Australian rains dent US wheat futures

Wheat fell from an 11-year high on speculation that rain in growing regions of Australia and Ukraine will help alleviate drought.

Rains in parts of Queensland and northern New South Wales will help soil moisture and improve crop prospects, according to Woburn, Massachusetts-based Meteorlogix. Rain was also expected in Ukraine, the forecaster said. Futures rose this week to the highest price since 1996 as excessive rains in the US and drought in Australia and Ukraine damaged plants.

"Moisture of any kind in Australia or Ukraine can spook traders, especially at these high prices,'' said Mike Zarembski, a futures analyst with Xpresstrade in Chicago. "Any kind of change in weather gets traders to try to protect their profits.''

On the Kansas City Board of Trade, wheat for September delivery fell 5.5 cents, or 0.9 per cent, to $6.07 a bushel at 10:37 am. Yesterday, the price reached $6.23, the highest since May 1996. Kansas City wheat has risen 31 per cent in the past year and 17 per cent this week.

Wheat futures for September delivery on the Chicago Board of Trade fell 2.25 cents, or 0.4 per cent, to $6.2025 a bushel after yesterday reaching $6.33, the highest for most-active futures since a record $6.36 in April 1996. Prices have jumped 72 per cent in the past year and 18 per cent this week.

Drought in Australia cut production 57 per cent to 10.5 million tonnes during the marketing year ended May 31 from 24.5 million tonnes a year earlier, the US Department of Agriculture said in a report this week. Growers there will harvest 22.1 million tonnes by May 31, 2008, according to the USDA.

Australia was the third-largest exporter of the grain two years ago after the US and Canada.

"Australia is looking at a boomer of a crop,'' said Louise Gartner, owner of Spectrum Commodities in Beavercreek, Ohio. Still, rain was needed to help improve soil moisture after the last year's drought, she said.