EU wheat holds firm, rapeseed hits 500 euros as war and weather risks weigh

PARIS/HAMBURG, June 19 (Reuters) - European wheat edged up on Thursday, adding to sharp gains from a day earlier, as investor worries about the war between Israel and Iran as well as adverse weather in some Northern Hemisphere wheat belts encouraged more short-covering.

September wheat BL2U5 on Euronext settled 0.5% up at 209 euros ($239.47) a metric ton. It earlier rose to its highest since May 22 at 209.75 euros, surpassing a previous four-week top from Wednesday.

After tracking a jump in Chicago wheat Wv1 on Wednesday, Euronext initially lacked impetus on Thursday due to a U.S. holiday closure. GRA/

But fresh gains for crude oil LCOc1, as the week-old conflict between Israel and Iran continued, later supported wheat along with ongoing concerns about harsh weather in the run-up to harvesting.

"It's mainly linked to the jump in oil prices," a futures dealer said.

"Beyond that, people are also talking about risks to U.S. winter wheat, with heavy rain forecast in Kansas and Nebraska, plus you have the heatwave in France that will certainly have some impact on the crop."

Large short positions held by investment funds in wheat have left the market prone to short-covering waves.

A hot spell in France is expected to peak with highs in the mid-30s Celsius across the country in the latter part of the week, which could hurt crops in dry northern areas depending on how long the heat lasts.

However, traders said a sustained price rally may need clearer evidence of crop losses in the Black Sea export zone, with participants reacting cautiously to news that the major Russian wheat-producing region of Krasnodar had declared a drought emergency.

“I think the concern about drought in Russia is not really all that serious and overall Russia is on the way to a good wheat harvest this summer,” one German trader said.

“Russian prices are still low despite the drought reports.”

Russian July 11.5% protein wheat was on Thursday around $214-$221 a ton FOB, about $8-$10 a ton cheaper than French depending on Euronext and currency moves, traders said.

Romanian and Bulgarian wheat was about $220-$222 a ton.

In oilseeds, August rapeseed COMQ5 settled 1.3% up at 500.25 euros a ton, as the benchmark contract reached the 500 euro threshold for the first time since early March.

Rapeseed, widely used for biofuel, was supported by crude oil as well as worries about crop conditions in Europe.

($1 = 0.8728 euros)