Wheat prices hit their highest for nigh on two years in Europe, and rose above $6 a bushel in Chicago, after farmers reported fears of yield losses of up to 20% in Germany because of dry weather.

Farming association Deutschen Bauernverbandes, or DBV, said that wheat yields in the European Union's second-ranked producer of the grain would be "10-20% down on the year".

Initial harvest results had shown signs of crop damage and lower yields, notably in areas with lighter soils, where the impact of this year's prolonged dry weather had been particularly severe.

While the DBV did not make a production estimate, the decline implied by the data is greater than many of the forecasts so far being factored in. FO Licht analysts earlier this month estimated the German wheat crop at 24.86m tonnes, only 300,000 tonnes lower than last year's.

Prices hit highs

The data helped wheat prices overcome early weakness to close up 2.3% at E178.75 a tonne in Paris, for November delivery, the highest for a nearest-but-one contract since the start of September 2008.

London's November contract finished up 2.9% to £132.75 a tonne, the highest since late July 2008.

In Chicago, September wheat reached $6.10 a bushel, the first time a spot contract had topped $6-a-bushel since June last year.

Price rises are also being stoked by concerns that Russia, which has grown into a major force in wheat exports over the last decade, will curb shipments, supporting domestic supplies but forcing importers to seek grain elsewhere.

"In Russia, the drought is getting worse every day," Agritel, the Paris and Kiev-based consultancy said.

"Certainly the government is concerned both by the situation of farmers but also by the country's food prices skyrocketing."

Rapeseed double whammy

The DBV also signalled a worse performance in rapeseed, of which Germany is the EU's top producer.

"The few results which have been received confirm the forecasts that lower yields will be achieved in rapeseed compared to last year because of the heat," the association said.

Separately, the Ukrainian Agrarian Confederation, a producers and merchants group, said that the rapeseed harvest in Ukraine, which has suffered both overly dry and wet weather, would fall to 1.5m tonnes from last year's 1.8m tonnes.

Analysts at UkrAgroConsult last month pegged the crop, of which most is usually exported to the EU, at 1.6m tonnes.

Paris rapeseed for August delivery closed 0.7% higher at E363.50 a tonne.