Milk haulers adapting operations to meet new demands
Sep 1, 2008 12:00 PM
Like Many of its sisters in the tank truck industry, milk haulers are experiencing a mixed market that is causing them to take a new look at their operations and the logistics that are required.
That was a continuing theme at the International Milk Haulers Association (IMHA) meeting April 20-22 in Phoenix, Arizona.
Milk haulers historically have loaded milk at dairy farms and transported the product to one or two nearby processors. Not anymore, the haulers said.
In a conversation with Bulk Transporter, Jim Koester of Indiana and Rick Barefoot of Pennsylvania noted that haulers are traveling longer distances from their home bases and serving more dairy processors than they have in the past.
That means the companies are developing different efficiencies to meet the demand, including tank cleaning requirements, fuel management, and processor service.
New issues have arisen from animal rights advocate protests and laws legislated by officials who are becoming further removed from agriculture experience, Paul Rovey, president of the United Dairymen of Arizona, said during the seminar segment of the meeting.
Also making presentations were Chuck LaComb of Haylor, Fryer and Coon, and Peter Switalski of Agri-Services Agency. They discussed insurance and investment programs that can help in a vacillating economy. They noted that on-the-road efficiency is impacted by diesel prices, congestion, need for infrastructure, increases in taxes, size and weight changes, and the addition of new toll roads.
Russell Laird of the American Trucking Associations (ATA) said hours-of-service regulations and subsequent legal protests from groups who have opposed the Federal Motor Carrier Safety Administration rule will remain a factor in transportation. He predicted that high fuel prices are here to stay, noting the growing energy demand coming from India and China. “There are no easy answers,” Laird said.
Turning to insurance costs and noting the change from previous years, LaComb said, “The soft (insurance) market has finally found its way to the milk market.” As the situation changes, some haulers are taking a look at captive insurance programs to ameliorate premium increases and decreases driven by market conditions.
He said a captive program is generally defined as an entity that is wholly owned and controlled by its insured (owners). The primary purpose is to insure the risks of the owners. The primary beneficiaries of underwriting profits are its owners. However, he noted that relatively high start-up investment for capitalization and formation are required, as well as finding the time to administer the program.
Switalski discussed rising health care costs that are driven by less healthy lifestyles, new medical technologies, an aging population requiring more health care, legal repercussions, fragmentation of the health care pool, and uninsured costs.
Health insurance premiums have increased 87% over the last seven years, he said, adding that retaining employees becomes more difficult when employers do not provide insurance.
Switalski suggested a health saving account as an alternative to traditional health insurance. According to information from the US Treasury Department, the program enables an individual to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis. To be eligible for the program, a person must be covered by a high deductible health plan. The high deductible coverage generally costs less than traditional health care coverage, and the money saved can be put into the health savings account.
No matter what decisions are made about health plans and other economic issues, there will be problems for the industry to overcome, such as maintaining a reliable labor force, Rovey noted. He added that immigration reform is not expected until after the 2008 elections for president and Congress. Other unknowns include fuel costs related to corn production, which in turn, affects the price of animal feed.
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