Category: Uncategorized

August CPI for Food

Posted on by Philip J Palin

Below are multi-year slopes for the Consumer Price Index for food. Here is the complete Bureau of Labor Statistics’ explanation of what happened in August:

The food index rose 0.2 percent in August, as it did in the previous month. The index for food at home increased 0.2 percent over the month, after rising 0.3 percent in July. The six major grocery store food group indexes were split over the month, with three increases and three decreases. The index for meats, poultry, fish, and eggs rose 0.8 percent in August as the index for pork increased 2.2 percent. The index for other food at home increased 0.2 percent over the month and the index for cereals and bakery products rose 0.5 percent. The index for dairy and related products decreased 0.4 percent in August after increasing 0.5 percent in July. The fruit and vegetables index declined 0.2 percent over the month, as did the nonalcoholic beverages index. The food away from home index rose 0.3 percent in August. The index for limited service meals rose 0.3 percent over the month, and the index for full service meals increased 0.2 percent. The food at home index rose 3.0 percent over the last 12 months. The index for cereals and bakery products rose 6.0 percent over the 12 months ending in August. The meats, poultry, fish, and eggs index was unchanged over the year. The remaining major grocery store food groups posted increases ranging from 0.3 percent (dairy and related products) to 4.8 percent (nonalcoholic beverages). The index for food away from home rose 6.5 percent over the last year. The index for limited service meals rose 6.7 percent over the last 12 months, and the index for full service meals rose 5.2 percent over the same period.

During most of 2020, 2021 and the first half of 2022 demand and supply for food (and much more) was totally discombobulated. Today’s nominal prices are often much higher than pre-pandemic and a serious gap emerged between price increases and wage increases. This was a source of considerable demand volatility to which supply chains were hard-pressed to adapt. During this period, food became much less affordable for the two least affluent economic quintiles.

But from a Supply Chain Resilience perspective, I perceive that since the beginning of 2023 the CPI for food — especially Food At Home — has been modest and healthy. This sort of nominal growth supports supply capacity and, given this year’s inflation-adjusted wage increases, are within reach of most households. The August CPI indicates some serious inflationary pressures (especially related to fuel and more), but 2023 grocery pull patterns are, so-far, well-matched to sustainable push capacity.

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September 14 Update: According to today’s Census Bureau report on August retail sales, seasonally adjusted sales at grocery stores increased from $73,644 million in July to $73,933 million in August (both are nominal, non-inflation adjusted figures). Given the population size, amounts of money involved, and inflation, this is about as flat as I would ever expect to see. Here’s the Fed’s related chart. Year-Over-Year there was much more spending growth in Food-Away-From-Home (8.5 percent compared to 2.1 percent), but the recent rate of growth in FAFH appears to be slowing as well.

Hot and tired

Posted on by Philip J Palin

[Important updates below] Many are tired of the heat. Electrical generation and distribution equipment can also get “tired” of trying to keep up with high temperatures. The CEO of the Electric Reliability Corporation of Texas (ERCOT) explains, “Coming off a long stretch of very high demand and high utilization, it’s not surprising to see some mechanical breakages happening on some of the dispatchable generation fleet.” Earlier this week an unusually high proportion of thermal generation was offline just about when it was needed most.

S&P Global has published an important, helpful review of ERCOT performance over the month of August. The report includes the following:

ERCOT President and CEO Pablo Vegas said Texas power consumers’ response to requests to conserve energy enabled the grid to avoid declaring Energy Emergency Alerts so far this summer, despite setting 10 peakload records, most recently 85.4 GW on Aug. 10. In comparison with summer 2022’s all-time peak of 80.1 GW, the increase has been more than 5 GW, Vegas said, about 7% growth year on year, compared with nationwide annual load growth averaging about 1% since the early 2000s. Texas’ energy demand reflects the growing Texas population and economy, which bring with them “demands on infrastructure in highways, schools and energy,” Vegas said. “I don’t think anybody expects the growth to slow down meaningfully…”

An August 31 report in the Texas Tribune mostly agrees with Vargas and raises the threat of conservation fatigue. “Repetitive power conservation appeals by the state’s grid operator face a challenge: Texans becoming less responsive to calls. Past conservation requests have helped reduce 100,000 homes worth of power demand on the grid.”

Regular readers know this issue has received ongoing attention here. A recent post — with several updates — may provide helpful context and a lot more links. This is not just a Texas problem. It is certainly not just a summer problem. For me it was the Christmas Eve problems at PJM, TVA and Duke Power that set off the loudest alarms. There is no short-term solution. I expect these challenges, close-calls, and occasional failures to persist for most of the next decade. Supply chains able to continue high volume, high velocity flows into wide-area, time-extended power failures is a key goal of Supply Chain Resilience.

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September 8 Update: Earlier this week the Texas grid may have gotten the closest yet this summer to a load-shedding event (more and more). High temperatures and high demand were, once again, the strategic prompt. But then tight conditions were aggravated by constrained transmission capacity. Bloomberg quotes Brad Jones, a former interim CEO of ERCOT, “The grid was facing the potential of congestion overload on the line coming from south Texas toward Dallas,” Jones said during an interview. “All the wind that was on in the south was struggling to get to Dallas to help meet demand. So right in the middle of this, Ercot had to reduce generation in the south to prevent that line from being overloaded.” (More and more)

September 15 Update: This blog has given extended and recurring attention to issues of North American grid capacity (especially Texas grid capacity) this whole long, hot summer, beginning with several posts from June 17 to 21. Yesterday Bloomberg published an in-depth look at these same crucial days and explained implications for grid capacity then and since. I was seeing much of the same behavior in real-time, but was not sure of its cause or implications… and did not make the time (and probably do not have the solo-competence) to unravel what I was seeing. Bloomberg has done a great job leading us through some very sticky wickets, melting in the white-hot heat.

FOT Assessment

Posted on by Philip J Palin

As discussed in a recent post, Force On Target is often helpful in thinking through Supply Chain Resilience. In the case of Hurricane Idalia the Force that hit Florida, Georgia, and the Carolinas was more fierce than forecast two days prior to landfall. Rather than a Category 1 or 2 hurricane, it reached CAT4 and came ashore as a CAT3. The forecast track was remarkably consistent, so anticipated targets were by-in-large the actual targets.

Given the track, my principal Supply Chain Resilience worry was potential impacts of storm surge at Tampa Bay and especially the fuel infrastructure supporting local racks and the Central Florida Pipeline. If Tropical Force Winds (see first map below) and predicted storm surge had breached sea walls and port-side structures the consequences could be wide-spread, time-extended, and deeply troublesome. So… on Wednesday about 0400 local when the ocean buoy nearest that fuel infrastructure showed that the bay had moved past high-tide with a survivable peak (see chart below), there was palpable relief.

Beyond Tampa Bay my next priority concern was direct population impacts — and issues with demand-signaling — at and near landfall. As the Force factor increased my Target zone did as well, extending into Southern Georgia. A colleague did a great job of sizing the space and population that would be the principal target. Please see the two maps below.

The much deeper (if narrower) target zone on the second map is not dense with supply chain capacity. It is, in fact, almost a “demand desert” characterized by sparse population and high-proportional poverty (here is the census summary for Taylor County, site of landfall). The potential for this already anemic demand to be further isolated was a real concern as Idalia tore across rural areas of the Southeast United States. Especially given the potential for delayed indicators of increased isolation, it will be another day or so before I can confidently assess the ability of dispersed demand to access supply that has mostly recovered, but remains at least as distant as before Idalia arrived.

Tropical storm winds (34 kn) – affected population of 15,300,003 https://onthemap.ces.census.gov/em/

Hurricane winds (64 kn) – affected population of 181,985 https://onthemap.ces.census.gov/em/

July grocery consumption

Posted on by Philip J Palin

Inflation-adjusted July Personal Consumption Expenditures on Food-At-Home once again increased slightly (see chart below). If we continue to see these “slight” increases for a couple more consecutive months I will have to retire my use of “flat” to characterize the current slope. But this July our real PCE for food was $1032.4 billion while last July our real PCE was $1027.9 billion. That’s still flat enough for me. What’s less than $5 billion among friends and fellow citizens?

Here’s how Bloomberg explained the PCE results:

Low unemployment, pandemic-era savings and wage growth are providing Americans the wherewithal to keep spending, allowing the economy to power ahead. Many economists have had to push out their recession calls, or in some cases, scrap them altogether as a result. The latest figures point to a strong start to economic growth in the third quarter… The saving rate decreased to 3.5%, the lowest since November, suggesting the recent pace of spending may not be sustained in coming months. Pandemic-era savings are dwindling, the labor market is cooling, delinquency rates are rising and the resumption of student loan payments this fall threatens to further strain consumers’ finances. Retail executives have suggested as much and remain cautious about the outlook.

If Bloomberg is right I should be able to keep using flat or falling into the Autumn.

Force On Target

Posted on by Philip J Palin

This blog often discusses Supply Chain Resilience in the context of Force On Target (recent examples here and here).

The resilience of a demand and supply network often depends which targets are hit hardest. Does the target play a central or peripheral role in network flows? Is the target isolated or are many other channels and nodes dependent on the target? What proportion of network flows depend on the target?

Many of us are watching how Tropical Depression 10 will develop over the next 48 hours or so. What sort of force will hit where? This Sunday morning’s NWS discussion includes:

The very warm and deep waters of the northwestern Caribbean Sea and Gulf of Mexico should support at least gradual strengthening during the next few days, tempered by moderate shear from a flat upper-level trough. However, this trough is forecast to amplify over the western Gulf of Mexico around Tuesday, which causes the shear to decrease near the cyclone in that time frame. There’s a notable risk of rapid intensification while the system moves across the record warm eastern and northeastern Gulf of Mexico…

Below are two data-generated graphics from from the Automated Tropical Cyclone Forecast system (ATCF) via TropicalTidbits. These and more are updated periodically. It remains very early. Right-now the models — based on this system’s recent behaviors, current and forecast context, and past performance of prior systems — give us a range of Force On Target possibilities to consider. Right now the bullseye is on Florida’s Big Bend. But we know both force and target could still change.

Emergent Force

Emerging Targets

Maui Update: Volume vs. Velocity

Posted on by Philip J Palin

Roughly 14,000 residents of west Maui have been seriously impacted by recent wildfires, ranging from total property-loss to sudden death. More than 100 deaths have been confirmed while it is widely assumed many more were killed in the conflagration. There are now 388 who have been validated as missing (updated estimates here). More than 10,000 have registered with FEMA for individual assistance (here). Maui’s total population is about 165,000.

As of yesterday, over 2900 people continue in emergency housing (hotels, Airbnb, and related, more and more and more). Many others are residing with family or friends. Rebuilding of housing stock will be complicated, delayed, extended, and expensive. At least 1500 residential properties have been destroyed, out of about 73,000 in Maui County. A significant portion of emergency housing has been secured using hotels and timeshares within one to two miles north of the Lahaina burn zone.

Unsafe Water Advisories continue for Lahaina, Upper Kula, and some other areas. Initial testing for dangerous chemicals has been undertaken (results). Further testing needs to be completed before public water system flows can support human hydration. Even bathing and cleaning should be avoided if possible (more). Both bulk and bottled potable water are being otherwise distributed.

Retail grocery outlets, including Foodland, Safeway, and Walmart are open and operating within twenty-miles of fire decimated Lahaina. SNAP benefits for hot food purchases are now authorized. A SNAP benefit to replace food lost in the disaster is available. The Lahaina Safeway survived intact and is ready to reopen when local officials give the okay. The Maui Food Bank has expanded its operations. Maui County and other emergency food/water distribution sites have been active. The Salvation Army, American Red Cross, and other voluntary organizations and individuals have been providing hot foods and other support. (More.)

Cell communications have mostly been restored (here and here). Other network connections have also been deployed (here and here). Here’s the FCC August 25 Communications Status Report.

Just under 1900 customers remain disconnected from the grid. In many cases a structure has not survived to be reconnected. More than 2200 structures have been seriously damaged or destroyed.

As previously posted here, the upstream and midstream supply chains for food, bottled water, and other essential freight have continued to operate and increased flows into Maui since the August 8 disaster (more and more and more).

In terms of Supply Chain Resilience, there is much more volume but much less velocity compared to August 7. Given the distance between Maui and its sources, for example, higher volume food flows are moving at about the same speed as before the disaster. But direction — more to the point, targeting — is much less precise since so many consumers are dispersed and some key nodes (such as the Lahaina Safeway) are not yet reopened.

This is not unusual.  This is typical.  It is common to mistake a velocity-problem for a volume-problem.  But not only do “solutions” for a volume problem not fix velocity, the added volume almost always increases congestion that further degrades velocity (here).  This is such a common mistake it has become close to a principle of Supply Chain Resilience diagnosis and prescription of post-disaster conditions.

Correction/Clarification: For my original post I misunderstood a report on emergency housing. The post above is corrected. The last group shelters (sometimes congregate shelters) have been closed. Displaced people are now housed in a range of facilities that will be paid-for using FEMA and state funding. This housing and financial support will persist for an extended period. Here is a helpful summary from MauiNow: “On Tuesday, Aug. 22, the last of the sheltered wildfire survivors staying at the South Maui Community Park Gymnasium in Kīhei, regained privacy as they were transitioned to longer-term housing. Since Aug. 16, the American Red Cross, Hawaiʻi Emergency Management Agency and the Federal Emergency Management Agency relocated nearly 3,000 survivors of the Maui wildfires from congregate shelters to contracted hotels. In total, more than a dozen hotels and timeshare properties are currently housing more than 4,400 shelter survivors and hotel employee survivors, while some 900 people are booked in Airbnb units. These accommodations will continue to provide meals, casework services, financial recovery resources and other disaster relief assistance.”

Union Pacific: Cascading Consequences

Posted on by Philip J Palin

Tropical Storm Hilary hit hard in the desert expanse between Los Angeles and Las Vegas. While sparsely populated, Hilary’s bullseye includes significant water, energy, and freight flows, including a major rail corridor connecting the Ports of LA/Long Beach with the rest of the United States.

On August 21 Union Pacific reported, “The Mojave and Yuma subdivisions are out of service due to water and mud over the tracks in the following California locations: Between Banning and Indio, Near Mojave, 10 miles north of Fontana (see map below). Widespread road and interstate closures are impacting our ability to transport crews to operate trains, and public electrical outages are impacting operations in some terminals. Once the storm passes and we are able to assess the status of our network in this area we will provide an update on estimated shipment delays” (more).

On August 22 Union Pacific reported, “Mud continues to flow back onto the tracks. Our Operating and Engineering teams are bringing in additional equipment to assist in clearing the track. There is a segment of double track that traverses a bridge that will need to be rebuilt…. Early estimates indicate the track may be out of service for approximately two weeks. Although we have returned service to some of the impacted segments, it will take multiple days to work through the backlog of trains. For safety purposes, these line segments will have temporary slow order speed restrictions placed upon them. We will also need to re-align locomotive power and crews to the region and customers should expect extended delays through the week.”

Also on Tuesday August 22, FreightWaves reported, “…normal rail flows stopped” after Sunday evening. The last loaded train to pass through the Loma Linda area was an eastbound mixed-manifest train with 109 cars, and it passed by at 8:39 p.m. PT… Ten days before the storm hit, the route saw an average of 31 trains, carrying a total of 3,600 carloads and 4,300 containers…” As this suggests, backlogs are accumulating quickly. On August 23 Union Pacific began restricting network access as far east as Chicago, Charlotte, and Atlanta in an effort to avoid total gridlock.

The potential for a high volume, high velocity node or channel to become a tangled chokepoint is an innate feature of most contemporary demand and supply networks. As this case suggests once flow is slowed or stopped at anyplace in the network there is a tendency for rapid congestion and related complications across the entire network, sometimes creating cascading impediments to recovery unless effectively mitigated. We see this again and again with airline networks, maritime flows, meat processing, and much, much more. Concentration is a key component of economies-of-scale that facilitate affordability and efficient, effective delivery to demand. But depending on context, what is usually a strength can suddenly become a serious weakness.

Map below shows UP system chokepoints on August 21 immediately following Hilary’s transit

Tropical Storm Hilary Map 082123 | O

MISO predicts peak-load

Posted on by Philip J Palin

The Midcontinent Independent System Operator (MISO) is the regional reliability organization for electric utilities serving more than 40 million people in the central United States. Yesterday MISO released a “Maximum Generation Emergency Alert effective from 08/24/2023 12:00 EST until 08/24/2023 22:00 EST…” [See several updates below]

S&P Global reports, “Sweltering heat continues to push up power prices in the Central US, where the Southwest Power Pool set a peakload record of 56.18 GW Aug. 21 and the Midcontinent Independent System Operator was forecasting a record-smashing 130 GW of demand Aug. 24. In preparation for the soaring demand, MISO notified all local utilities in its footprint to prepare every available resource to serve the projected load, the grid operator said in a statement late Aug. 21. “We anticipate challenging operating conditions throughout the entire week, and we will need every available resource at some point,” Jessica Lucas, MISO executive director for system operations, said in the statement. (Below see SPG chart of MISO data.)

The emerging situation is of particular concern given the forward-looking assessment of MISO’s capacity in this year’s NERC Summer Reliability Assessment, “Demand forecasts and preliminary resource data indicate that MISO is at risk of operating reserve shortfalls during periods of high demand or low resource output. MISO’s resources are projected to be lower than in the summer of 2022 while net internal demand has also decreased. Firm transmission imports for this summer have significantly increased; this has resulted in a higher Anticipated Reserve Margin (ARM) of 23% (on an installed capacity basis) compared to 21% last summer…”

The prior paragraph is purposeful in highlighting ambivalence — both strengths and weaknesses. Bottom line: capacity is lower than last year and tomorrow’s demand is expected to spike. Our situation on Thursday night may mostly depend on some consumer restraint in the face of brutal temperatures and how the wind blows. The Summer Reliability Assessment for MISO also notes, “Performance of wind generators during periods of high electricity demand is a key factor in determining whether system operators need to employ operating mitigations, such as maximum-generation declarations and energy emergencies. MISO has over 30,300 MW of installed wind capacity; however, the historically-based on-peak capacity contribution is 5,488 MW.”

The MISO demand/supply dashboard can be accessed here.

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August 24 Update: The following alert was distributed 8:16 Central Time this morning: “MISO is escalating the Maximum Generation Alert to a Maximum Generation Emergency Event Step 2a effective from 12:00  until 22:00 EST today for the MISO Balancing Authority Area. The reason for the Event is because of Forced Generation Outages, Above Normal Temps, Higher than Forecasted Load.” According to Reuters, “MISO projected it would have 125,907 MW of supplies available with 120,656 MW from internal resources and 5,251 MW of imports. That would not be enough to meet the grid’s forecast peak of 127,692 MW, which would top the system’s all-time high of 127,100 MW in July 2011.” Reuters and others are also reporting that the Texas grid is facing similar shortfalls today (more).

Later: At 2:00 Central Time on Thursday some personal observations: MISO’s solar and fossil-fuel generators are achieving forecasts. MISO’s wind generation has been less than forecast most of today. For example, the day-ahead forecast for 1:00 Central anticipated 4294MW being generated, instead 3134.33MW was being generated. At 2:00 the deficit had grown to just over 1500MW. Imports seem to be arriving as anticipated. This is, however, a wide-area challenge encompassing at least the Southwest Power Pool, ERCOT, and MISO. Will exports from other regions be sufficient to fill gaps across such a wide area? Behavior of the national grid can be monitored on the EIA website.

August 25 Early Morning Update: The mid-continent’s grid did not fail on Thursday. Both MISO and ERCOT avoided rolling blackouts and other extreme measures, but barely. Good news does not attract the attention that would have been given the opposite. I will be looking for more detailed assessments from domain specialists. Bloomberg is crediting a pop-up thunderstorm for cooling demand in Houston. Right now, it seems to me that in combination with other measures, it was possible to import more power from other regions when it was needed most. The chart immediately below is most of yesterday’s import pattern for MISO. At about 4:45 PM local time (16:45 on chart) imports peaked (or on this chart bottomed-out) at slightly more than 8745MW, even more than scheduled, much more than expected on Thursday morning. I won’t have access to data for another 24 hours or so, but I bet PJM was exporting lots of megawatts to MISO. In the case of ERCOT (Texas), they were importing too, but I am as intrigued with the release of “stored power”(see second chart below). Just before 8PM local this was contributing 1132MW… just as solar power was fading and evening demand was peaking. Related to this report? I’m not sure. Almost certainly related to this report.

Below is the August 24 Fuel Mix for ERCOT (Electric Reliability Council of Texas)

The chart above reflects “previous day” fuel mix, so for August 24, 2023

August 25 Afternoon Update: Bloomberg reports, “A punishing heat wave will test power supplies in Texas for a second day as triple-digit temperatures continue to drive up electricity consumption. The state’s grid operator expects to have almost 80 gigawatts of capacity available at about 8 p.m. local time, after solar farms start shutting off, based on hourly forecasts. Demand will be within about 1 gigawatt of that total. Five-minute forecasts show demand exceeding supply around that time…”

August 26 Update: It was once again very close, but the Texas grid made it through another sundown. Here’s more from the Dallas NBC affiliate. Below are the Friday, August 25 supply slopes. Excessive heat is forecast to continue through this weekend. MISO has also declared a Hot Weather Alert through Sunday.

August 27 Update: The Texas grid continues to operate along the cusp. Reuters is reporting renewed conservation requests by ERCOT. The warnings and earnest requests are prudent. Repeated skin-of-the-teeth avoidance of blackouts does tend to reduce attention and related conservation behavior…

September 2 Update: S&P Global has published an important, helpful review of ERCOT performance over the month of August. The report includes the following:

ERCOT President and CEO Pablo Vegas said Texas power consumers’ response to requests to conserve energy enabled the grid to avoid declaring Energy Emergency Alerts so far this summer, despite setting 10 peakload records, most recently 85.4 GW on Aug. 10. In comparison with summer 2022’s all-time peak of 80.1 GW, the increase has been more than 5 GW, Vegas said, about 7% growth year on year, compared with nationwide annual load growth averaging about 1% since the early 2000s. Texas’ energy demand reflects the growing Texas population and economy, which bring with them “demands on infrastructure in highways, schools and energy,” Vegas said. “I don’t think anybody expects the growth to slow down meaningfully…”

An August 31 report in the Texas Tribune mostly agrees with Vargas and raises the threat of conservation fatigue. “Repetitive power conservation appeals by the state’s grid operator face a challenge: Texans becoming less responsive to calls. Past conservation requests have helped reduce 100,000 homes worth of power demand on the grid.”

Hilary et al: Force-On-Target

Posted on by Philip J Palin

Hilary swept through Southern California with a record-breaking overnight visit. According to ABC10 news , “A slight eastward jog in the track of Hilary though Baja California meant the heaviest rain and strongest winds occurred east of the Peninsular Ranges, sparing the densely-populated coastal cities from the worst of the storm… The deserts of Southern California were particularly hard hit, with 4-10 inches of rain falling in places like El Centro and Palm Springs… Many areas saw at least an average year’s worth of rain in 48 hours…” (see screen capture below). (More and more and more and more.)

A late Sunday afternoon magnitude 5.1 earthquake east of Los Angeles contributed an extra dose of Hollywood-like dread to what might happen overnight.

A tropical storm swiping San Diego is entirely different from a hurricane hitting Los Angeles. A tropical storm tearing through the Imperial Valley, Salton Sea, Joshua Tree, and Mojave is very different from four to ten inches in one day for any urban area, Los Angeles Basin infrastructure, or supply chain clusters in San Bernardino County.  Wherever “an average year’s worth of rain in 48 hours” occurs, flooding, landslides, and related infrastructure troubles will unfold. 

But supply chain clusters and capacity concentrations are highly differentiated by target area. Risk emerges from the interplay of threat with vulnerability. The risk associated with a very hard hit on empty space is nil. The more capacity and interdependencies in any particular place, the more vulnerability to even incidental threats.

In the case of Hilary, the threat was substantive but the storm track happened to spare (that “eastward jog”) the largest inventory of potential vulnerabilities. Our situation today would be very different if, instead of making landfall in Baja, Hilary had come ashore at Long Beach with maximum rain and wind hitting the ports, refineries, urban transportation network, and dense population. (See more on the historical precedent here and here.)

A magnitude-5.1 earthquake in rural Ventura County spawns different consequences than a 5.1 along Ventura Boulevard at the intersection of the 101 and 405. A 7.1 in either place will be horribly destructive. There is, however, much more to destroy in the vicinity of Ventura Boulevard and many more people to harm.

When Ojai or Palm Springs are hit hard, proximity to the supply chain capacity of metro Los Angeles allows for rapid and effective response and recovery. Fort Myers was helped because Tampa was spared. Lahaina is getting more help faster because Kahului continues to operate and Honolulu still receives flow from Oakland, Long Beach, and elsewhere. But when a network’s core capacity is hit hard, response will be constrained and recovery long delayed.

This reality is widely recognized by supply chain and crisis management professionals, but tends to be discounted. The discounting is reinforced by easy-to-anticipate — if hard to predict — catastrophic outcomes (more and more) of losing any major proportion of water, food, fuel, or related supply chain capacity serving a large population. The problems of lost-capacity can seem so overwhelming that many otherwise tough-as-nails veterans are reduced to hoping for another slight jog.

There are mitigation strategies to explore, exercise, and worth our investment of time, thought, and more. In a future post I will list a few. But this morning’s challenge is that rush of dopamine many of us (me too) experience when the bullet just dodged somehow discounts the artillery round still to come.

Freight vitality

Posted on by Philip J Palin

Freight is where, when, and how push meets pull. Demand prompts supply, freight fulfills demand. Air cargo, maritime (riverine and ocean-going), train, truckload, LTL, refrigerated, van, flatbed, package delivery, and even more reflect diverse modes, intermodal possibilities, and diverse, responsive spot and contract markets. Freight is most of how volumes achieve velocity.

The many parts of the freight sector are highly interdependent, but most deliveries finally depend on some sort of truck and trucker on the road able to refuel (here and here).

The chart below suggests the steep peaks, deep valleys, and recurring volatility of the US trucking market. The red line is basically volume (compared to a 1990 baseline). The blue line is the Producer Price Index (PPI) for the trucking sector, measuring price changes freight carriers command or suffer. When demand for stuff is strong and stresses capacity (e.g., first half of 2022), prices will trend higher. When freight demand falls, especially if capacity hangs on (e.g., since at least last summer), prices will be softer… in this case, compared to a 1992 base-line (more and more).

There are plenty of other freight indicators: FreightWaves SONAR, DAT Trendlines, Bank of America Truckload Demand Indicator, U.S. Bank Freight Payments Index, ATA Truck Tonnage Index — each offering different angles more or less current. Diesel prices are absolutely worth tracking. Most of these smoke signals now agree — some more, some less enthusiastically — with Brooke Sutherland at Bloomberg “The free-falling freight market may finally be finding a bottom. Shippers shouldn’t count on a return to the go-go days of Covid, but resilient US consumers offer a way out of the morass…”

Volumes are more or less fine, not great but no where near the deepest valleys of 2020 or even 2017. Price-drops may have stopped (at least slowed) while still above pre-pandemic levels, even after adjusting for inflation (see second chart below). The recent loss or downsizing of some trucking firms, such as Yellow, can be good news for those still hauling.

Freight movement is analogous to human blood pressure, not too high and not too low is best for the whole supply chain. I’m sure truckers hope our current pace and related pressure builds a bit, there is existing capacity to do more. But current flow volumes and velocity are inside healthy ranges.

One Month Percent Change: PPI Transportation Services-truck transportation of freight, not seasonally adjusted

Bureau of Labor Statistics, Data extracted on: August 17, 2023 (5:59:47 AM)