While some say the US economy is improving at a snail's pace, the trucking industry is forging ahead as trucking vehicle orders soared in March, bucking a trend of overcapacity seen in 2007-2009, as more money is now flowing into truckers' pockets.

"With the uptrend firmly established, the question for 2011 is now the industry's ability to meet demand, instead of whether demand would rise to expectations," said Kenny Vieth, American Commercial Transportation Research Co president and senior analyst, in an April 5 release.

Heavy-duty vehicle net orders for North American markets rose to 29,200 units in March, up 159% from March 2010, and the largest monthly order intake since May 2006, ACT said.
"Truckers started making money again in 2010," Vieth said in an interview.

But the increase in demand for trucking also comes at a price, at the pump that is. Although US unemployment remains high, non farm payrolls have increased along with consumer spending and that, in turn, has improved demand for transportation fuels like diesel, which are hitting highs not seen since 2008.

US diesel prices have reached highs last seen in 2008. Platts assessed Gulf Coast pipeline ULSD at $3.2268/gal April 7. That's up nearly $1/gal from the same day last year, and is on par with April 2008 prices. By July 2008, ULSD prices had blown through $4/gal.

Higher diesel prices are of concern to truckers, but just about "every trucker in the US has some fuel surcharge mechanism" to help deal with higher prices, Vieth said.

At the same time, farmers are getting their tractors into full swing as the US enters the spring planting season just as agricultural prices hit all time highs.

CBOT corn futures rallied to all-time highs this week as stocks declined at a time of rising demand. US Department of Agriculture data released March 31 showed corn inventories at 6.52 billion bushels in early March, down from 10 billion bushels at the start of 2011. The USDA is expecting an increase in US wheat and corn plantings, but a decrease in soy plantings.

Additional ULSD demand is also coming from outside the US, with Gulf Coast traders saying exports to South America began picking up in the second half of March to satisfy harvest season and then winter needs.

Farmers and truckers may start griping about high fuel costs, but they'd be up in arms if it wasn't for this year's supply cushion.

Using the NYMEX heating oil futures as a proxy for diesel, the price spread to crude futures--the "crack"--is down significantly from the same period in 2008.

NYMEX heating oil cracks this year have been distorted by relatively lower crude futures prices, the result of a well-supplied delivery point at Cushing, Oklahoma.

Using ICE Brent futures as a basis, the front-month heating oil crack settled April 7 at just $11.98/b, down from $15.54/b in mid-March, and down $10/b from the same day in 2008.

Energy Information Administration data shows an improvement in US distillate demand this year, but demand has not yet recovered to pre-recession levels.

Distillate demand was 3.672 million b/d, the week ending April 1, not far from the five-year low for that week of 3.637 million b/d, but nowhere near the 4.465 million b/d seen in April 2008.
US diesel stocks at 119.128 million barrels the week ending April 1 were down from the all-time high 125.723 million barrels in early February, but were higher for the third week in a row at a time inventories typically draw.

And US refiners have plenty of spare capacity, operating at 84.4% the week ending April 1, while margins should encourage higher diesel production once facilities exit the spring turnaround season.

So, keep on truckin'.

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