EU wheat rebounds as Israel-Iran escalation fuels short-covering

PARIS, June 13 (Reuters) - Euronext wheat climbed on Friday as news of Israeli strikes on Iran encouraged investors to cover short positions after prices hit contract lows this week amid growing supply pressure.

September wheat BL2U5 on Euronext was up 1.8% at 202.25 euros a metric ton by 1541 GMT, moving away from a contract low of 198.00 euros touched in each of the past two sessions.

Israel's raids on Iranian nuclear and military sites sent oil prices sharply higher and fuelled a risk-off mood in other financial markets. MKTS/GLOB

"Funds are heavily short and some shorts could be liquidated in the current environment," Andrey Sizov, head of consultancy Sovecon, said of wheat.

"Matif (Euronext) fell below 200 euros and showed no intention to climb above it until now. If things more or less stabilise in Iran/Israel, I suspect that it will continue to slide lower."

A retreat in the euro EUR= after Thursday's 3-1/2 year high against the dollar also supported Euronext.

Chicago wheat Wv1 also rallied, recovering from a four-week low. GRA/

Expectations of abundant Northern Hemisphere supply and stiff export competition continued to hang over the wheat market.

Tunisia bought 100,000 tons of optional-origin wheat in a tender on Friday, welcome demand after a period of slack importer buying. But traders cautioned Black Sea wheat held a strong price lead over the west EU for the July/August shipment period Tunisia sought.

Russian and Romanian wheat for July were on Friday around $221-$224 a ton FOB, about $10 a ton cheaper than French, depending on Euronext and exchange rate moves, they said.

Cheap offers of Ukrainian new-crop feed wheat were seen as low as 192 and 197 euros a ton including delivery to north Germany/the Netherlands. But buyers were restrained, hoping for even lower prices pending the outcome of Ukraine's harvest as well as details on EU import quotas for Ukrainian grain.

Improving harvest prospects in Europe also remained a curb on prices.

French soft wheat ratings improved slightly last week, according to farm office FranceAgriMer, though traders are now monitoring a hot spell this week and dry weather forecast for the rest of June to see if this hurts wheat crops and accelerates winter barley harvesting.

In Germany, widespread sunshine was expected to give wheat and rapeseed crops a further boost after repeated rain since late May.

“Wheat growing conditions can almost be described as perfect in parts of Germany,” one trader said.