* Exchange to launch new milling wheat contract in March
* Contract to use higher quality terms initially due in 2017
* Euronext reacts to fallout from rain-hit French harvest (Adds comments from Euronext commodities head, background)
By Valerie Parent and Gus Trompiz
PARIS, Feb 5 (Reuters) - Exchange operator Euronext said on Thursday it will launch a new wheat futures contract next month in response to urgent calls for it to adopt higher quality standards for grain traded on its Paris-based market.
Euronext is under pressure to revamp its wheat futures <0#BL2:>, its flagship commodity product, after confusion linked to a weather-hit 2014 crop in France just as it faces competition from CME Group, the world's largest futures operator, which is considering a European wheat contract.
Euronext announced new quality criteria for its current wheat contract in October, after market operators said the previous ones were shown to be too low by the rain-affected harvest. But for legal reasons these changes will only apply from the 2017 harvest, drawing criticism that the issue was unresolved for 2015 and 2016.
"This new contract is a response to strong calls in the grain sector to have right away in 2015 a contract with stricter milling wheat specifications," Olivier Raevel, commodities director at Euronext, told Reuters.
Euronext's new milling wheat contract will start trading at the beginning of March with September 2015 as the first available delivery position, Euronext said in a statement.
The new contract will be called No. 3 as opposed to Euronext's current No. 2 contract that will continue to trade in parallel.
Some operators welcomed the quick introduction of a new contract but others said the co-existence of two wheat contracts could also create an awkward transition period.
"This is a bit of a quick fix," a futures broker said. "It could cut liquidity and create confusing price spreads between the old and new contracts."
Euronext will offer a mechanism to help investors switch positions from the existing contract to the new one, along with specific fees for the upcoming contract, Raevel said.
In a suggestion that one of the contracts would be discontinued once their quality terms converge in 2017, he added "there is no point in having two contracts with the same specifications."
The new contract will apply minimum requirements of 11 percent for protein content, 220 seconds for Hagberg falling numbers and 76 kilos per hectolitre for specific weight, seen as common standards for milling wheat in France.
The No. 3 contract would also offer a wider delivery zone, including for the first time the Atlantic ports of Nantes and Bordeaux through silos operated by cooperative group InVivo, Euronext said.
The new delivery network does not include La Pallice, France's largest Atlantic wheat port, or inland silos but Raevel said discussions were ongoing about adding more delivery points.
Reporting by Valerie Parent and Gus Trompiz, editing by Sybille de La Hamaide, Mark Heinrich and David Evans