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Wheat Futures Fall From Five-Month High as Austra

By Whitney McFerron - Jan 5, 2012 5:00 AM GMT+0800

Wheat futures fell the most in three weeks on easing concerns that flooding will disrupt output in Australia, the world’s fourth-biggest exporter.

Harvests were mostly completed before the worst floods in 50 years in the Australian state of Queensland, Wayne Newton, the president of Agforce, a local industry group, said Dec. 29. Yesterday, prices jumped as much as 3.9 percent amid speculation that the floods would hamper transportation of grain.

“The main wheat belt of Australia remains relatively dry, and the harvest will be completed,” said Frank Cholly Sr., a senior market strategist at Lind-Waldock in Chicago. “We already know we’ve lost a significant percentage of quality wheat.”

Wheat futures for March delivery dropped 16.25 cents, or 2 percent, to settle at $7.8925 a bushel at 1:15 p.m. on the Chicago Board of Trade, the biggest decline since Dec. 14. Yesterday, the price rose to $8.25, the highest since Aug. 6. Futures are up 42 percent in the past year.

Australia may produce 25.5 million metric tons of wheat this year, 16 percent more than last year, even as excessive rains in eastern growing areas eroded crop quality, the U.S. Department of Agriculture said last month.

Some areas of Australia had four times the normal amount of precipitation in December, and rain may continue for at least another four days, according to QT Weather forecasts.

The U.S. is the world’s largest exporter, followed by France, Canada and Australia, according to the International Grains Council and FranceAgriMer.

U.S. Crop Concern

Futures still may rebound if dry weather in the U.S. Great Plains worsens and temperatures drop low enough to cause damage, Cholly said. Only about 27 percent of the crop in Kansas, the largest winter-wheat producer, was in good or excellent condition last month, down from 37 percent at the end of November, the USDA said yesterday.

“The winter wheat is already in a weakened state,” Cholly said. “We’re looking for some cold weather, and the wheat could have some winter kill that could drive prices up.”

Wheat is the fourth-biggest U.S. crop, valued at $10.6 billion in 2009, behind corn, soybeans and hay, government data show.