PARIS: European wheat futures edged lower on Monday in hesitant trading ahead of closely followed US government crop forecasts while news that a French wheat cargo may be rejected by Egypt added to already gloomy export sentiment.

"The market is waiting for the USDA report and any surprises that may bring," a futures dealer said. "Matif (Euronext) is not falling much despite the lack of competitiveness of west European wheat, and this just avoids dealing with the problem."

Grain markets are focused on Tuesday's monthly supply and demand report from the US Department of Agriculture (USDA), which will give further indications about the upcoming US corn and soybean harvests, as well as possible revisions to wheat supply from big exporters such as Russia and Australia.

Traders said a sharp fall in the euro on Monday, following Friday's 2-1/2 year high above $1.21, did little to recoup the loss of competitiveness against Russian wheat after the euro's recent rally.

Egypt's agriculture ministry said on Monday that test results showed poppy seeds present in a French wheat cargo were of the harmful variety, increasing the risk of the wheat being rejected.

The supplier has pointed to confusion between seeds from non-toxic poppy flowers found in France and the opium variety grown in parts of Asia. Traders fear more headaches in trade with Egypt after a row over traces of a fungus.

December milling wheat, the most active contract on the Paris-based Euronext exchange, settled down 0.50 euro, or 0.3 percent, at 159.00 euros ($190.26) a tonne.

Traders said an intraday peak of 168.25 euros, a one-month high for the contract, was the result of a glitch in a spread trade against March futures. The March contract also briefly jumped to a one-month high at 173.75 euros.

The December contract drew some support from the shifting of positions away from September futures, which expired at the end of the session.

The spot contract ended at 149.00 euros after hitting a new contract low of 147.00 euros, which was also the weakest spot price in a year, reflecting seasonal supply pressure after summer harvesting.

In Germany, a poor outlook for exports continued to weigh on sentiment.

Standard bread wheat with 12 percent protein content was offered for sale for September delivery in Hamburg unchanged at 2 euros over the Paris December contract.

"The euro's strong trend in recent weeks is a burden on German export prospects with supplies of good quality wheat tighter after the poor harvest this summer," one German trader said.

"Low prices are again being offered today by the Baltic States in competition with Germany after their good crops."

Lithuanian wheat with 12.5 percent protein was offered at 2 euros under Paris for September delivery free on board Klaipeda, he said.

Source: Reuters