EU wheat holds above lows with Algeria tender in focus

PARIS, May 14 (Reuters) - Euronext wheat edged higher on Wednesday to hold above contract lows as traders assessed initial reports of a large import purchase by Algeria.

September milling wheat BL2U5, the most active position on Paris-based Euronext, unofficially was up 0.4% at 205.25 euros a metric ton by 1623 GMT, still near Tuesday's contract low of 201.00 euros.

Chart support around the psychological 200 euro threshold and a bounce in Chicago futures Wv1 helped underpin Euronext, dealers said. GRA/

Algeria's state grains agency OAIC bought about 660,000 tons of milling wheat in an international tender on Wednesday, European traders said.

While the large volume was welcome in a wheat market that has faced tepid international demand, traders said the tender suggested strong Black Sea competition for the upcoming season.

French wheat, meanwhile, was not expected to be in the running, despite attractive prices, as a diplomatic stand-off between Paris and Algiers continued this week.

Farm office FranceAgriMer raised its outlook for 2024/25 French soft wheat exports, partly due to market expectations of late-season French sales to Egypt, though France was still set for its lowest exports this century after a rain-hit harvest.

Export sentiment in Western Europe was also being tempered by a firm euro and talk of cheap U.S. prices attracting interest overseas.

"U.S. wheat export prices remain the cheapest high-volume origin in the world," one German trader said. "There is talk today of U.S. export sales to North Africa and the Middle East."

Traders said U.S. soft red winter for June U.S. Gulf shipment was about the world's cheapest high-volume origin at $216-$220 a ton FOB. This was roughly $10 a ton cheaper than French and around $20-$25 cheaper than Romanian, Russian and Ukrainian wheat, in turn quoted in a similar price range.

There was unconfirmed talk a buyer in Morocco, an important market for EU wheat, this week bought U.S. hard red winter wheat for May/June shipment but tonnage was unknown.

In a sign of recent downward pressure on prices, financial investors extended their net short position in Euronext wheat last week, data showed on Wednesday.