Wheat Falls as Argentina Eliminates Restrictions on Exports

By Tony C. Dreibus

Jan. 30 (Bloomberg) -- Wheat fell for the second straight day after Argentina, the world's fourth-largest exporter of the grain, planned to end temporary limits on shipments next month.

The lifting of restrictions will free up about 2 million metric tons of wheat for sale overseas, eroding demand for supplies from the U.S., the biggest exporter, analysts said. Argentina halted registrations in November to curb rising domestic food prices.

``That's business that we would've gotten if Argentina wouldn't have allowed those exports,'' said Larry Glenn, owner of Glenn Commodities in Wichita, Kansas. ``That's five weeks worth of export business if we sold 400,000 a week.''

Wheat for March delivery fell 21.5 cents, or 2.3 percent, to $9.225 a bushel on the Chicago Board of Trade. The announcement yesterday in Buenos Aires that shipments would resume by Feb. 15 sent wheat tumbling 19 cents, or 2 percent, after the price earlier rose the exchange's 30-cent limit, or 3.1 percent.

Wheat futures still have doubled in the past year and reached a record $10.095 on Dec. 17 after importers began buying U.S. grain on concern supplies would fall short of demand.

Higher prices have hurt profit at Kellogg Co., the largest cereal maker in the U.S. Fourth-quarter earnings dropped 3.3 percent, partly because of higher wheat costs, the company said today. Net income fell to $176 million, or 44 cents a share, from $182 million, or 45 cents, a year earlier. Sales increased 8.1 percent to $2.79 billion.

Minneapolis Rally

On the Minneapolis Grain Exchange, contracts for high- protein spring wheat extended a rally, reaching a record in overnight trading on concern farmers in the U.S. and Canada may not seed enough acres in April and May.

Inventories of spring varieties are low after drought curbed yields in southern Canada and the northern U.S. in 2007. With corn and soybean prices at or near records, farmers may sow more of those crops rather than wheat, analysts said.

``Things are awful tight for spring-wheat supplies and demand's been high for quality wheat,'' Glenn said.

Wheat for March delivery in Minneapolis rose 16 cents, or 1.2 percent, to $13.43 a bushel after reaching $13.55, the highest ever. The price has jumped the 30-cent limit in six of the past nine sessions. Futures have surged 30 percent this month and more than doubled in the past year.

Futures for delivery in September and December fell the exchange limit on speculation stockpiles of spring wheat will rise as record prices encourage growers to plant more of the grain. Spring wheat is harvested starting in August.

Wheat was the fourth-biggest U.S. crop in 2006, valued at $7.7 billion, behind corn, soybeans and hay, government data show.