenthusiastic about such general in-
structions as "ship by truck" and usually attempt to make the receiver specify
the particular truck broker or truck line he wishes to have used or make specific
trucking arrangements. Receivers have preferences for certain truck lines and
often specify the truck line anyway.

In the past few years, in response to the need for coordination, truck trans-
portation brokerage has come into existence in California.

Although relatively new in California, there have been truck transportation
brokers in eastern and southern produce markets for some time.^/ They appeared

1/ Transportation brokerage is known throughout the trucking industry and i3
expressly recognized as part of the transportation function in the Motor Carrier
Act, 1935. Brokers arranging transportation which falls under the jurisdiction
of the ICC must be licensed and are regulated by the ICC, Similarly, many state
agencies covering motor transportation include brokerage within the scope of
their actions. But brokers who deal only with interstate movement of commodities
exempt from ICC regulations are al30 exempt.

The California Public Utilities Commission has decided that, on the basis
of a recent court case and an ICC ruling, it has the authority to regulate truck
transportation brokers who deal in interstate movement of ICC exempt commodities
where the ICC has not occupied the field. This claim is based on a rather am-
biguous state law passed before the Motor Carrier Act, 1935. Several brokers
registered in 1953 and were granted licenses after hearings, but, generally
speaking, truck transportation brokers arranging interstate movement of exempt
commodities do not agree that the California Public Utilities Commission had any
jurisdiction. In the summer of 195H, the Public Utilities Commission warned
shippers of dried fruits against hiring exempt truckers for less than Public
Utilities Commission established rates, even in interstate commerce.

Mft -eh^'Af^ %$Sfi ^ - t '6£& ■ -&$Mk "iu>»»it ;e$di

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. ' : Via* a$Mi» f ' M W ' U ' i

28.

with the development of extensive produce- trucking operations which, because they
are nearer to the populous East, became established in the East and South markets
earlier than on the West Coast. Some of the earliest truck brokers to be estab-
lished in California had southeastern experience, and some of the southeastern
brokers established branches in California, No state except Florida approaches
California in number of truck brokers. In California, more than half of the
brokers are located at Los Angeles.

The commonly used name of these brokers is "truck brokers" although the
term "truck transportation broker" is a more accurate description of what these
brokers do. To avoid the control of the ICC and the state agencies, brokers
who operate in the produce industry often restrict their operations to inter-
state movement of exempt commodities. A truck transportation broker is a focal
point of the needs of shippers and truckers. He exists because of his ability
to coordinate supply and demand and to provide a service of coordination more
efficiently than can many individual shippers and truckers on their own. A
typical shipper will have on his desk the telephone numbers of many truck bro-
kers or private haulers furnishing trucks, and he will check with them about
availability, quality of trucking equipment, and rates. Most shippers make a
practice of calling up several different truck transportation brokers from time
to time to keep an eye out for bargain rates.

Brokers operate in several different way3. For example, a trucker who deals
regularly with a certain broker will give him a general idea of his schedule and
the areas to which he is willing to transport California produce. The broker
will keep the trucker informed of the business outlook. While traveling toward
California, the trucker may telephone the broker well before his arrival and tell
him where he is going and when he will be ready for a backhaul.

When necessary, truck brokers solicit business for the trucks at their dis-
posal. Upon locating a load for a trucker, the broker gets in touch with him,
makes certain that he is not otherwise committed and that the terms and desti-
nation are acceptable. The broker then reports to the shipper and arranges the
time of arrival of the truck at the packing shed. The physical movement of the
truck is only slightly changed by the action of the broker, but much time and
energy may be saved.

The truck broker has been largely the coordinator of the small, independent
truckers, and it has been estimated that three fourths of trucks handled by bro-
kers fall into this category. Only about 12-15 per cent of all truck movement

9P« 9-3$; ltv*X*l

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29.

is accounted for by brokers .-^ The remainder is taken care of by direct dealing
between the trucking agency, the receiver, and the shipper. Sometimes brokers
outside of California may be involved.

Generally, the very large private haulers, such as the midwestern meat
packers, are well equipped to make their own arrangements. For example, a mid-
western meat packer could have his transportation department negotiate with near-
by produce houses. Since there are a number of fairly large chains of wholesale
produce dealers in the Midwest, this is relatively easy. With their fairly pre-
dictable demand, these firms can agree a week in advance to load a truck for the
haul from California.

1/ Replies from six brokers performing the bulk of California truck broker-
age indicate that the combined 1952 total of all truck brokerage was about 6,300
truckloads. This amounts to about 12 per cent of the interstate passings by
truck reported by the Federal-State Market News Service.

.■

t& c *2R&«£Q >:'-»i£K^ai- fe-fl-vU'o^nr)^ •^9^^r::^M^*^t^i'^^^;": , *jtiT. i '

30.

IV. Public Regulation and Truck Transportation
of Fresh Fruits and Vegetables

How It Came About

Regulation of transportation by administrative agencies began with railroads
in the 19th century following in large measure well-established principles devel-
oped from English common law. Today motor transportation laws and regulations
govern rates, entry into the transportation business, the kind of service, and
the equipment which may be used. Transportation confined to one state is regu-
lated by state agencies of which the California Public Utilities Commission,
formerly the Railroad Commission, is an example. Interstate land transportation
is the domain of the ICC. Originally, the regulation of railroads grew out of
the demand for reform of abuses common in the early days of railroading. Since
that time, the transportation industry has changed very much, and the basic laws
and regulations governing transportation have had to be updated repeatedly.

Motor carrier regulation came in 1935 some time after interstate motor
transportation had become well established. The need for regulation was evident,
by that time, to the railroads, shippers, the various states, and the motor car-
riers themselves. Regulation had been made urgent by the rapid growth of long-
haul traffic by truck and the limited authority of the states under the interstate
commerce clause of the Constitution. Regulation of interstate trucking was es-
tablished by the Motor Carrier Act, 1935, which became Part II of the Interstate
Commerce Act.

Regulation under this Act stipulated standard safety practices, limitation
of the number of certificated or permitted carriers, and often required common
carriers to maintain service where they might prefer to drop it, even though it
would leave some communities with inadequate transportation. Rate regulation
in trucking more often aimed at limiting cut-rate competition than at control-
ling monopoly. Regulation is under the Interstate Commerce Commission. The ICC
is in a rather complex position. It establishes, by congressionally authorized
procedures, regulations of wide scope; holds hearings on suspected violations of
those regulations; and adjudicates those same hearings. It both detects and
punishes violations. Thus, the ICC combines within itself elements of legisla-
tive, judicial, and executive branches of the government.

Regulation as a Barrier to Interstate Commerce

The regulations and agencies of the various states affect interstate motor
transportation even if the states cannot regulate interstate transportation

■ ;'Vf
* V

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31.

directly. State regulations must be complied with by all vehicles within the
state and, where a vehicle must pass through a number of states, the variety of
these regulations can be a serious impediment. The more states a truck passes
through, the more complex becomes the problem of complying with regulations of
equipment, dimensions, weight, and axle loading. The restrictions of the most
limiting state in effect determine the truck types which can be used over the
entire route. Since the larger equipment is generally most economical on the
longer hauls, this type of limitation is of most concern to the long-distance
haulers •

While no state can constitutionally levy import or export duties except as
may be absolutely necessary for operation of inspection laws, a number of port-
of-entry and quarantine requirements are in effect. States and smaller political
divisions can apply fixed fees and per-ton or per-mile fees to trucks passing
through them. Despite reciprocity agreements, an interstate motor carrier gen-
erally must pay fees in several states. State annual fees in 1950 ranged from
$U5-$830. They generally are higher for common and contract carriers than for
private carriers and generally apply whether or not the trucker does any busi-
ness in that state. Gasoline in the tanks of trucks passing through a state is
sometimes taxed at the ports of entry.— ^

Local regulations severely limit itinerant merchant truckers almost every-
where, and although this group no longer has its former importance in fresh fruit
and vegetable marketing, it might reappear on a larger scale if the current
strong demand by established merchants for truck transportation were to decline
so that truckers might be encouraged to be merchants.

1/ There has been extended discussion of trade barriers arising from regula-
tion. See :

Purcell, M. R. Interstate Barriers to Truck Transportation . U. S. Bureau
of Agricultural Economics^ Washington, Govt. Print. Off., December, 1950. Proc-
essed.

Hillman, J. S., and J. D. Rowell. Taws Relating to the Interstate Movement
of Agricultural Products in the 11 Western Sta les. Tucson, May, 1952. (Ariz.
Agr. Exp. Sta. Report No. 109)

Hillman, J. S., and J. D. Rowell. Barriers to Interstate Movemen t of Agri-
cultural Products by Motor Vehicle in the g We stern St ates . Tucson, 1953. U7p .
-^Ariz. Agr. Exp. Sta. Bui. 2U8)

Taff, Charles A. Commercial Motor Transportation. Chicago, Richard D.
Irwin, 1950. (Chapter 13, "Restrictions of Interstate Movement of Goods")

In addition, fruit and vegetable markets and the firms and persons operat-
ing in them have been regulated by the U. S. Department of Agriculture under the
provisions of the Perishable Agricultural Commodities Act. Solely transportation
companies are not covered but are indirectly affected by this Act.

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32.

There is a great lack of uniformity in the types of control which state
agencies exercise over intrastate motor transportation. Sometimes it is more
strict than that of the ICC. In California, for example, there are far fewer
exemptions than there are under ICC regulation. At the same time, it is easier
to obtain permits to engage in general contract hauling within California from
the California Public Utilities Commission than it would be to obtain comparable
permits for interstate hauling.

Classification of Motor Carriers

The Motor Carrier Act, 1935, established a classification of motor carriers
as common carriers, contract carriers, private carriers, and exempt carriers. A
common carrier by motor vehicle is defined in the Act as "any person which holds
itself out to the general public to engage in the transportation by motor vehicle
in interstate or foreign commerce of passengers or property or any class or
classes thereof for compensation, whether over regular or irregular routes /ex-
cluding railway express/." Of all classes of motor carriers, the common carriers
are most thoroughly regulated. They must follow specified uniform accounting and
record- keeping systems, conform to regulations on fitness of drivers, safety,
types of equipment, and maximum hours of continuous service by drivers. The same
regulations apply to their issuance of receipts and bills of lading as apply to
railroads. The language of the Act requires that common carriers must publish,
file, and adhere to just, reasonable, nondiscriminatory, and nonprejudicial rates,
fares, charges, and regulations and must arrange just and equitable divisions of
joint rates in which they may participate. All these matters can be regulated
by the ICC. Before undertaking to do business at all, a common carrier must ob-
tain a certificate of public necessity and convenience from the ICC. Today, such
a certificate is obtainable only after a long and expensive public hearing if at
all.

The term, "contract carrier by motor vehicle," means any person, who under
individual contract or agreement, engages in transportation for compensation.
Contract carriers must publish and adhere to rules, regulations, and minimum
rates, but they can charge more than the minimum. Furthermore, the ICC can,
when necessary, establish the minimums. Contract carriers are issued permits by
the ICC. In practice, the differences between a common and contract carrier may
sometimes be subtle, but the principle underlying the distinction is that, while
a common carrier will deal with the general public, a contract carrier will deal
only with a limited number of private individuals. No person can ordinarily serve
both as a common and contract carrier over the same routes.

- •

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33.

Private carriers are these persons, not common or contract carriers, who
transport their own property for "sale, lease, rent, or bailment" in any commer-
cial enterprise in their own or leased vehicles. An example of importance in
fresh fruit and vegetable marketing is the midwestern meat packer.

The Exempt Interstate Carriers

A large class of interstate carriers is exempt from the major part of the
regulations of the ICC. This includes motor vehicles engaged in carrying "live-
stock, fish, or agricultural commodities not including manufactured products
thereof if such motor vehicles are not used in carrying any other property or
passengers for compensation."^

The agricultural exemption means that ICC does not have the power to pre-
scribe rates or limits on rates, and rates do not have to be published. There
is no restriction upon discriminatory business practices by truckers of exempt
commodities. However, the same safety regulations apply as for nonexempt truckers.

Exempt Commodities

What constitutes an unmanufactured, agricultural commodity was clarified in
a hearing following the so-called "spinach" or Harwood case. Agricultural com-
modities falling within Section 203(b)(6) were said to include:

1. Fruits, berries, and vegetables, which remain in their natural state,
including those packed in bags or other containers, by excluding those
placed in heremetically sealed containers, those frozen or quick fro-
zen, and those shelled, sliced, shredded, or chopped.

2. Fruits, berries, and vegetables dried naturally or artifically, in-
cluding raisins.

3. Seeds, including inoculated seeds, but exclu ding seeds prepared for
condiment use or those which have been deawned, scanified, or other-
wise treated for seeding purposes.

U. Forage, hay, straw, corn, sorghum fodder, and corn cobs.

5. (a) Hops and castor beans and (b) leaf tobacco but excluding redried
tobacco leaf.

1/ Section 203(b)(6) of the Motor Carrier Act, 1935. Also, farmer owned ve-
hicles transporting farm produce or supplies, and vehicles of agricultural co-
operatives, are excluded from regulation. Formerly, the exemption applied only
to carriers hauling exempt commodities exclusively . Under the ICC ruling of
February 1, 1951, the exclusiveness of exempt hauling is no longer required, and
common and contract carriers may haul exempt commodities without regulation of
rates provided they do so in straight loads. This ruling was the outcome of the
cases of ICC versus Dunn and ICC versus Service Trucking Company, Inc. The agri-
cultural exemption was expanded by law in 1952 to include horticultural products.

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3U.

6. Raw peanuts and other nuts unshelled .

7. Whole grains, namely, wheat, rye, corn, rice, oats, barley, and sorghum
grain, not including dehulled rice and oats and pearled barley.

8. (a) Cotton in bales or in the seed, (b) cottonseed and flaxseed, and
(c) ramie fiber, flax fiber, and hemp fiber.

9. Live poultry, namely, chickens, turkeys, ducks, geese, and guineas.

10. Milk, cream, skim milk, including that which has been pasteurized,
standardized milk, homogenized milk and cream, vitamin D milk, and
vitamin D skim milk.

11. Wool and mohair, excluding cleaned and scoured wool and mohair.

12. Eggs, including oiled eggs, but excluding whole or shelled eggs, fro-
zen or dried egg yolks, and frozen or dried egg albumen.

13. (a) Trees which have been felled and those trimmed, cut to length,
peeled or split, but not further processed and (b) crude raisin syrup,
maple sap, bark, leaves, Spanish moss, and greenery.

111. Sugar cane syrup, sugar beets, honey in the comb, and strained honey.

All of the listed commodities are exempt, no matter how much sorted, boxed
or packaged, washed, refrigerated, fumigated, ripened, dried (not dehydrated),
shredded, chopped, or sliced. A packaged salad mix was not considered to be
manufactured. On the other hand, the following were held to be manufacturing
operations, and transportation of fruits and vegetables subjected to these opera-
tions is not exempt: salting, crushing, extracting, steaming or filtering,
blocking, canning, freezing (quick freeze process), dehydrating, evaporating,
grinding (dry), fermenting, and splitting (peas).

After the findings outlined above, it was widely assumed that the agricul-
tural exemption was a settled matter. However, recently a court ruled that
dressed poultry is also exempt. This interpretation has threatened to expand
the scope of the exemption considerably.

Consequences of the Exemption

The transportation of exempt commodities is exempt, no matter by whom it is
performed. The major economic significance of the agricultural exemption lies in
its creation of a special group of commercial motor carriers who haul agricultural
produce beyond the first point of sale. Just as with haulers of general merchan-
dise, their business is primarily transportation, but by hauling exempt commodities
only, they escape the bulk of regulation to which other carriers are subjected.
Their whole manner of doing business is conditioned by this fact. Common and
contract carriers hauling general commodities have found it impossible to com-
pete with these exempt commodity specialists.

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35.

The large volume of exempt traffic available has tended to support a large
number of small trucking concerns without any ICC operating rights. But this
same group is free to lease out to carriers who do have rights, and, in this
way, they succeed in hauling a large volume of nonexempt traffic. This type of
leasing has been of great significance in motor transportation. The exemption
is under regular attack from fully regulated carriers and the railroads who urge
that haulers of agricultural commodities beyond the first point of sale should
be covered by the general body of ICC economic regulation.

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36.

V. The Trip-Lease Controversy

Economics of Exempt Trucking

The term "load factor" refers to the ratio of ton-miles of transportation
actually performed to ton-miles that would have been performed if a truck were
fully loaded at all times. The small truckers who serve the fruit and vegetable
marketers of California depend on having a high load factor for their business
profit. Since few of the loads available for movement toward California are
exempt, they can achieve an adequate load factor only by frequently leasing
their trucks—with themselves as drivers— to carriers authorized to haul the
general class of commodities which are not exempt. Frequently, these leases
cover a single trip only. How these arrangements have worked in the past and
their uncertain future were discussed in a recent report of the ICC:

"Trip leasing of exempt trucks by authorized carriers occurs only
where two conditions exist: there are a number of exempt carriers haul-
ing agricultural commodities from an area which the regulated carrier is
authorized to serve, and there is more freight offered to the authorized
carrier for transportation to that area than is offered from that area.
This Commission originally interpreted the exemption of agricultural
trucks 'motor vehicles used in carrying property consisting of . • . agri-
cultural commodities ... if such motor vehicles are not used in carry-
ing any other property or passengers for compensation' as applying only
to trucks which are not used at any time in transporting other commodi-
ties for the carrier. This interpretation prevented regulated carriers
from transporting agricultural commodities in the direction of their
light movement of general freight, because they were required to file
rates and observe them and could not compete with the unregulated ex-
empt carriers. When the courts reversed the Commission's interpretation
and said that the exemption applied to trucks not used at the same time
to haul exempt and other freight, it became possible for regulated car-
riers to balance their loads by hauling agricultural commodities in one
direction without regulation of charges and hauling general freight
under regulation in the opposite direction. This removed the need for
trip leasing of exempt trucks in order for regulated carriers to bal-
ance their loads. This has resulted in a situation in the southeast
section of the country— where the court decision was first made —
wherein the regulated carriers are not handling agricultural commodi-
ties to such an extent that trip leasing of exempt trucks has become
negligible. In other parts of the country, however, the hauling of
exempt commodities by regulated carriers has not been as extensive up
to this time."!/

1/ U. S. Congress. House. Committee on Interstate and Foreign Commerce.
Effecl of Trip-Lease Prohibition on Cost of Farm Produce Transportation; Trip
Leasing . Hearings, «3d Congress, 1st Session of H. R. 3202. April 21, 22, 23,
2E] 30, and May 7, 1953. Washington, Govt. Print. Off., pp. k91-U°2.

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37.

There are two particularly noteworthy points in this statement: (1) the
Commission's argument that the cases of ICC versus Dunn and ICC versus Service
Trucking Company, Inc ., produced a fundamental reversal in the economic neces-
sity for trip leasing and (2) the suggestion that trip leasing falls of its own
weight once it becomes possible for the permitted and certificated carriers to
engage in the hauling of exempt commodities at competitive rates.-'

If, as suggested, the time is ripe for the western common and contract
carriers to take over exempt trucking, they have been slow in realizing it.
Among large western motor carriers recently adding refrigerator vans to their
equipment, there has been considerable interest in nonexempt frozen fruits and
vegetables and fresh meat brought from the Midwest but very mijior interest in
fresh fruits and vegetables. The carriers do recognize that the possibility of
obtaining some fresh fruit and vegetable business during periods when frozen
food traffic is light adds to the soundness of engaging in refrigerated trans-
portation of nonexempt commodities.

Ex Parte No. MClt3

The ICC has proposed in Ex parte No. MCU3 that the common and contract car-
rier not be permitted to lease owner operated trucks for less than 30 days at a
time. The original Ex parte MCH3 has been considerably modified.- At present

1/ Neither certificates nor permits are issued for hauling exempt agricul-
tural commodities. However, certificated and permitted carriers are free to
haul exempt commodities and are unregulated when hauling them in straight loads.

Private carriers are also unregulated, except for safety regulations, pro-
vided their transportation of nonexempt commodities is auxiliary to their regu-
lar business and not the main part of it. They can haul exempt commodities as
much as they wish.

2/ Ex parte No. MCU3 was released in January, 19U8. Extensive hearings were
held starting in October of that year after which ICC examiner H. C. Lawton re-
leased proposed rules governing the lease and interchange of equipment. His re-
port was reviewed in Traffic World , September 3, 19U9> PP. 33-37. There was a
series of further hearings and changes in the proposed rules. See the current
version in U. S. National Archives and Record Service, Division of the Federal
Register, Cumulative Pocket Supplement to the Code of Federal R egulations.
Title U9. "Transportation Part 165 to end, for use during 195h . Section 207
Lease and Interchange of Vehicles, pp. 99-lOij.

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it provides that authorized carriers may lease equipment provided with the
driver for less than 30 days in certain special cases. These include trucks of
farmers and farmer cooperatives used only for occasional for-hire transportation
and the trucks of the professional exempt truckers in certain cases, such as
when they have just completed a haul of exempt commodities and are headed back
in the general direction from which they came or to their headquarters.

Why the ICC Is Concerned

Any circumvention of the letter or spirit of the law is of consequence to
the ICC: first, because the law and the regulations are being avoided and the
purpose of the Act thwarted; and, second, because pressure is put on other trans-
portation agencies for whose economic health the ICC is responsible. Further-
more, enforcement of highway safety by the ICC is at present made exceedingly
difficult by trip leasing as the irregular operations of the individual truckers
hauling nonexempt commodities under lease make them difficult to locate and check.
Tightening up regulations on leasing and interchange of equipment also would
clear up many ambiguities and make it more possible to eliminate some of the bor-
derline practices.^ But, at the same time, the ICC recognizes that tighter con-
trol of leasing will have substantial economic impacts upon the trucking industry.
Other transportation interests are interested in the trip-lease issue for this
reason also.

The irregular practices of much trip leasing are a thorny problem. The
lease of a truck fulfills ICC regulations if the truck is in exclusive posses-
sion and control of the leasing trucking company. However, most truck owners
who lease their trucks want to drive them too. If they also solicit loads for
their truck, they are really contract carriers, and the law forbids anyone to
act as a contract carrier without a special ICC permit, which these truckers do
not have. One way in which operations by unauthorized carriers can be "legalized"
is for the lessee to add the owner of the vehicles to his payroll for the

1/ See report of speech by Commissioner A. F. Aspaia, "The Future of Public
Transportation." Traffic World , vol. 99, no. lit, April 3, 19$h, pp. 23-2U.

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39.

duration of the trip.i^ This employment is easily recognized as a fiction,
particularly where the lease does not cover a round trip and the "wage" and
"rental" are on a share basis. With a genuine lease of equipment, or genuine
employment, the hiring party would be expected to return the man or equipment
to the point at which he was hired and to be liable for a given wage or payment
regardless of the revenue earned. Under the usual trip-lease type of arrange-
ment, "employment" lasts only to the point of destination. Most of the carriers
using owner-operator equipment concede that, after completion of a one-way trip,
they assume no responsibility for the owner-operator or his equipment.

An owner-operator might very well have a standing arrangement to be
"employed" to haul cargo westbound on successive trips while the eastbound
traffic arrangements were strictly the owner-operator's responsibility. Several
midwestern meat packers have made such arrangements. The refrigerated vans,
suitable for meat, are also ideal for eastward movement of fresh fruits and vege-
tables. The truck owner-operator solicits business in California, perhaps
through a truck broker, or makes arrangements with midwestern produce receivers
before he leaves the Midwest. On the westbound hauls he is an "employee" or
under lease, and, where the eastbound hauls are not performed under lease to the
same midwestern shipper (as they usually are not), he must make a separate lease
for each westbound trip. For all practical purposes, he is acting as a contract
hauler for both eastbound and westbound shipments.

Effect of ICC Proposal on Produce Marketing

Marketers of California produce are interested in the quality of service,
the volume of transportation available to them, and the rates which are charged.

1/' Other practices are for some owner-operators to solicit business and then
arrange with some authorized carrier to legalize the transportation through a
trip lease, the revenue being shared. Another arrangement is for the owner-
operator to "purchase" the cargo, pose as an itinerant merchant in case he meets
an ICC investigator, and then "sell" the cargo to the consignee at cost plus
transportation charges. The ICC finds these practices, when skillfully per-
formed, to be completely uncontrollable. It should be noted that these subter-
fuges are an outgrowth of the near impossibility of an owner-operator's obtain-
ing a license for a given route, the ICC and the Act serving to restrict the
number authorized. licenses are granted only when public convenience and neces-
sity can be proved in a hearing—which is very expensive and in which those
already operating the proposed routes undertake to prove that they can adequately
handle the business and that more carriers are undesirable. Further, licenses
tend to limit the geographical range of operations more severely than would be
practicable for single-unit owner-operators. (See the discussion of these prob-
lems in Interstate Commerce Commission, 67th Annual Report , 1953, pp» 55-59.)

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ho.

All three would be affected by the trip-lease proposal. How great the effect
would be is hard to tell since neither the extent to which the present arrange-
ments would be disturbed nor possible alternative arrangements can be known.
For that matter, our uncertain knowledge of the present trucking industry is a
major limitation on estimating possible future change.

If the authorized carriers cannot trip lease the trucks of the group
which hauls exempt commodities at other times, they will have to make some other
arrangement for their trucks, and by doing so they will deprive this group of a
large share of this revenue. Naturally, this will reduce their numbers and in-
crease their costs per trip to the detriment of the fresh fruit and vegetable
shippers. However, a substantial proportion of the truck transportation avail-
able for produce would not be affected by the trip-lease proposal at all.
Truckers who now restrict themselves to exempt commodities at all times would
not be affected. Private haulers would not be affected (other restrictions
prescribe trip leasing by them); this group could continue hauling exempt com-
modities legally and could remain an important source of agricultural commodity
transportation. In addition, often truckers who at present do trip lease would
be able to take advantage of the provision that trip leasing at the conclusion
of an exempt haul is permissible. In addition, the authorized carriers may be-
come more interested in exempt commodity hauling, often as ayneans of increas-
ing load factors for newly acquired refrigerator equipment .-

The quality of service rendered by the independents has been shown to be
unsatisfactory in many respects. It would not be improved or much affected by
Ex parte No. MCU3 except for a complicated concern of the trucker over the
proviso which would permit trip lease so long as he had just completed an

1/ General operating practices of common and contract carriers, adapted to
the~handling of nonexempt commodities, would almost certainly be carried over
into their exempt commodity operation. Many common carriers view the business
practices of the fresh fruit and vegetable marketing industry with unconcealed
distaste and would be less satisfactory suppliers of transportation for this
reason if for no other. These carriers have financial strength to resist rate
cutting when their equipment is idle. The authorized carriers habitually ad-
here to fixed rate schedules and would likely continue to do so even when not
required by law.

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exempt haul. Truckers would be particularly anxious to avoid completing non-
exempt hauls into areas where exempt hauls were not available.

Effect on the S t ructure of the Tru cking Ind ustry

It is clear that the limitation imposed on leasing will force many car-
riers to acquire new equipment. Having this equipment on hand, the authorized
carriers undoubtedly will seek out means of employing it during slack seasons.
The repercussions of such a trend are impossible to evaluate. The motor car-
riers will seek out new traffic, including some not previously considered
profitable for truck transportation.

If the trip- lease proposal becomes effective, the independents without oper-
ating rights must eventually be reduced in number and develop new means of oper-
ating. For a time they may restrict themselves to exempt hauling. Temporarily,
there may even be an increase in the number of trucks available for produce trans-
portation. The major reduction in numbers would come through failure to replace
worn out equipment. It is, of course, problematical whether the added restric-
tions would cause private concerns doing their own trucking to shift to other
means of transportation or to expand their lines of business to make good use of
their vehicles in both directions. Contract and common carriers would likely
make inroads into private hauling by virtue of a 30-day minimum on leases.

Exempt haulers who were forced to restrict themselves to exempt commodities
in both directions might compete where they have not been important before (East

Coast fish to California). Agricultural commodities now shipped into California
by rail would be likely candidates for truckers to substitute for nonexempt loads.

In general, the most important sources of rail shipment of agricultural products

into California are the Pacific Northwest and the Midwest— important markets for

California fresh fruits and vegetables.

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U2.

VI. Why Trucks Are Used Instead of Railroads

There are many explanations as to why trucks are being used more and more.
The economic advantage of the shippers is the key, but a complete analysis of
the advantages would be too complex to undertake here. We can discuss some
factors which, although not necessarily the most important in over-all trans-
portation policy, are special to fresh fruit and vegetable transportation.
Other important related issues, such as whether truckers pay their full share
of highway costs, have been avoided because to cover the necessary points would
take us too far off the subject of produce transportation.

What Users Said

A large number of fruit and vegetable men reported that usually it was not
entirely the price but also the type of service that truckers gave which inter-
ested them. What these men reported— and some points were reported over and
over __indicates the advantages which shippers hope to get from trucking. The
disadvantages of using trucks which they mentioned should suggest to truckers
how they could improve their service.

Claimed advantages to shippers of using trucks were:

1. Multiple pickups and deliveries can be arranged with trucks where
they could not be arranged with rails. Split and mixed load
arrangements are often taken by truckers without extra charges
which railroads would require.

2. Frequently, a truck can be obtained for loading more quickly than
a railroad car.

3. Fruits and vegetables shipped in trucks often arrive in better
condition because of speed of transit.

U. There is less mechanical damage in truck transit than with rail-
road cars for many fresh fruits and vegetables (but not all).
The expensive stripping, bracing, and heavy containers necessary
in rail shipment are not necessary in trucks.

£. The regulations of railroads concerning irregular containers or
methods of loading have no parallel among truckers. Since irregu-
larly packed produce is often available at bargain rates, use of
trucking may permit a business advantage.

6. Claim adjustments with truckers often can be made on the spot
while the process of claim settlement with railroads is involved,
drawn out, and less likely to be favorable to the claimant.

7. Price risk is reduced by shorter transit time and the decreased
possibility of a price change while in transit.

8. Rates are lower.

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fegeg ai aatT .fcjdr*

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U3.

Trucking Is Mast Effective In Smaller Markets

It is in shipments to the smaller towns without terminal markets that
trucking is most effective. The reason is that it is just about as easy for a
truck to operate into a small out-of-the-way town as a big city— perhaps even
easier— and railroads are better able to handle traffic between major terminals.
Also, most shipments to small towns are small. Unfortunately, it is not practi-
cable to ship less than carload lots of perishable produce for great distances
by rail. Before trucking developed, the small-town receivers frequently had to
buy a full week's supply at a time, and some of the produce would be rather
wilted before it was all sold. Now, by using trucks, they can receive more
frequent small shipments. "When buying by rail, small-town receivers sometimes
split up a car among several receivers. It is almost essential that they all
be on the same rail line. local truck distribution of a rail carload received
at some central point is quite common.

Still Room for Improvement

Trucking has its limitations also. Present-day truck operation is not
adapted to the important volume of non-f .o.b. selling in the terminal markets
and particularly in the auction markets. For one thing, these markets have fre-
quently been designed for efficient railroad loading or unloading. Sometimes,
through their ownership of the markets, railroads can exert pressure against
trucking. In addition, there are many small snippers without outstanding repu-
tations who must almost always ship for auction sale or subject to inspection,
and truckers have generally not been willing to transport cargoes where a
definite receiver is not completely responsible for accepting it.

The objections to trucks make an impressively long list even though they
do not seem to have prevented the growing use of trucks by the objectors. Among
the disadvantages of trucking in the shipper's and receiver's "plant" operations
were the following:

1. Trucks must be loaded quickly at the point of shipment, often
requiring the disrupting of packing-house routine and employment
of a larger crew for fewer hours* Overtime occasionally is made
necessary by late arrival of trucks and insistence of the trucker
on prompt loading.

2. Truckers often do not report for loading at the agreed time.

3. Truckers frequently do not have adequate "know-how" in loading,
refrigeration, and the protection from weather extremes while
en route.

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'•$^nro% '09

kh.

U. Trucks, more than railroads, have delaying emergencies en route-
such as accidents, breakdown of equipment, action of public
authorities for traffic violations, overweight, etc.

5. Icing facilities for trucks are not so widely established nor so
well organized as for railroads.

6. Additional precooling facilities are sometimes necessitated by
extensive use of trucks since adequate precooling is particularly
essential with trucks.

7. Truckers will seldom permit their vans to be used for temporary
cold storage in the manner in which receivers frequently use
refrigerator cars when storage facilities are crowded or loads
arrive at inconvenient times. Truckers usually insist on prompt
unloading.

8. Special loading facilities must be constructed where trucks are
used extensively.

9. Lack of uniformity of equipment is more of a problem with trucks
than with railroad cars.

Some disadvantages of using trucking affect primarily "front office" opera-
tions of shippers and receivers, for example:

1. The financial responsibility of a trucker is often uncertain.

2. A bill of lading issued by the exempt trucker does not have the
same standing as a business document as does a railroad bill of
lading.

3. The irregularity of truck transit time means more uncertainty in
planning day-to-day business operations than with railroads.

U. While there have been relatively few claim adjustment problems
with trucks, the uncertain effectiveness of legal procedure and
adjustment systems is a problem in the eyes of many shippers and
receivers. For example, most truckers probably would not pay
claims based on loss of market through unexpected delays in
transit.

$, For receivers whose business establishments are in terminal
markets owned or controlled by railroads, to use long-haul
trucking exclusively may be awkward.

6. Failure of truckers to adhere to published rates means that rate
bargaining and close watch of truck rates are essential. This
is a business complication avoided by using railroads.

7. There are no diversion privileges with trucks, and often there
is no way of getting in touch with the trucker while en route.

8. Truckers often will not accept certain types of fresh fruits and
vegetables. For example, wet-pack lettuce is disliked by many.

Transit Time

Speedy transit is a highly Important advantage of trucks both as a means of
reducing price risk and because of improved quality of the fresh fruits and

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«3nxJbsoXn»

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•atso bscti'xin dJ±w asd*

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15.

vegetables en rtnL How ™* trU * B «" ^ **" \

great deal upon the trucker. With many, times en route are somewhat irrefalar.
Generally, truck schedules approximate railway express schedules.^ while evi-
nce on L travel times of truckers is scanty, information from truck brokers,
shippers, and receivers on the number of hours which can be taken as the rea-
sonably certain maximum for truck delivery to various zones was obtained ar»i
used to prepare Figure 7.

~Rates inevitably attract more attention than any other single point. What
rates are charged and what incidental costs must be included in figuring fetal
transportation costs are important to all shippers. They also consider differ-
ences in services rendered, so direct comparison of rates alone is not com-
pletely adequate. It is not possible, furthermore, to obtain completely
satisfactory information on either rates or services.

So far as the rate part of transportation costs is concerned, rail trans-
portation charges can be determined precisely by those who know how to interpret
them in the published tariffs. The California Grape and Tree Fruit league's
Transportation Department has summarized rates on deciduous fruit from Califor-
nia to United States and Canadian points. Figure 8, which is based on the

i/ p.n wa v Express service guarantees fourth-morning delivery to Chicago,
1/ Railway Express service & U *V daliverv to East Coast markets,

Minneapolis, and St. Louis, and fifth-morning del ivery ™J£ S Railroad started
except sixth morning for Boston. On May J«#Wgj *J ^ov e f rSS and vege-

for departure on eastern trains.

For this extra service, there is a of
SS-Sn: relJKfore sSpmentYs Xg^ST J» must be for
points which are no farther west than Kansas City.

^ing 0*>e and August, ^^^^^^Z^ -ST
trains and were generally reported to ^™ ^iv^ in g

a comparable service.

See further discussion of Santa 1?JW** ™ ■JSEZtiSEtiR *

Bureau of Agricultural Economics. Marketing and lransporxa __

Washington, Govt. Print. Off., October-December, jyw, pp. 33-3U.

| ta« «*O*W0 w ,«,« aJ ^ oviui ^ to* nts , M0 , :£dMC5

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M y?/ - 1 ' U " : >w f ■^ Lf n - 5 r!? . ?fe-1 •scicroiiocl Xs^«i;ox«A So i«m<rt?

FIGURE 7

Estimated Maximum Transit Times in Hours for Truckload of Fresh Fruits and
Vegetables Shipped from Central California to United States Points

Source; Estimates of truck transportation brokers in California markets.

FIGURE 8

.53

*5*J

► Via Wells » Nevada

77-*

* Rates are based on combinations

U8.

league's traffic manual, presents graphically the total cost of transporting a
31-pound box of deciduous fruit from Fresno by ordinary refrigerated freight and
under typical conditions as of the fall of 1953. In preparing this map, the
following charges were included: the basic rate per 100 pounds} the cost of
"standard refrigeration" J cost of salt at * per cent of "standard refrigeration"
charge; and a 3-per cent tax on transportation.^/ If other than "standard re-
frigeration" were used or if a different kind of salting was ordered, Figure 8
would be slightly different. The map does not include such items as possible
preceding charges, switching charges, charges for extra diversion of the car,
extra stops en route, or charges for holding cars on tracks.

Determining Truck Rates a Problem

Rates on transportation by truck cannot be presented so neatly because the
basic data cannot be obtained. It is known that there are substantial differ-
ences in the rates paid by various shippers. These differences reflect the
quality of transportation equipment, business methods, bargaining ability, and
the type of contractual arrangements made. Trucking rates vary seasonally as a
result of changing conditions of supply and demand for trucking.

While many shippers consider the rates they pay to be confidential informa-
tion, several trucking agencies have published suggested rate schedules which,
if interpreted cautiously, may be of some use. The information from these
schedules is summarized in Figure 9. It has been described as "what the trucker
would like to get," and shippers report that they overstate rates actually paid
by 10 or 15 per cent. However, the schedules are often used in bargaining by
those who operate through the truck brokers or who do not have regular contracts.

1/ It does not seem necessary to go into the details of the type of service
defined in the regulations as "standard refrigeration." Here is the story on
one item in rail transportation rates which is difficult to presen t ad equately
in Figure 8. Rail rates are quoted per 100 pounds, and minimum total weights
per car are required if the shipper is to obtain the lowest rate. This minimum
weight, in general, is higher for shipment to far eastern points than it is for
shipment to midwestern points. We have always assumed, ^ffV^JJ***^
that the rail car was loaded to the minimum weight required to qualify f cr the
lowest transportation rate chargeable for shipment to the most eastern point.
Thul! a rate of $2.0U could be obtained on shipments of 26,000 pounds to Illi-
nois bat this rate could be obtained only on shipments of 3 k, 000 pounds to
Indiana. We have assumed a weight of 3U,000 pounds to Illinois. The reason is
that usual practice is to load cars so that they can be diverted to eastern
points without taking a penalty in freight rates.

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♦ 1«*8 i it ddgiatl nX vi/anaq a aotbtei #»arf*i# gdaX^i

FIGURE 9

General Pattern of Estimated Rates for Truck Transportation of Peaches from California to United States
Points as Quoted by California Truck Transportation Brokers in Cents Per Lug, Summer, 1952

Additional charges, which must be borne by the shipper or receiver and which are
not considered in Figure 9, are for ice or mechanical refrigeration (usually
about $2$ per trip) and the 3-per cent transportation tax.*/

Comparing Truck and Rail

Do not expect to learn too much by comparing Figures 8 and 9. Point-for-
polnt comparisons between the two maps should not be made. However, while the
map of suggested truck rates is of limited significance so far as actual rates
are concerned, the shape of the contours probably reflects fairly well the geo-
graphic structure of truck transportation rates, and to compare the shape of the
equirate contours with Figure 8 is helpful.

The geographic pattern of truck rates differs in some respects from the
pattern of rail rates. The entire area east of the Mississippi takes almost the
same rail rates (with slight differences due to added refrigeration costs for
the more distant points). However, truck rates continue to increase substan-
tially between the Mississippi River and the East Coast. Truck refrigeration
charges also increase with distance. The absence of a large area in the East
where truck rates for shipments from California are identical, such as exists
in rail tariff schedules, is a real difference between the structure of truck
and rail rates.

Figures 8 and 9 are consistent with common opinion about truck-rail competi-
tion. Within the eastern flat rail rate zone, the railroads are in a relatively
more advantageous position. If the rates on which Figure 9 is based do over-
state what is actually paid by about 10 per cent, it would appear that trucking
has a rate advantage as far east as the range of states south of the Great Lakes.
Yet, trucking does not compete effectively for shipments this far east.

The favorable position of trucking in the Southwest is indicated by the
bulge of the contours. Compare Figure 9 with Figure 7 showing time en route.
There is a marked similarity, suggesting that the relatively low rates per mile

1/ There is a 3-per cent federal tax on all interstate truck or rail trans-
portation and a 3-per cent California tax on intrastate transportation, other
than purely local. Tax records do not form the basis for any good statistical
information on truckers. The federal tax is collected by the office of the
district of the Bureau of Internal Revenue where the trucker has his principal
place of business. Truckers report only their total revenue from taxable
service and amount of tax on a quarterly basis. There is serious question
over the completeness of tax collection in any case.

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ft,

into the Southwest reflect, at least in part, nearly ideal conditions for long-
distance trucking in these states.

The strong bid which truck operators make for business into the Midwest,
where such a large percentage of the refrigerated traffic to the West Coast
originates, is also indicated by the contours of Figure 9* The Dakota-Minnesota
area has a rate only one tenth higher than Iowa, eastern Kansas, and Nebraska
despite a much longer distance.

Other Factors

Many other factors influencing the selection of truck or rail transporta-
tion were mentioned occasionally by shippers. Many objections to or advantages
of trucks which were cited blunt the edge of rate competition. Demand for
trucking on the part of receivers rather than shippers has led to the expansion
in produce trucking. The general attitude of shippers has been either passive
resistance or a general disinclination to encourage expansion in trucking.
Shippers using trucks often declared that trucks were objectionable, lead to
added costs, were inconvenient, and caused additional business headaches but
that the pressure of competition made their use essential. However, a few
shippers have seen great opportunities in the increased use of trucks. By con-
centrating on receivers who want to receive their shipments by truck, these few
have expanded their business impressively.

Why Financial Responsibility Is a Problem

The risk involved in consigning their cargo to truckers with limited finan-
cial responsibility was mentioned by many shippers as a factor against using
trucks. It is not that the record of the truckers is so badj the shippers just
want to be protected. Many truckers do not have the financial resources to meet
any substantial claim. Many truckers who are driving expensive equipment have
little equity in that equipment. Some are so short of funds that they need ad-
vances from shippers to pay for gas and oil and are driven by financial despera-
tion into cutthroat and illegal business practices. This makes shippers dubious
about entrusting their fresh fruits and vegetables to them. Shippers and re-
ceivers can protect themselves to some extent by dealing with large and well-
established transportation companies. Except at too high rates, there are not
enough of such companies to meet the needs of the produce industry, and it is
inevitable that many truckers are used about whom little is known.

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52.

No special insurance requirements are in force for interstate haulers of
exempt agricultural commodities. The state liability laws applying to all
drivers are seldom adequate or well enforced. Cargo insurance is not required.

Insurance to protect the shippers is, of course, the appropriate form »f
protection against losses. Insurance to protect the shipper or receiver might
be taken out by: (a) the shipper or receiver, (b) the trucker, or (c) a truck
transportation broker. Some shippers obtain open insurance policies which pro-
tect them against unrecoverable business losses sometimes including noncollect-
ible transportation losses. Not all shippers can afford or can obtain such
insurance, and the coverage available is carefully prescribed.

Truckers themselves often need more insurance. The ability of the small,
undercapitalized, itinerant trucker to obtain insurance is extremely limited,
and the rates on what is obtainable are high. Individual truckers can and do
get insurance covering loss or damage such as may be caused by fire, lightning,
cyclone, tornado, flood, collision, derailment, overturn, perils of the sea, etc.
This coverage gives a limited, indirect protection to the shipper. Often it is
carried only on demand of the shipper. Trip-transit policies extending coverage
for a single trip are common, reflecting the fact that many truckers purchase
coverage only when obliged.

Brokers' Insurance Arrangements

The obvious need for insurance and the inadequacy of current arrangements
have led several truck transportation brokers to arrange insurance protection
for the shipper. The interesting feature of this arrangement is that the broker
is not financially responsible for the losses.

Ordinarily, a broker cannot be held legally responsible for the actions of
those for whom he performs brokerage. This immunity is based on the duality
of his status as an agent.l/ Yet, because proper development of truck

1/ A transportation broker is not ordinarily entirely the agent of either the
buyer or seller of transportation services. While ICC rulings do not affect
brokerage involving only movement of exempt commodities, the statement of broker-
age in Copes, 27 M.C.C. l£3, is still illustrative of the function of a broker:
"A broker is essentially a middleman or intermediary. Every broker is in a
sense an agent but not every agent is a broker. The chief distinguishing fea-
ture is that a broker generally acts in a certain sense as an agent for both
parties to a particular transaction."

See also U. S. Congress. Senate. Interstate Commerce Acts, Annotated .
76th Congress, 3rd Session on S. Document No. 202. Washington, Govt. Print.
Off., 191*1. Sec. 203(a)(l8), p. 7887. One who sells or holds himself out as
one which sells motor carrier transportation to be performed by another is a
broker within the meaning of the Act.

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53.

transportation of fresh fruits and vegetables requires the existence of a
stable, reachable person against whom claims can be filed and because shippers
are often unwilling to use trucks unless they feel that they are adequately
protected, truck transportation brokers have assumed a degree of responsibility
not ordinarily part of the act of brokerage. It also has given them a great
business advantage over the independent trucker soliciting shippers directly.

Brokers have done this by assuming, within certain limits, the responsi-
bility for performance by truckers whom they refer to shippers and by agreeing
to make good losses sustained in transportation performed by those truckers.
One broker issues an "insurance participation certificate" which reads as
follows s

"We hereby certify that we have insurance under an open cargo
policy held by us and issued in our name covering the legal liability
of the truck operator and/or owner hauling under Transportation Agree-
ment No. . We further certify that in the event ^we are7 notified

by telephone within 12 hou rs after any delay or accident occurs which
might result in a claim, all SUBROGATION IS EXPRESSLY WAIVED against
the truck operator and/or owner except in the case of a willful act or
gross negligence. It is warranted by the truck operator that he has

has not adequate Cargo Insurance in force. Merchandise covered

under this Certificate shall be valued at invoice value at point of
origin of shipment PLUS FREIGHT earned to point of loss subject to One
Hundred ($100.00) Dollars deductible for each loss separately occurring.

"(A) If the truck operator has adequate Cargo Insurance, the
following are the perils covered by this Certificate:

(1) Riot and riot attending a strike.

(2) Civil commotion.

(3) Vandalism and malicious mischief.
(U) Aircraft or parts therefrom.

"(B) If the truck operator does not have adequate Cfxzo Insurance,
the perils of FIRE, EXPLOSION, COLLISION, OVERTURN, COLLAPSE OF BRIDGES
OR CULVERTS, FLOOD, PERILS OF SEAS, LAKES, RIVERS, OR INLAND WATERS
WHILE ON FERRIES, AND THEFT OF AN ENTIRE SHIPPING PACKAGE, are covered,
in addition to those listed above. .

"(C) Spoilage losses caused:

(1) As direct result of one of the perils mentioned in Section
(A) or (B)|

(2) By incapacitating illness, accident, or death of the driver j

(3) By breakdown of refrigeration equipment j

Ik) By mechanical breakdown of truck exceeding 12 hours;

are covered regardless of whether the truck operator has
adequate insurance or not.

"Signature of Truck Transportation Broker"

i.efcfl 9iP yerf.i . v tsd>t J.&n'i $Md~4»«£aff arftwnt-t.^isjc? .o4^.tCt±iwx; ttfffeM

This statement, which accompanies the bill of lading, evidently means that
the truck transportation broker undertakes a rather wide range of responsibility
to the shipper for the safe arrival of his cargo. The broker is covered by an
insurance company's open-cargo policy on all cargo for which he arranges trans-
portation. He pays a premium based on gross revenue of the truckers for whom
he arranges transportation. If the trucker is insured, his insurance coverage
and not the transportation broker's must apply. How effective this type of
arrangement has been in protecting shippers has not been determined since
nothing is known of the loss record of firms using exempt truckers or the
percentage of losses which have been allowed under the terms of this type of
policy. Several different Los Angeles brokers have had extremely different
loss records, reflecting mainly their skill or care in selecting truckers.

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it i7>b(iif bewolXfi ri9©d ©vsrf fijxfaiv/ *$aia\5<lil 2o .03£*n©3*Taa
[i ©v*d eisgatotd wlqgaA »cJ ' lsrtev®S ■ *icpxIo$
t ©aso' to Xliife ttedd' >frnlsm srjxio-aila'i t afaico8i asaC

VII. Trucking Can Be More Useful

55.

Transportation Efficiency

How the entire transportation system of the United States should be organ-
ized if it is to be as efficient as possible cannot be easily determined. Ef-
ficiency in the marketing of transportation services is part of the problem and
is similar in many respects to the problem of efficiency in marketing fresh
fruits and vegetables, more familiar to members of the produce industry. What-
ever one's job — public official or private businessman— the transportation sys-
tem which is synonymous with optimum utilization of all economic resources is
the most suitable goal for any change in transportation organization or policy.
The transportation laws themselves clearly have a broad conception of economic
efficiency as their objective.

Present-day truck transportation of fresh fruits and vegetables has been
seen to be less than ideal. There are three general areas where improvement can
be soughtj First, equipment and physical operations can be improved — better and
more easily utilized trucks, better roads, and adequate mechanized loading ter-
minals! second, governmental policy and regulations need to be formulated with
economic efficiency clearly the major policy objective j and third, the structure
of the transportation industry itself needs to be reconsidered in the light of
objectives of efficiency.

It is in reorganization of the structure of the trucking industry where mem-
bers of the produce marketing trade and the trucking industry are most likely to
be able to improve trucking. It is not the equipment which most needs improve-
ment but the ways in which the equipment is used. A time lag exists in adapting
business methods to trucks and establishing markets for truck transportation.
Incomplete adaptation has meant a lack of smoothness in coordinating shipper and
receiver needs with the services that truckers can render. One result is higher
than necessary costs for the firms using trucks. Another is higher costs for
the truck operators themselves. Some of the costs are partially hidden — such as
backhauling or idle time.

Coordination between buyers and sellers is primarily a marketing job, and
the present method of marketing truck transportation is the source of many diffi-
culties. Its most serious imperfection is the excessive costliness of time, en-
ergy, and money with which information is developed between shippers, receivers,
and truckers. Today, the majority of truck transportation arrangements are sepa-
rately negotiated. Truckers frequently canvass the produce packing sheds, looking

arid ^iMi has fssvid
grid ttl b9i9bieno&»*j

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MB.'

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56.

for loads, and in doing this, they travel considerable distance perhaps without
ever finding the shipper whose needs fit in best with their own plans. Every
call they make takes up their time and that of some shipper. Also, because they
have no fixed place of business and do not appear to be completely reliable,
shippers who otherwise might find their services very valuable hesitate to employ
them.

There is no single point to which a trucker, a shipper, or a receiver can
turn to determine the availability of or demand for truck transportation. Both
shippers and truckers are widely scattered although heavily represented in the
terminal market cities. Furthermore, frequently the person who arranges for
truck transportation is actually a midwestern or other distant receiver rather
than a shipper — yet the truck must be loaded and the trucker must negotiate near
the shipping point. This obviously awkward and costly situation is a result of
the lack of adequate information on availability, rates, and responsibility of
the truckers. This same lack is the reason why shippers, who are in a much bet-
ter position to choose truckers, are unwilling to arrange truck transportation
for receivers and insist that the receiver who wants to use trucks make his own

Although it takes at least two parties to conduct a busine?s transaction,
the fruit and vegetable middlemen who buy truck transportation can do some things
by themselves to improve the efficiency with which they use trucking. What they
can do is indicated by the common criticisms of their methods. The main diffi-
culties which shippers experience which they should be able to correct by them-
selves are:

1. Not using persons with "know-how" in traffic management.

2. Not reorganizing business methods or facilities so as to use trucks
effectively. Keeping outmoded habits and equipment, although improved
methods or changing conditions of demand and supply have developed.

3. Using trucks or rails on a hit-or-miss basis rather than according to
some rational plan.

l/ The demand for truck transportation is, to a large extent, a demand by the
receivers. While policies among shippers differ, in general the receiver is
pressed to make his own truck arrangements. The reason usually given is that
shippers do not want to be blamed if they select the trucker and the transporta-
tion service is not properly performed. Most shippers report that they will use
trucks only for f.o.b. shipments and consider that, for other types of sales,
the added risk involved in using trucking is prohibitive.

ft.

U. Overcompensating for the extra risks involved in using trucks or fail-
ing to take adequate account of the risks,

5. Spending excessive time and resources in bargaining for and locating
truck transportation.

6. Having inadequate capital.—^

At the same time, there are problems which could be better solved through
some kind of organized effort. Examples of problems in this category are:

1. Having adequate information on rates, equipment available, financial
responsibility of truckers, etc.

2. Having accurate information on the kinds of risk involved in using
itinerant truckers.

3. Disestablishing obsolete customs which may only be changed by mutual
consent.

U. Shippers receiving poorly advised instructions from buyers who are
acting without sufficient information.

5. Overcoming elements of monopoly in the market for truck transportation.

6. Improving governmental regulations.

Another type of group action would be to assist truckers in improving
their transportation of fresh produce. Truckers could be made more efficient by
reducing:

1. Loss of operating time by over lengthy negotiating with shippers.

2. Difficulties in performing proper maintenance.

3. Revenue lost through failure to find the best shipper for truck trans-
portation which means higher costs in the long run.

h* Failure to keep business expenses in line with revenue, often the re-
sult of not knowing how to calculate maintenance, depreciation costs
and normal profit, or of not keeping adequate books.

5. Inadequate knowledge of loading and refrigeration requirements of
produce •

How Brokers Have Helped

Transportation brokerage is one of the first developments to appear wher-
ever better coordination is needed. Experts can, because of their many contacts,
perform more efficiently than can the transportation departments of all but the
largest shippers. The basic function of the truck transportation broker is

l/ Given the present method of obtaining truck transportation, the most ef-
ficient use of trucks can be made by a large firm with an integrated system of
buying points and selling points. Its own integration substitutes for a poor
marketing system. It appears unlikely that there are many economies of scale
within any one plant associated with trucking.

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58.

coordination of information. A broker with whom many truckers are registered
is usually able to find one to go to any particular destination. To some ex-
tent, truck brokers specialize in territories. Thus, one broker located at Los
Angeles might have especially good connections to the Midwest butter and egg
belt while another might specialize in Texas and other southern points.

While the coordination of information has substantially improved by develop-
ment of brokerage, it has not progressed so far as it might. As presently es-
tablished, truck brokerage is not like brokerage on a board of trade. There is
no single point at which all demands for truck transportation are concentrated
together with all supplies. Brokers do not seem to exchange information with
each other freely, and a shipper cannot find out what trucks are available by
placing a single call. While the most important brokers are concentrated in a
few buildings adjacent to the Los Angeles produce market, they have separate of-
fices, and their negotiations are conducted by telephone and teletype. The
physical concentration is mainly a convenience to the truckers who can very
easily shop around among brokers and for whom brokerage offices are popular con-
gregating places.

The truck brokers are useful to shippers and truckers of all sizes and
types although in different ways and to different degrees. Some brokers act as
agents of fairly large truck companies. A typical customer of this type would
be a ICC permitted contract carrier with a long-term contract with a midwestern
meat packer to haul meat to the West Coast. The trucker would use the broker
as his agent in finding exempt loads as backhauls.

For the small trucker, the broker is not only a convenience but frequently
is the only possible source of loads. He is known by the shippers and receivers
and knows vrhich of them is likely to have business. Many shippers or receivers
will refuse to deal with truckers except through brokers.— ^ His advantages make
it possible for the broker to charge high for his service, and in some cases,
the charges are out of line with the services rendered. The potential advantages

l/ Some drivers will first attempt to obtain a load through direct dealing.
Whe"reas an independent might not have much success along this line, a driver for
a well-known concern— especially one who had originally become acquainted with a
shipper or receiver through a broker — might be able to accomplish more. Some
trucking companies have issued instructions to their drivers to resort to brok-
ers only after failing to pick up a load through direct contact. However, some
shippers and receivers consider it unethical to deal directly with truckers
originally contacted through brokers.

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to the transportation industry of a well-developed brokerage, justified by serv-
ice and not monopoly power, should not be ignored, however.

Can Brokerage Ee Improved ?

Today, truck brokerage in the produce industry is a high-cost type of op-
eration. A considerable amount of selling has to be done to both truckers and
users of truck transportation. Many brokers run their offices like junior-grade
social clubs for truckers. Considerable investigation and record keeping, keep-
ing tract of truckers and negotiation via long-distance telephone are involved.
Neither the ICC nor state agencies regulate brokers who restrict themselves to
interstate movement of exempt commodities. Their rates, terms, and services are
determined by what the market will bear or by their own good sense. Today, the
most commonly quoted brokerage fee is 10 per cent of the cost of transportation.
This is substantial enough to deter truckers who can avoid it from using truck
transport brokers. Some truckers will go to considerable lengths to avoid rela-
tively small charges, and the payment of fees as high as those charged by brok-
ers indicates the importance of their services.

The services which brokers do render to small truckers often are a real
contribution to efficiency in transportation. Many small truck operators are
sailing close to the wind, and their ability to make money depends on keeping
their equipment utilized to the utmost. This is a factor in making truckers im-
patient over delays in loading or in obtaining loads. It is one factor in their
willingness to pay high brokerage rates.

Truckers also need protection against unscrupulous clients. For example,
sometimes receivers will settle transportation damage claims in an unsatisfactory
manner, taking advantage of the poor bargaining position of the trucker to offer
substantially less than the agreed upon transportation charge, perhaps under the
guise of compensation for spoilage incurred en route. Truckers forego traffic
revenue if they must remain to argue these claims, and there is no established
mechanism of arbitration. Several established common carriers have reported
that their own response to this kind of situation was to put the cargo in cold
storage, take immediate legal action to obtain payment, and get out of busi-
ness of hauling fresh produce very quickly.— ^

l/ It is not uncommon for truckers to demand partial advance payment for
loads. Sometimes this is because they are short of cash, but at other times,
it is merely a form of partial protection against not being paid in full by the
receiver. Truck brokers may make advance payments to truckers; sometimes such
payicents come from shippers.

60.

Often the broker is more oriented toward providing service to the shippers
and receivers than to the trucker. Some brokers, indeed, became established
with the financial backing of large fresh fruit and vegetable middlemen, who
felt that the establishment of brokerage would serve their needs. The conven-
ience of being able to obtain trucks from a limited number of brokers instead of
a multitude of shippers was one advantage sought. Responsible brokers also can
be relied upon to police the quality of truck equipment and to insure certain
standards of ethics and business practices on the part of truckers. Some brokers
have developed a system of guaranteeing railway express delivery schedules for
a surcharge; another development which they have pushed is the system of "check
calls" by which truckers notify receivers of their location daily after the second
day out on the road. The insurance arrangements which truck brokers make are
primarily of interest to shippers and receivers, especially because it is not
easy for them to check the insurance coverage of the occasional trucker who may
solicit business from them.

The efforts of brokers to improve their services to shippers may be looked
upon as ways of encouraging the shippers and receivers to deal only through them
and thereby put the truckers more thoroughly at the brokers' mercy, but their ac-
tions are also steps forward in the general improvement of trucking of fresh
fruits and vegetables. Brokers apparently are in a good position to encourage
technical improvements in trucking equipment and perishable handling techniques.
On the other hand, brokers have not been very successful in getting truckers to
arrive at shipping points for loading according to schedule. This is perhaps
the greatest single source of irritation to shippers. Nor have the brokers yet
gone as far as they might in supervising refrigeration and en-route icing of
produce loads.

Other Means of Coordinating

Good systems of marketing rarely develop entirely without planning. The
most famous markets — the commodity and the stock exchanges— were deliberately
developed and arp regulated by their own members and by government. These ex-
changes are examples which are likely to be considered in any contemplated reor-
ganization of the transportation market. The main argument for a truck trans-
portation exchange is that it permits, by the free flow of information at low
cost, a more efficient utilization of truck transportation. It should mean gen-
erally lower brokerage and transportation rates.

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61.

One of the notable features of an organized exchange is the prominent posi-
tion in which it places the broker. However, brokers on an exchange would have
to act differently than at present. An exchange would require brokers who act
as representatives of the parties to any transaction and advance their interests
in every way possible. No shipper or trucker would be willing to turn over the
process of negotiation to any other kind of an agent.

Under one possible exchange system, each broker would receive orders for
transportation (or quotation requests) from his clients. On the floor of the
exchange, he would ask other brokers for offers, and those with trucker clients
available to perform the desired transportation would be expected to make that
information known. All requests and offers would immediately be known throughout
the exchange and perhaps flashed over a ticker. A brief standardized code could
be developed for passing this information on quickly. Negotiation on the ex-
change could then be completed among these brokers and arrangements referred to
the original parties for acceptance or rejection. Each shipper or trucker would
have one broker with whom he dealt and through whom he put orders or requests
for quotations for trucks. Orders could be perfunctory in character and take a
minimum amount of time.

One disadvantage to such exchanges is the loss of secrecy of rate arrange-
ments. Of course, the purpose of exchanges is to dispel all such secrecy equally
for all parties. It is secrecy and incomplete information that make rate in-
formation and negotiating so expensive. Another possible objection is that some
truckers and receivers like to make standing arrangements with each other. Some
of the advantages of private agreements would be dissipated by the development
of the exchange; but these arrangements would still be entirely possible and
charges could be based on the exchange if so desired.

A third objection is that rates established by an exchange fluctuate fre-
quently and that a shipper may prefer to deal with one trucker whose rates are
stable. Since fluctuation in rates is one of the main ways in which markets co-
ordinate supply and demand, these fluctuations are inevitable. Some commodity
exchanges do impose limits to daily fluctuations.

Market N ews Coverage of Trucking

The truckers as a group probably could do a better job of supplying trans-
portation with the trucks now available if, from day to day, they knew more about
the nationwide supply and demand situation for truck transportation of exempt
commodities. In this way, many local shortages and surpluses could be avoided.

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62.

Real gains in efficiency might develop from publication of market news informa-
tion on the number of truckers looking for loads in various terminal markets or
shipping areas or on the rates being paid. The news of produce movement has
proved to be invaluable in fresh fruit and vegetable marketing. Would not com-
parable news on the market for truck transportation be of use to shippers, re-
ceivers, and particularly to truckers because there are so many small independent
truck operators?

Be tter Insurance

Where risks are great, caution prevents businessmen from acts which, in
retrospect, would have been profitable. One way of helping those who market
fresh fruits and vegetables become more efficient is to reduce the risk in using
motor transportation thereby encouraging them to use it when, risk aside, it is
the best transportation available. The economic loss caused by using a less ef-
fective system of transportation is indeed a real loss, although it might not be
practicable to estimate its magnitude.

Insurance is one way by which the problem of risk has often been partially
solved. Lack of adequate insurance protection has led many shippers to avoid
using trucks when they might have used them effectively. Adequate insurance
coverage is not available mainly because the insurance companies do not have the
experience or actuarial record necessary to operate effectively in this field.
Insurance companies must, of course, be reasonably well able to ascertain that
the insured truck operators have lived up to certain standards of performance
for a risk to be insurable. Spoilage and loss in transit from mechanical damage
are controllable by the trucker to a degree and complicate the problem for this
reason.

The techniques of insurance of perishable shipments being transported by
small, owner-operator truckers need to be developed beyond their present point.
Much must be done before such insurance is practicable. Insurance would be - pro-
hibitive unless the risk really were small, and this would depend on the manner
in which truck operators performed. Some truckers never would qualify for any
reasonable type of insurance.

Risk Reduction by Other Means

Another risk against which it is desirable for a shipper to protect him-
self is financial irresponsibility on the part of the truckers who may be re-
ferred to him. T /\Jhile this might be covered by insurance, probably a kind of

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63.

"credit bureau" would be more effective. In this way, the bad operators could
be detected and quickly eliminated. For the shipper himself to check into the
qualifications of truckers would be unreasonably expensive unless he dealt with
a small selected number.

Truckers need insurance also, for example, against nonpayment by receivers
with protection so arranged that they need not wait several days or until the
next trip to collect. A collection agency or truckers' association might do this
work very well.

Another type of risk faced by shippers is the possibility that transporta-
tion equipment may not be available when needed. Truckers cannot individually,
nor as an organized group, make any guarantee of availability. The total amount
of equipment is too small compared to the total transportation needs, and in-
dividual truckers cannot afford to assume obligations to meet any transportation
demands such as falls on the railroads and other common carriers. Only if truck-
ers were regulated and protected common carriers could they be in a position to
guarantee availability of equipment.

Reliability and responsibility are benefits which develop in a transporta-
tion system dominated by common carriers. Yet, it is obvious that common car-
riers cannot compete successfully side by side with unbridled competition. While
the establisliment of produce trucking on a common carrier basis would not be
favored by the produce industry, many of the risks of using trucks would be re-
duced by such a change. The advantages are perhaps obscured at present because
produce shippers do have a common carrier group — the railroads — to fall back on
in time of emergency.

Government Regulation and Marketing Efficiency

Today, many of the factors which led to the original Interstate Commerce
Act no longer apply. Competition among truckers is inherently greater than among
railroads, and the railroads no longer have the virtual monopoly of transporta-
tion which they did in the days when the Act was passed. The shifting emphasis
in transportation suggests re-examining the laws affecting truck transportation
and the administration of these laws.

Since we have in the past ten years dispensed with wartime economic regula-
tions when plausible arguments were advanced for their continuance, and often
with strikingly beneficial results, a burden of proof rests on the shoulders of
those who wish to continue transportation regulation. A more restricted scope
for ICC activity might be an improvement over the extremes of no regulation or
the present situation.

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6U.

There is still a plausible case for continuance of regulation — too involved
to give here. Indeed, most of the enfranchised transportation industry has be-
come accustomed to regulation and the protective umbrella it holds over them.
It deplores the impact of unregulated price and other competition from the ex-
empt part of the industry. It wants all carriers to compete on an equal basis
and strongly prefers having them all regulated to having them all unregulated.
It feels that regulation contributes to over-all industry efficiency.

There has long been a presumption in the law that the common carrier, in-
curring obligations for a certain performance and in turn partially protected
from competition, was the type of agency best suited to serve public transporta-
tion needs. The produce industry has never had a motor transportation common
carrier group available for interstate transportation, although there are some
intrastate common carrier operations. However, highway common carriers would
produce many special advantages and retain as well advantages of speed and
flexibility of exempt truckers.

The agricultural exemption which rules out common carriers for produce
trucking should be re-examined. Furthermore, public policy on transportation is
a larger issue than fresh fruit and vegetable transportation, and the entire
regulatory pattern can be adjusted to benefit a special group without producing
serious dislocations elsewhere. The exemption was designed to help agriculture.
It may be asked if the benefits to agriculture are large enough to offset the
adverse effects on the transportation industry. There is, actually, no adequate
way of answering this question. Perhaps agriculture as a whole does not benefit
at all.

Some transportation problems of agriculture, such as perishability and sea-
sonal variation in shipments, may mean that common and contract carriers are not
so well suited to agricultural transportation as are exempt haulers. On the
other hand, lack of regulation may benefit agriculture mainly by permitting in-
tensified competition among those supplying transportation. If this is the real
advantage, and if the advantage is so great that the agricultural exemption is
justified as public policy, the merit of public regulation of transportation for
any product must be seriously questioned.

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VIII. Better Ways of Assembling Loads for Truck Transportation

Efficient long-haul trucking means keeping the big trucks busy in the
kind of transportation for which they were designed and not wasting them in
local pickup and delivery operations for which smaller trucks are better
adapted. Trucking can be more efficient and ultimately more economical if the
big trucks' "turn around time" can be cut to a minimum. Reducing both of these
wastes is mainly the job of the trucking industry, but the fruit and vegetable
marketing industry can help too by arranging for the cross-country hauler to
stop at a minimum number of points M

One of the reasons some people have been interested in concentration mar-
kets is that they would help trucking be more efficient in just these ways and
would help establish a better market for truck transportation besides . Where
concentration markets do exist — and there are nearly 100 in eastern United
States—they have been particularly well adapted to trucking operations. Per-
haps these markets belong in California too.

What Concentration Markets Can Do

A concentration or shipping point market is a center located in an area
of commercial production of fresh fruits and vegetables to which near-by
farmers or agents bring produce for sale (usually in small quantities), where
buyers and sellers meet, and where the produce is purchased and assembled into
lots for transportation to distant markets. A concentration market is not like
a farmers' market located near or in a large city where produce is sold by
growers mainly to consumers or retailers. While physical concentration is the
outstanding characteristic of each type of market, sales in a concentration
market are to middlemen, not consumers. Such a market only works if it is an
assembly point for produce middlemen. If concentration markets are to be suc-
cessful and useful, the commercial fruit and vegetable growing area where they
are located must be at some distance from the consumers. Otherwise, growers
find it too easy to contact retailers directly. Also, there must be enough

1/ While the extreme of always one single loading point and one single un-
loading point would be inconsistent with some of the main advantages of truck-
ing, reducing the number of loading points would produce economies. A cost
study of various ways of using long-haul produce trucking would indicate what
investment in a concentration market might be justified by the savings.

oid'sJioCTafiBtT 3I01/1? 10I abfioa

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oa dcMw dnsiaxutoorti ad bXuov dnxoa ^tifeaoX

66.

growers of the kind who find the market useful to keep it well supplied. This
usually means growers who are small enough so that they cannot make effective
use of such agents as shippers, brokers, or distant receivers or efficiently
market their own crop directly in some distant big city. Concentration markets
must be near to the growers. The one at Benton Harbor, Michigan — one of the
largest — served mainly growers living within 20 miles according to a 19U6 study.

Concentration markets in California would have to compete with the present
well-established and efficient system of marketing. For this reason, they might
not be as successful in California as they are in the Southeast where alterna-
tive marketing systems frequently are not so good. In California, there are
many large shipping organizations with packing plants or contacts all over the
state which can arrange to assemble complicated mixtures of produce by tele-
phone at little cost and then arrange for truckers to pick up the load at a
minimum number of points. Concentration markets usually are for personal sell-
ing by the grower. One of the bad features is that this may take him several
hours a day. Not only does this distract him from his main interest — growing—
but often he is not very skillful at selling.

Parenthetically, it must be noted that there are many reasons why concen-
tration markets are desired other than efficiency in truck transportation.
Many- farm marketers are ever anxious to reduce the number of middlemen. Also,
in the opinion of many, efficient price making requires physical assembly of a
large number of buyers and sellers. There are those who feel that prices should
be determined in a local market rather than at some distant big city. These
problems do not concern truck transportation directly, and we will pass them by.

Of direct and special interest is the problem of efficiency in marketing
motor truck transportation itself. A trucker and potential buyer of truck
transportation dealing with each other are somewhat isolated from other truckers
and buyers, and it may be that more satisfactory trucking arrangements and rate
determination would be made if many truckers and shippers were assembled at one
place. Indeed, since the marketing of exempt truck transportation is poorly
developed, the gain here might be more than in marketing of fruits and vege-
tables-,^

1/ Loading docks and terminals are needed badly by produce truckers. One
other advantage of a concentration market is that in building it, a modern
physical plant could be developed with consequent improvement in operating ef-
ficiency of truckers and middlemen.

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nc in

67.

Where a California Concentration Market Might Be Located

If a concentration market were established, engaged primarily in selling
to middlemen and designed to accommodate trucking, how well would it perform
and where might it be located?

Adequate volume is obtainable only by locating in a producing center. A
California concentration market in an area where other shipping channels exist
might be predicted to draw 25 per cent of the produce from a surrounding area
on the basis of eastern experience. Where 1,000 cars per month are shipped,
this would mean about 12 cars per day. This volume probably would attract a
limited number of buyers.

The nine counties in California shipping at least 1,000 carloads per
month for six months or more in 1950 were: Fresno, Kern, Monterey, San Joaquin,
Santa Barbara, Tulare, Los Angeles, Orange, and Ventura. However, every county
has a minimum season when the volume of produce would be too little to support
a concentration market*

The Watsonville-Salinas Area Possible

All told, Monterey, San Benito, and Santa Clara counties ship 50,000 to
over 60,000 carloads of produce a year. In 1953, Monterey County shipped over
6,000 carloads a month for a six-month period so that, even if quite a small
percentage of the produce of this area flowed through a concentration market,
it would be sufficient. Monthly shipments suggest a long season for a market
in this area as shown in Table h»

While the volume of produce is sufficient, the number of growers is quite
low. According to the 1950 Census of Agriculture, there was a total of 3,759
fruit, nut, and vegetable farms in Santa Clara, Santa Cruz, and Monterey
counties. Monterey and Santa Cruz counties had only 880 such farms, and it is
from them that most volume comes. About 50 per cent of the shipments from
Monterey County are lettuce, with celery and onions also representing an ap-
preciable part of the traffic— ^

There are many small growers, however, especially in Santa Clara County,
of the type that generally finds a concentration market useful. Of all the

1/ Truckloads of California lettuce have gone as far East as Philadelphia.
Letter from E. R. Biddle, U« S. Production and Marketing Administration,
Fruit and Vegetable Branch, Philadelphia, April 6, 1953.

mm y

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68.

TABLE 4

Monthly Rail Shipments of All Fresh Fruits
and Vegetables from Three California Counties,

Month

Santa Clara

Monterey

Santa Cru?,

Total

car lots

January-

409

101

520

February

257

■Mai

287

March

302

1*5

346

April

2 8U5

2.923

May

452

6,390

1,013

7,855

June

955

6,589

871

8,415

July

918

6,415

1,072

8,405

August

6,882

1,394

8,366

September

552

7,304

829

8,685

October

471

7,028

987

8,1*86

November

5^5

4,134

315

4,994

December

167

1,513

158

1,838

Total

4,226

50,068

6,826

61,120

- Preliminary data.

Source: Calculated from U. S. Production and Marketing Adminis-
tration. Federal-State Market News Service. Preliminary
Summary of Car lot Shipments of Important Fruits and Vegetables

in California , Sacramento.

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69.

fruit, nut, and vegetable farms in the three counties, for 58 per cent of them,
the value of farm products sold amounted to less than ^,000 according to the
1950 Census.

The Stockton Area

Another possible area would be San Joaquin County. There is already a
vestige of a concentration market in the old defunct product market. Here one
trucker assembles less-than-truckload lots from many small growers and trans-
ports them to Los Angeles for delivery to whatever broker the grower names.
The variety of produce from this area is greater than in the Watsonville-Salinas
area, and there are more small growers. The monthly pattern of fresh fruit and
vegetable shipments from three Central Valley counties nearest to Stockton in
1953 is shown in Table 5.

For a six-month period at least, 25 carloads a day might be expected
(assuming 25 per cent) with considerably more at peaks. The Stockton area is
also a moderate distance from metropolitan San Francisco where gluts could be
shipped.

Farther South

Fresno and Tulare counties are another possibility and together ship about
38,000 carloads a year. Grapes are about 15,000 carloads a year, but there are
also nearly 8,000 carloads of oranges, 3,000 of plums, 6,000 of cantaloupes,
and 3,000 of peaches. Other near-by counties are also heavy shippers. To the
south, Kern County ships about 7,000 carloads of produce a year, exclusive of
the heavy early potato crop — a special case. The monthly pattern of shipments
is shown in Table 6.

According to the 1950 Census of Agriculture, there was a total of 6,935
fruit and nut and vegetable farms in Fresno and Tulare counties. The value of
farm products sold amounted to less than oii,000 for h6 per cent of the farms
which indicates that many of them are quite small and might find a concentra-
tion market useful. If 25 per cent of the produce of this area passed through
a market, once it was established, the central location of Fresno County and
the variety of produce available would probably insure a successful market.

Markets in Metropolitan Areas

Because trucks available for hauling California produce back East have
generally brought loads of other perishables to the major metropolitan centers

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TABLE 5

Monthly Rail Shipments of All Fresh Fruits
and Vegetables from Three California Counties, 1953^'

Month

San Joaquin

Sacramento

Stanislaus!

Total

carlots

January-

189

February

March

U86

518

April

583

689

May

1*05

179

131*

718

June

1*77

1*7

596

July

71*2

$99

138

1,1*79

August

1,266

297

982

2,51*5

September

k,01$

135

1,262

5,1*12

October

U,539

1,331*

5,901

November

1,879

392

2,283

December

97U

976

Total

15,596

1,1*16

1*,353

21,365

a/ Preliminary data.

Source: Calculated from U. S. Production and Marketing Adminis-
tration. Federal-State Market News Service. Preliminary
Summary of Car lot Shipments of Important Fruits and Vegetables
in California, Sacramento.

TABLE 6

Monthly Rail Shipments of All Fresh Fruits
and Vegetables from Two California Counties, 1953^

Month '

Fresno

Tulare

Total

carlots

January

U5i

1,738

2,189

February

Uoi

1,078

1,1*79

March

212

175

387

April

322

201+

526

May

J-LO

J., JOO

X jOOt

June

2,266

2,678

k,9hk

July

3,36<D

1,712

5,072

August

6,08$

1,502

7,587

September

2,622

1,13U

3,756

October

2,732

1,9U8

i*,680

November

578

1,981*

2,562

December

678

2,931

3,609

Total

20,023

18,1*50

38,U73

s/ Preliminary data.

Sources Calculated from U. S. Production and Market-
ing Administration. Federal-State Market News
Service • Preliminary Summary of Car lot Shipments
of Important Fruit3 and Vegetables in C alifo rniaT
Sacramento •

Sfcs

■

•tajfaflM bciB no

■

72.

of California, from the point of view of the trucker the large cities have ad-
vantages as the location of a concentration market. Also, there usually is a
produce market area available, although it is not always well adapted to truck-
ing. Los Angeles has been rather effective as a concentration market without
any special effort being made. It has the advantages mentioned above and is rea-
sonably near to major growing areas. It is doubtful if a market in the lower
Central Valley would have any real advantages over Los Angeles, especially from
the truckers' point of view. San Francisco, also, is near an area of fruit and
vegetable production* It also is the terminus of much westward movement of
truckers who want to haul produce eastward. In San Francisco and Oakland, there
are well-developed terminal markets. However, these markets and the amount of
trucking reflect the smaller population in this area compared with Los Angeles,

What Would Be Gained by a New Concentration Market?

The purpose of a concentration market is exchange between growers and mid-
dlemen and, to be successful, it must benefit both. Present shippers usually
have considerable funds invested in their own packing sheds and frequently own
several, all placed strategically near growing areas. Coordination is achieved
by telephone communication, not by physical concentration, but it may be just as
effective or even more so.

It is not self-evident that much could be gained by concentration markets.
Actually, the geography of major fresh fruit- and vegetable-producing areas in
California has meant that long-haul truckers moving from point to point can fre-
quently pick up loads at multiple points without greatly increasing mileage or
time.

Truckers undoubtedly would prefer any arrangement which speeded up their
loading, reduced the number of points at which they had to call, or increased the
possibilities of obtaining loads without resorting to brokerage. They would
probably favor the development of concentration markets only if the latter of-
fered such advantages. A valley concentration point would have no particular ad-
vantages so far as trucking is concerned. Because it is generally necessary for
trucks to go to major p opulation centers with their westbound loads, Los Angeles
and San Francisco are, therefore, ideal points for truckers to pick up eastbound
loads .

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73.

Who Might Develop a California Concentration Market

In general, where markets have not "just growed," they have been the work
of private real estate companies, railroads, trade associations, or special
market authorities. Governments have scmetimes built terminal markets. Con-
centration markets have often been established by agricultural cooperatives.

For a market to be supported at government expense, the area of benefit
must correspond reasonably well with the area from which taxes are collected.
Then cities can afford to operate terminal markets serving the retail outlets
of the city even when the fees collected do nott cover the costs. It is not
likely that a city would operate a concentration market when the majority of
the sellers and buyers are from outside the city and the produce was not con-
sumed locally. Financial support from actual beneficiaries would have to be
obtained in some other way.

A system of fees is a practical way of supporting a concentration market
and causing the costs to be borne by the beneficiaries. Fees could be levied
against truckers, growers, and middlemen who use the market facilities, and
they would pass the cost on. Many markets operated m a fee basis are entirely
self-supporting. Where there is sufficient use, and the economic benefits of
the market justify fees adequate to cover the costs of operation, it is possible
for almost any group with a real economic interest in produce marketing to op-
erate a market successfully.

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7U.

IX. Trucking Makes Marketing Dynamic

You cannot keep abreast of the changes in fruit and vegetable marketing
without paying attention, among other thirgs, to the growing importance of truck
transportation. Trucking is a tool for marketers, but it is the kind of tool
which cannot be used without transforming the users into different kinds of op-
erators. Changes must take place because of the new economic pressures generated
by trucking, and if the old firms and institutions do not change, they find them-
selves replaced by new ones. At the same time, fruit and vegetable marketers can
control the development of trucking while they adapt themselves to it. To do
this they need to think out how trucking can be guided into contributing as much
as possible to marketing efficiency with as little disruption as necessary.

For the truck operators and the marketers both, improvement in the tech-
niques of produce transportation is a challenging problem. Such specific im-
provements as better service, better equipment and facilities, and more responsible
drivers are needed and will surely come in time. It is the insistence of the mar-
keters, using their power to choose whom they hire, which has lead truckers to
improve their service and equipment.

Competition in T ransportation

Of course, shippers are most interested in truck transportation because it
has meant lower transportation rates and better service. Aside from rates lower
than rail sometimes charged by truckers in recent years the main effect of truck
competition has been to delay increases in rail rates and stimulate improvements
in rail service rather than bring about any actual reduction in the rail rates.
This is why even shippers who do not use trucks much are helped by having them
compete with the railroads. A3 trucks have become able to compete on longer and
longer hauls, more shippers have benefited by this competition and by the actual
use of trucks too. On the very short-haul shipments, trucks have such great ad-
vantages that they have taken over practically all traffic.

There is one special point to make about the fact that trucking at first
nwant savings only for short hauls, and over the years, the length of haul for
which trucking was most economical gradually increased. At first trucking put
the shippers nearest to market in a better competitive position vis-a-vis the
more distant shippers. In the middle 1930' s, Duddy and Revzan noted that termi-
nal markets were receiving a larger percentage of fresh fruits and vegetables

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from near-by sources and thought that trucking might be partially responsible
The most recent developments, however, have favored the more distant shippers.
It might appear that they are being put back on the same competitive plain as
before the development of trucking, but so much has happened to railroad rate
structures in the meantime that this is only partially true.

We could speak more precisely about competition between trucks and rail-
roads if we knew more about rates, particularly trucking rates. While there
are many incidental costs and differences in services which every shipper must
consider, rates are so important that by themselves they give a good first ap-
proximation to the story on competition between types of transportation.^/ Un-
fortunately, what we know about truck rates for hauling exempt commodities is
very scanty. The information is there — piecemeal in the hands of those mho pay
the rates — but too few of them keep this information in a way that makes it
readily accessible or easy to consolidate into an over-all picture. Generally
speaking, truck rates are based on rail rates — as is natural because railroads
are the dominant type of carrier.

Truck rates are tied in with rail rates, but truck operating costs are de-
termined by quite independent factors. Truck costs increase with distance more
rapidly than rail costs, and they continue to increase as distance increases
even though rail rates— and, consequently, the rates truckers can charge — flat-
ten out at great distances.^ The rail rate structure has become especially
different from truck operating costs in recent years. Most rate increases for

1/ Duddy, Edward A,, and D, Revzan. The Physical Di stri bution of Fr es h Fruits
and Vegetables . University of Chicago Studies in Business Administrat.j un, vol.
VTI, no, 2, p. 79. The authors compare the results of an analysis of 1923-1927
data with one for 1933-1935 data and suggest that the tendency noted applied
mainly to those fresh fruits and vegetables which were adaptable to widely dif-
ferent growing areas and conditions.

2/ One of the most obvious possible i ivantages of the truck is the saving in
transportation costs which may be obtained through savings in co"?tj incidental
to transportation — such as drayage from place of business to loading dock, load-
ing costs, and storage. Data have been collected on the costs of drayage from
team tracks to wholesale fresh fruit and vegetable markets. For a recent study
of such costs, see Stanford Research Institute. "Transportation and Handling
Costs of Selected Fresh Fruit and Vegetables in the San Francisco Terminal Mar-
ket Area." Washington, D. C, 1952. 65p. Processed. (U. S, Department of
Agriculture Market Research Report 2) Handling costs for arrivals by rail and
by truck are compared, showing substantial advantages in using trucks.

3/ In general, trucking charges do not increase in direct proportion to dis-
tance or weight carried, however. See Interstate Commerce Commission Statement
No. 52U, p. 18.

76.

rail shipments of fresh fruits and vegetables which the ICC has granted, particu-
larly since World War II have been percentage increases over the old rates. How-
ever, it has been usual to include a flat dollar-and- cents ceiling in these
increases so that rates to distant points have not gone up by the full percentage.
Successive increases, each with a ceiling, have produced a rail rate structure
with almost equal rates for all California shipments to northeastern and North
Central United States points. This probably means that shipments to the East
Coast do not pay their full share of transportation costs, hard though that fair
share is to determine. Truckers of exempt commondities are free to pick and
choose the most profitable areas to which to operate, and the peculiar rail rate
structure is probably one of the factors limiting trucking from California to
the far eastern United States.

The Transition in Produce Marketing

Just how is it that the development of trucking has brought changes to
produce marketing? Among the most significant changes are the growing tendency
to by-pass terminal markets, the increase in service wholesaling, and the chang-
ing size of retail units.

The traditional system of produce distribution in the United States has been
described many times. It was complex as was disovered by those who ineffectively
attempted to fit its many types of businesses into neat systems of classification.
Its keystones were the terminal markets. In them were concentrated the special-
ists—receivers, brokers, jobbers, wholesalers, and other middlemen— and to them
came the retailers and consumers for their daily requirements. Most of the fresh
fruits and vegetables sold in the United States moved through these markets.

While today the teminal markets are still our most important produce mar-
keting institutions, they are being by- passed by new kinds of marketing channels,
and they seem destined to play a smaller part in produce distribution. Behind
this change, there are many factors, but the development of efficient long-haul
trucking is one of the most important. The markets were not badly hindered by
trucking when trucking was confined mostly to local delivery and pickup, but with
long-haul produce transportation becoming more and more Important, the situation
has begun to change drastically.

The new system of marketing which is emerging from the old one centered on
the terminal markets does not need the horde of specialists of the terminal mar-
ket organization. Instead, it revolves around those shippers who assemble loads
of perishables in growing areas for direct truck shipment to service wholesalers—
often affiliated with the shipping organization. These service wholesalers are

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77.

growing in numbers and size. They are especially well adapted to serve retailers
in suburban and rural areas, and they have been helped by the decentralization of
large cities, the larger incomes of rural people, and their growing tendency to
buy their foodstuffs in the stores of the nearest town. Rural grocery stores no
longer restrict themselves to local produce in season. New display equipment and
technique and the increased variety and quality available to which truck trans-
portation has contributed in no small part have helped expand sales of fresh
fruits and vegetables from country stores and in turn the sales of the service
wholesalers who supply them.

Retailers in urban areas have found a growing group of service wholesalers
in the terminal market towns who can serve their needs and make unnecessary the
arduous and timeconsuming shopping for produce in crowded, unsanitary, and inef-
ficient terminal markets. The larger supermarkets and the smaller chains too,
by using trucks and the other new service wholesalers, are able to by-pass the
terminal markets. The change is, of course, primarily one of emphasis. Service
wholesalers have always existed, particularly to serve the country districts.
In almost any town, middle sized cr larger, you will find today a long- established
firm which has always been the intermediary between distant growers or the main
terminal markets and the small isolated retailers.

Of course, advantageous as truck transportation may be, there are disadvan-
tages also. One of the inevitable by-products of the growth of trucking has been
that some old facilities have been made obsolete. This has been costly to the
firms with large investments in terminal market and railroad loading facilities.
Another difficulty which probably never can be remedied is that the Market News
Service does not get information on fruit and vegetable movement of the same ac-
curacy as when movement was almost entirely by railroad car.

Some of these problems can be attacked by trade organizations, by individuals
alone, or by government. For example, problems having to do with the organization
of transportation marketing, establishment of efficient trading customs, and co-
ordinated movement of equipment seem to be of the type most suitable for trade
associations to handle. Terminal markets need not give up their traditional po-
sition without a struggle, and much might be done to make them more attractive
for trucking operations and the service wholesalers. Present terminal markets
are too often inadequate for trucks, the streets being too narrow, loading docks
the wrong height, or too small. The development of truck maintenance facilities
and brokerage houses in terminal markets, adequate parking areas and access roads
would help in many cases.

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78.

Ultimate Objectives

While it is, of course, only a means to the end of more efficient produce
marketing, how the market for truck transportation, as a coordinator of that
transportation, affects fresh fruit and vegetable marketing is the primary con-
cern of this report. A marketing system of a competitive economy tends to be
more efficient as marketing information tacomesmore complete and accurate, as
price making is systematized at low cost, as prospective buyers and sellers are
enabled to make necessary business connections easily, as partial monopolies
are limited, as the number of poor business decisions based on imperfect know-
ledge of the market is reduced, and as efficient use is made of storage and
transportation facilities. We are interested in whatever can be accomplished
along these lines by growers, truckers, and middlemen working together to in-
crease the effectiveness with which all of them do their jobs.

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