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Paragon Investments' Futures File: Oil & Corn

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Saudi Shakeup Unnerves Oil Market

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 Easts major military powers, and two of the worlds 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 Reach 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 Thursdays 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 years 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 that waited until harvest to price their grain.

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About the author

With a degree in Grain Science / Management from Kansas State University, Mr. Haverkamp has worked directly with and for several corporations in research, logistics, and origination of commodity products. Among these are Continental Grain, Kansas Wheat Commission, National Livestock Association, Kice Industries, and Land 'O Lakes. Mr. Haverkamp is a regular guest analyst on both radio and television programs throughout the Midwest and also provides fundamental and technical research for Bloomberg, DTN, Dow Jones, The Wall St. Journal, CNN and CNBC as well as several other local and regional news syndicates. Mr. Haverkamp sat on the board of directors for the NIBA (National Introducing Brokers Association) in Chicago for five years and on the National Futures Association's nominating committee for one year. Mr. Haverkamp began trading in 1987 and founded Paragon Investments in 1996. 

  Mr. Haverkamp continues to provide consulting services for individual investors, livestock operations, grain processors, and individual producers as well as holding the title of CEO for Paragon.

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