EU wheat eases on supply glut, rapeseed recovers on German biofuel plan

PARIS, Dec 10 (Reuters) - Euronext wheat futures edged down for a second session on Tuesday after U.S. government forecasts underlined swelling global wheat supply, while rapeseed came off a seven-week low as proposed changes to Germany's biofuel legislation raised the prospect of additional demand for rapeseed oil.

March wheat BL2H6 on Paris-based Euronext was down 0.3% at 189.75 euros ($220.93) per metric ton at 1705 GMT.

The U.S. Department of Agriculture's December supply-demand report on Tuesday raised the USDA's outlook for global wheat supply following recent increases to harvest estimates in major exporting countries like Australia, Argentina and Canada.

"Wheat supply is heavy and USDA increased production pretty much everywhere as expected," a futures dealer said. "Export demand isn't bad but we're faced with such high supply."

Chicago wheat eased for a fourth session to a six-week low. GRA/

Argentina's announcement on Tuesday of a cut to its grain export taxes also created some price pressure, though the impact may be limited, traders said.

“Argentina’s cut in wheat export taxes remains bearish but it will perhaps not generate huge new wheat exports above what can be achieved now with Argentine wheat the cheapest in the world,” one German trader said.

“There is also welcome new demand in the market with a large tender from Tunisia and another regular tender from Jordan," the trader said. GRA/TEND

In Germany, there had also been increased selling by farmers, which could facilitate exports after thin sales so far this season amid farmer dissatisfaction with prices, he added.

In rapeseed, February futures COMG6 on Euronext were up 1% at 476.50 euros a ton, moving away from Monday's near seven-week low of 471.75 euros.

The contract earlier rose by as much as 1.6% on news that the German government had approved a draft biofuels law, which will allow continued use of food crops as biofuel ingredients, while removing so-called double-counting whereby waste-based biofuels are credited twice toward compliance targets.

“This is supportive for the rapeseed market as the new government is permitting continued use of rapeseed oil in biodiesel,” another German trader said. “The end of double counting could also create new rapeseed oil demand but the timing of new regulations is still uncertain.”

Financial investors last week reduced their net short position in Euronext wheat and cut their net long position in rapeseed, data from the exchange showed.

($1 = 0.8589 euros)