Shipping by rail is getting drastically more expensive. Last year rail car use cost $400. Late this summer the cost sky rocketed to more than $3 - thousand dollars. AgResource Company President Dan Basse said there is a real logistical jam due to the rising energy production in the United States, particularly in North Dakota
"North Dakota now producing a million barrels of crude oil a day and that competing with agriculture in terms of rail car availability, Basse said. "It's going to pressure basis levels to the farmer because the grain farmer is always the one who bears the weight of all this and unfortunately there is going to be mounds of gold, corn stored across the ground, if indeed the producer doesn't think about his storage options and availability toward the harvest time frame."
Cattle feeders in the midwest will benefit. Basse said the cattle producers located closer to corn are going to be at an advantage because they are going to have cheaper basis levels and the availability of that supply.
"If you are at a situation where you are in North Texas or maybe New Mexico where you rail in a lot of corn, that rail availability will be diminished and of course basis will be to you somewhat higher," Basse said.
Basse predicts a high fed cattle price between $162 - $168 per hundred weight.
"We honestly at AgResource can't figure out how we are produce enough calves or feeder cattle to expand the herd and of course produce enough beef in this country," Basse said. "As we think about the next three to four years, it's going to take an increase of at least 9 - 11 percent in the US cattle herd to get us there and that doesn't seem likely with cow prices at record highs."
Beef prices will continue to rise, putting burden on producers to make sure they provide an eating experience that's worth it.