Euronext wheat dropped on Monday, approaching contract lows. Market attention was shifted from the military escalation taking place in the Middle East to the tough competition for exports and the large harvests expected in the Northern Hemisphere.

The September wheat contract on the Paris-based Euronext Exchange closed at 200.00 Euros ($231.66) per metric ton, down by 1.3% from the previous week's low of 198.00 Euros. However, the 200 Euro level remained intact.

Investors' concerns over Israeli attacks against Iran led to short-covering of the contract.

Chicago wheat fell by over 1% as well on Monday.

"Overall, there is no real threat to the crop so the market struggles to maintain gains. "We're headed for higher production this year, so any recovery is a selling opportunity," said a futures broker.

The euro's rise to near its 3-1/2 year high against the US dollar on Thursday also revealed a negative outlook for the export of wheat from western Europe.

The news that Algeria will hold a wheat tender on Tuesday is expected to increase demand following Friday's purchase of 100,000 tons by Tunisia. Black Sea origins dominated again. French wheat was expected to be ignored by Algeria, as it has been in recent months because of diplomatic tensions between Algiers & Paris.

Algeria is an important customer of wheat imported from the European Union and France in particular, but Russian exporters as well as those from other Black Sea regions have seen a strong expansion on the Algerian market.

A German trader stated that "you would have to tip over the Black Sea in order to supply the Algerian bid." "The August shipping period requested would mean that Russian exporters should be expected to make a strong offer. In the competition for west EU, there is no doubt that wheat from Ukraine, Romania and Bulgaria will also be very competitively priced. $1 = 0.8633 Euros (Reporting and Editing by Shash Kuber, Tomaszjanowski and Shaseh Kuber)

(source: Reuters)