Saudi Arabia was a hotbed of activity this week, which spooked the oil market to a two-year high near $58 per barrel.
The Middle Eastern kingdom is undergoing internal turmoil after the heir to the throne, Crown Prince Mohammed bin Salman, fired numerous government ministers and detained other princes on the premise of anti-corruption efforts. The moves are being seen by many as a consolidation of power, as the crown prince takes out many of the ruling class, some of whom rank among the wealthiest in the world.
On top of the internal struggles, Saudi Arabia shot down a missile this week that was fired at its capital from neighboring Yemen. U.S. intelligence officials confirmed that the missile came from Iran and was fired by pro-Iranian Houthi rebels in Yemen. Saudi Arabia has been at war with these rebels for years, but now declared that the missile attack may be an “act of war” by the Iranians.
If war were to break out between two of the Middle East’s major military powers, and two of the world’s largest oil producers, the impact on the global oil market would be devastating on a scale not seen since the First Gulf War.
Corn yields hit new record
Despite hot and dry weather this summer, U.S. corn yields hit a new record high this year at 175.4 bushels per acre, according to Thursday’s update from the U.S. Department of Agriculture.
Crop yields have risen sharply in recent years due to crop genetics, better pest management, improving machinery, and increasingly efficient farming techniques. Rising yields have allowed the U.S. to continue providing a surplus of grain despite a rising global population, increasing livestock herds (that are largely grain-fed), and the additional demand from biofuel production.
This year’s harvest is projected to exceed 14.3 billion bushels, which could leave an excess, or carryover, of more than 2.3 billion bushels of corn. Fears of oversupply knocked corn to a new low price near $3.40 per bushel, cutting deeply into farmers' profitability for those who waited until harvest to price their grain.