US and European wheat futures rose on Thursday recovering previous sessions' losses with buyers encouraged by advances in Asian stock markets and high oil prices boosted by concerns about Middle East unrest.
The recovery comes on the heels of a two-day sell-off in US futures which saw prices plunge 4 percent as funds liquidated long positions, deciding to take profits after the grain rallied to 2-1/2 year highs on prospects of tightening global supplies.
"Outside markets are providing a very solid footing for agricultural products right now," said Luke Mathews, an agricultural commodities strategist at Commonwealth Bank of Australia. "Crude oil has pushed higher and we have seen some broad gains across corn, soybeans and wheat," said Mathews.
In a new sign of tightening global supplies, China, the world's largest wheat producer said the ongoing drought in the northern wheat areas is likely to last, putting the winter crops in further jeopardy. China has increased wheat imports over the past two years, but the rise was driven mainly by cheap global prices and a search for higher quality wheat, rather than domestic shortages.
European wheat futures rose in a technical rebound, buoyed by a slight rise in US futures, with traders trying to guess market direction. Benchmark May on Euronext milling wheat futures was 2.75 euros higher or 1 percent at 261.50 euros a tonne at 1224 GMT.
A trader stressed there were still strong fundamentals such as dry weather in the United States and China. "But global stocks are more abundant than in 2008, let's not forget it." French analyst Strategie Grains on Thursday cut its forecasts for most of the European Union's 2011 grain crops with the barley harvest trimmed to the largest extent due to lower estimates in western and northern EU countries. At the same time Strategie Grains predicted that the European Union would export 20.1 million tonnes of soft wheat during the 2011/2012 season, up from 18.4 million tonnes for the current season.
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