Germany's largest drugmaker Bayer on Tuesday raised its full-year earnings outlook much more than expected as high grain prices fuelled demand at its farming pesticides unit and a fallen euro lifted the value of the its overseas revenues.

The diversified company, which invented Aspirin and synthetic rubber, said it expected a high single-digit percentage gain in adjusted earnings before interest, tax, depreciation and amortisation (EBITDA), where it had previously seen a slight increase.

"We expect (analysts') FY earnings estimates to be raised, which should further support positive confidence in the stock," Claudia Lakatos of Silvia Quandt Research said in a note to investors.

Bayer now expects revenue of €39-40 billion ($47.8-$49.0 billion) this year, compared with a prior outlook of about 37 billion, which was based on a euro value of $1.40. The currency has fallen below $1.23.

Second-quarter adjusted EBITDA rose 6.7% to €2.17 billion, above the average estimate of 2.08 billion in a Reuters poll, in part driven by a strong crop chemicals division, which is the world's second-largest maker of conventional pesticides after Syngenta.

Prices of crops such as soy, wheat and corn have risen between 30 and 50% in global markets since early June - just before the end of the quarter - mainly driven by supply shortages due to a severe drought in the United States.

Higher prices for crops encourage farmers to spend more on pesticides.

Syngenta last week posted forecast-beating results in the first half and was optimistic for the remainder of the year.

Bayer's reported net income, however, dropped by a third to €494 million as the company unexpectedly set aside €500 million for litigations in connection with its Yasmin/Yaz birth control pills.

U.S. health regulators in April added warnings to the labels on the popular class of birth control pills that includes Bayer's Yaz and Yasmin, to show they may raise the risk of blood clots.

Bayer said on Tuesday it has agreed to pay a combined $402.6 million to settle almost one third of about 6,000 legal claims that Yasmin caused blood clots.

Bayer's drugs division, where quarterly underlying core earnings rose 8% on growth in emerging markets, is pinning its hopes on drug launches to lift earnings in the coming years.

It has said its four most promising drugs, led by stroke prevention pill Xarelto, have the potential to rack up combined annual sales of more than €5 billion, although little of that will be seen in 2012.