Crude, tensions rise
Crude oil prices exploded higher this week as the military conflict escalated in Iraq. Sunni militants have reportedly captured multiple major Iraqi cities and now threaten to take Baghdad, the capital. Meanwhile, as government troops were in full retreat, ethnic minority Kurdish troops took control of oil-rich Kirkuk, a city in northern Iraq. As the Iraqi government’s control collapsed, fears rose that instability could interrupt the flow of oil from the world’s sixth-largest oil exporter. In the wake of these fears, oil prices blew over $107 per barrel on Friday morning, the highest price in nearly nine months.
In the near-term, it looks as if there could be more conflict to come in Iraq. The Iraqi government is calling upon the U.S. for military support, including airstrikes. Meanwhile, there are reports of Iranian troops crossing the Iran-Iraq border in support of the government, which could create an odd alliance for the United States and Iran, who are both seeking to bolster the current Iraqi leadership.
Grains in the drain
On Wednesday, the U.S. Department of Agriculture confirmed the market’s expectation that this year’s crop of corn and soybeans will more than meet demand, leading to an abundance of grains this year. Without a major weather event, like the searing drought that hit the Midwest in 2012, USDA analysts expect that US grain stockpiles will swell this fall. As a result, corn and bean prices fell to multi-month lows, with December corn crumbling to $4.39 and November soybeans nose-diving to $12.04 per bushel.