Demand hopes lift EU wheat as Turkey eases import curbs

PARIS, March 19 (Reuters) - Euronext wheat futures rallied on Wednesday as news that Turkey was easing import restrictions boosted demand prospects.

May milling wheat BL2K5 on Euronext was up 2.3% at 227.25 euros a metric ton by 1718 GMT, just off an earlier two-week high of 227.50 euros.

The front-month contract saw the sharpest gains, with the lifting of the Turkish import curbs adding to short-term demand prospects after reports of large Iranian imports.

Turkey is permitting tariff-free wheat imports under a flour export scheme from Wednesday, the Turkish flour industrialists federation told Reuters, citing a memo from grain board TMO and confirming earlier market rumours.

While Turkey mainly imports wheat from Russia and other countries in the Black Sea region, any renewed buying could leave room for Western European wheat to capture sales in other importing countries.

"It's clearly about Turkey," a futures dealer said of the rise on Euronext.

European Union wheat exports are running about a third below last season's level and traders have been concerned about sparse demand.

“The demand side is becoming more active with Iran buying a lot of wheat and talk Turkey could resume imports soon,” a German trader said.

Iran's Government Trading Corporation (GTC) is believed to have purchased around 500,000 tons of wheat late last week expected to be mainly sourced from Russia, European traders said on Wednesday.

This was considerably higher than earlier trader estimates of a purchase of around 120,000 tons. Some estimates were even higher than 500,000 tons with unconfirmed talk of 1 million tons bought amid talk that poor weather was hurting local crops.

A fall in the euro EUR= from a five-month high against the dollar also supported Euronext. FRX/

The euro's recent strength had dented export sentiment even as shipments from top exporter Russia had slowed.

Financial investors expanded further their net short position in Euronext wheat last week, data published by Euronext on Wednesday showed.

Traders noted that the net short position of the investment fund category increased to a new record of nearly 219,000 contracts.

"This could lead to a short-covering squeeze if we get into a weather market," another futures dealer said.