Euro strength sends Paris wheat down to contract lows

PARIS/HAMBURG, April 15 (Reuters) - European wheat plummeted to contract lows on Tuesday as a firm euro and strong competition from Black Sea origins continued to weigh on sentiment.

Benchmark May milling wheat BL2K5 on Paris-based Euronext, closed 1.5% lower at 210.25 euros ($236.87) a metric ton after hitting a contract low of 209.75 euros. The contract lost 13% over the past two months.

The euro has been hovering around three-year highs as investors, trying to make sense of the constant changes to President Donald Trump's tariffs policy, remained wary of U.S. assets.

“Sadly, the euro’s strength in past weeks has damaged the export competitiveness of west European wheat despite Euronext’s falls, especially French, and this is bearish for the market even though there was not much change in the euro today,” one German trader said.

“The euro’s strength means the Black Sea is again cheaper than French, just as a new tender from Algeria was issued for offers this week.”

Russian and Ukrainian 11.5% protein wheat were priced about the same at around $241-$244 a ton FOB, about $4 cheaper than French, he said.

Romanian and Bulgaria wheat was also about $2 a ton cheaper than French, although some dealers on Tuesday said French and Romanian were almost the same.

U.S. soft red winter wheat was about the cheapest at $233-$236 a ton FOB U.S. Gulf and could also come into contention for the Algerian tender.

Traders say a diplomatic rift between France and Algeria led Algerian grains agency OAIC to tacitly exclude undefined French wheat and firms in its purchase tenders.

“There had been hopes the improvement in French/Algerian political relations could mean French wheat would again be accepted for Algerian tenders. But we will have to see when offers are submitted on Wednesday as relations between France and Algeria seem to have deteriorated again,” another trader said.

Welcome rain in parts of west Europe, especially Germany, was also bearish as it will benefit crops but is still not enough to remove the threat of dryness stress after a very dry March and early April weather.

“Some traders in Germany and Denmark are increasingly worried about drought but parts of Germany received rain in past days and more is forecast later this week and next week,” the first trader said. “If the forecast rain volumes actually arrive the dryness worry could be removed.”

Rain in past days has slightly raised Rhine river water levels in Germany, but improvements were moderate and vessels are still sailing considerably less than half full, traders said on Tuesday.

For next season, France's farm ministry on Tuesday raised its estimate of the area sown with soft wheat and said growing conditions were improving compared to the beginning of the year.

($1 = 0.8876 euros)