EU wheat drops to six-week low on Iran war ceasefire

PARIS, April 8 (Reuters) - Benchmark wheat prices on Euronext fell over 2% on Wednesday to their lowest in almost six weeks as a U.S.-Iranian ceasefire agreement raised expectations of easing disruption to energy supplies, traders said.

May milling wheat BL2K6, the most-active position on Paris-based Euronext, settled 2.4% down at 197.75 euros ($230.99) a metric ton.

The contract earlier struck its lowest since February 26 at 197.00 euros, with the breaching of the psychological 200 euro threshold adding to selling momentum.

A rise in the euro EUR against the dollar also pressured Euronext by making European grain more expensive overseas. FRX/

Chicago wheat Wv1 dropped around 3%, with the U.S. market further curbed by rain forecast in dry parts of the U.S. Plains. GRA/

Crude oil LCOc1 plunged below $100 a barrel as the two-week ceasefire between Washington and Tehran averted a threatened U.S. escalation in the war and raised the prospect of a gradual resumption of shipping through the Strait of Hormuz. O/R

Grain prices have broadly tracked fluctuations in crude oil during the war, reflecting the use of crops like corn in biofuels and potential repercussions on harvests from rising energy and fertiliser prices.

"There's been some pretty brutal liquidation of long positions today following the (Iran) news," a futures dealer said.

Investors switched from a short position in Euronext wheat early in the Iran crisis, though data from the exchange on Wednesday showed they trimmed their net long position last week.

Euronext also reported on Wednesday that its commodity trading volumes in March rose 21% compared with the same month last year, led by a jump for options.

While traders remained cautious about the chances for peace in the Middle East, the initial ceasefire in Iran raised hopes of a recovery in international grain demand.

“The ceasefire could bring more demand back into the export market after a pretty quiet period after prices rose and buyers delayed purchasing when the Iran fighting started,” one German trader said. GRA/TEND

“Today’s fall in Euronext is a welcome move for west EU export competitiveness against cheap Black Sea prices,” the trader added.

($1 = 0.8561 euros)