The European Wheat Futures closed slightly lower on Tuesday as technical resistance and the competition from Black Sea wheat supplies offset a rally fueled by weather risks and demand by importers.

The December wheat price on Paris' Euronext closed 0.4% lower at 228.75 Euros ($250.23) per metric ton.

Before losing momentum, the contract had risen nearly 2% earlier to close a chart hole created by a decline last Friday.

The Russian government's revised harvest estimate is due Thursday. Also, the U.S. government's crop forecasts will be released on Friday.

Investors who held large short positions on wheat have been prompted to cover their short positions by the adverse weather conditions in Russia, and by possible export restrictions by Moscow.

Euronext published data on Wednesday showing that financial investors have reduced their net short positions in wheat by a significant amount.

Andrey Sizov of the crop consultancy SovEcon said: "It appears that grain and wheat are being driven by short-covering at Matif (Euronext).

The Algerian tender could have triggered today's event, or models that were a little drier in the Russian winter wheat regions where there is still no significant precipitation.

Saudi Arabia and Algeria bought wheat this week in tenders, following an important deal Egypt made last week with Black Sea wheat.

The news that Algeria had purchased a large amount of Black Sea products, above 500,000 tonnes, was viewed by traders as a sign that Black Sea exports remain competitive.

The report that Algeria had excluded French wheat and firms from the tender on Tuesday due to diplomatic tensions has reinforced the likelihood that Russia will become Algeria's main supplier this year.

A German trader stated that "cheap Black Sea prices are a drag for the market, but there's also a bullish effect from the interest of the large importers."

On Wednesday, traders said that 12.5% Russian Black Sea October/November shipment wheat was quoted at around $233-$235 per ton FOB. This is about $25 less than west EU.

A storm that will sweep through France on Wednesday is expected to bring even more rain. Reporting by Gus Trompiz and Michael Hogan, both in Hamburg. Editing by Jonathan Oatis.

(source: Reuters)