EU wheat rises with Chicago as Ukraine war tensions prompt short-covering

PARIS, June 2 (Reuters) - Euronext wheat rose on Monday in step with U.S. futures as news of a Ukrainian drone attack deep inside Russia rekindled concerns about the war between the two grain exporters, prompting some short-covering after recent price lows.

September milling wheat BL2U5, the most active position on Paris-based Euronext, was up 1.4% at 203.50 euros a metric ton by 1606 GMT. The front-month position had hit a contract low of 200.25 euros on Thursday, though it held the psychological 200 euros floor.

Chicago wheat Wv1 climbed more sharply, with additional support from a drop in the dollar as investors fretted again about tariffs following U.S. President Donald Trump's threat to double duties on imported steel and aluminium to 50%, and as Beijing hit back against Trump's accusations it violated a U.S.-Chinese agreement on critical minerals shipments. GRA/

Russia and Ukraine held their second round of direct peace talks since 2022 in Istanbul on Monday, but the negotiations were overshadowed by Kyiv's attack on Sunday on some of Moscow's nuclear-capable bombers far inside Russian territory.

"There are worries about an escalation of the conflict after the Ukrainian drone attack," a futures dealer said.

Investment funds hold large short positions in Euronext and Chicago wheat, leaving the markets prone to wave of short-covering.

Gains on Euronext were capped by strength in the euro, which made Western European wheat more expensive for export at a time of slow international demand. GRA/TEND

Easing weather concerns for wheat crops were also keeping prices in check.

Rain in parched areas of northern Europe in the past week, including the far north of France, has tempered drought worries.

French wheat crop conditions declined in the week to May 26 but less sharply than in the previous week, data from farm office FranceAgriMer showed on Friday.