EU wheat rallies as Russia export snags spur short-covering

PARIS/HAMBURG, July 10 (Reuters) - Euronext wheat climbed more than 2% on Thursday as export delays in Russia, the world's biggest wheat supplier, encouraged short-covering after recent contract lows, traders said.

September wheat BL2U5, the most-active position on Euronext, settled 2.3% up at 201.25 euros a metric ton.

It earlier reached a two-week high at 201.75 euros, as it breached the psychological 200 euro threshold and moved away from a contract low of 192.75 euros hit twice in the past week.

The Russian government ordered measures to boost agricultural exports as July wheat shipments were set to be their lowest since 2008, a trend traders said reflected a supply squeeze due to a late harvest and slow selling by farmers.

"There is some market support today from the slow start to the Russian harvest coupled with reluctance to sell by Russian farmers because of low prices," one German trader said.

"Downward pressure on Russian prices from the harvest is not yet visible."

Traders said there was demand for Russian 12.5% protein wheat from Egyptian private buyers, but deals were hampered by the tighter-than-expected supplies of Russian crop.

However, with the Russian harvest expected to accelerate in the coming days and a large volume still forecast, traders said supply tensions should be short-lived.

The export snags in Russia, and talk of some similar issues in other Black Sea exporting countries, fueled talk that merchants could turn to French wheat to cover sales to destinations like Tunisia or Thailand.

But traders cautioned there were no clear indications on switching towards French wheat, while they dismissed chatter that Chinese buyers were inquiring about French supplies.

"There's a bit of excitement but there's no fundamental basis. Funds are just covering their shorts," another trader said.

Investors also hold a large short position in Euronext wheat, making futures prone to short-covering moves.

Western European wheat still faced a competitive challenge in export markets, despite an easing in the euro EUR= from 3-1/2 year against the dollar last week.

Ukrainian and Russian 11.5% protein wheat for August shipment were around the same, up about $2-$3 a ton at around $221-$225 a ton FOB, around $6-$7 cheaper than French depending on Euronext and exchange rate moves.

Romanian wheat was around $224-$226 a ton.

Consultancy Strategie Grains kept unchanged its monthly forecast for European Union soft wheat production, still expecting a 15% rebound from last year's rain-hit harvest.