Wheat prices made further headway on Friday, despite insistence by Germany that its crop had not deteriorated sufficiently to warrant a reliance on imports of milling grain.

The European Union's second biggest wheat producer acknowledged damage from an early-summer heatwave and sodden harvesting conditions, forecasting a fall of 12% to about 43.8m tonnes in its grain output this year.

However, the German farm ministry's estimate for the key winter wheat crop was, at 23.6m tonnes, above that of some other observers, if down 5.3% year on year.

DBV, the German farmers' association, which last week pegged production of the winter wheat harvest, used in bread-making, at 22.7m tonnes.

FO Licht, the German-based analysis group, on Friday cut its estimate for Germany's total wheat crop by 800,000 tonnes to 23.3m tonnes.

'Satisfactory volumes'

Germany's flour millers association warned earlier this week that the country would need to import 1m tonnes of high grade wheat, following the country's biggest such purchase from the US for nearly a decade.

However, the farm ministry said that domestic supplies would prove sufficient, forecasting that wheat for food use "should still be available in satisfactory volumes this year".

Besides the drop in harvest volumes, traders have also been concerned about the fall in quality of a crop exposed to less-than-ideal weather.

The prospect of a limited rate of German wheat downgrades sent London feed wheat 2.9% higher to close at £160.50 a tonne, reducing its discount to Paris milling wheat, which ended 1.0% higher at E232.00 a tonne.

In Chicago, wheat for September delivery soared 4.0% to $7.08 ¼ a bushel, its first close above $7 a bushel for three weeks.

Exports rise

Prices were also helped by continuing excitement at export wins by the European Union and US continuing to win trade from traditional former Soviet Union customers, denied supplies by Russia's grain ban and tightness in shipments from Kazakhstan and Ukraine too.

Sentiment has also been supported by the prospect of an extended Russian export ban lifting demand for American supplies, even though informed sources appear to believe it will be lifted sooner than the November date many investors have factored in.

"This piece of bad news is likely to give further tailwind to wheat prices," Commerzbank said, forecasting particular support for further-ahead contracts.

"Furthermore, harvests in Argentina and Australia could also be much lower than expected."

The increasing dependence of importers on US and European supplies was reflected in American data on Thursday showing a fourth successive week of export sales of more than 1m tonnes, and in the European Union by statistics revealing that weekly shipments had reached a 2010-11 high of 856,000 tonnes.