Food prices rise but 2013 cereal crop looks strong: FAO

Global food prices rose in April for a third straight month as surging dairy costs kept upward pressure on the United Nations food agency’s index, but cereal output is expected to be strong this year.

Food prices spiked during the summer of 2012 as the United States was hit by a severe drought and dry weather plagued other producers. After falling at the start of 2013, prices have been rising again in the past three months.

The Food and Agriculture Organization’s (FAO) price index, which measures monthly changes for a basket of cereals, oilseeds, dairy, meat and sugar, averaged 215.5 points in April, up one per cent from a revised 213.2 in March.

A sharp rise in dairy prices was the main reason for the increase, while meat prices rose marginally and other commodities fell, FAO said.

The agency said global cereal production would increase six per cent to 2.708 billion tonnes in 2013 from the previous year, led by an expected 9.3 per cent rise in coarse grains output and a 5.4 per cent gain in wheat.

Whether the production increase lowers prices will depend on weather and demand over the next few months, FAO senior economist Abdolreza Abbassian said.

The cereal forecast is still “very much at the mercy of Mother Nature”, he said. “If demand accelerates in 2013, the increase in production would be offset by higher demand.”

Production of coarse grains in the United States is expected to drive this year’s increase, FAO said. Growers of maize in the U.S., the world’s largest producer, intend to plant the largest area since 1936, FAO said, citing survey data.

Crops in Europe and the Black Sea region are expected to contribute to higher wheat output, and producers in India and Indonesia are expected to drive a 10 million-tonne increase in rice output this year, FAO said.

The estimate of world cereal output in 2012 was 2.306 billion tonnes, about four million tonnes lower than last month’s figure.

Global cereal stocks at the end of this year are seen at 505 million tonnes, five million tonnes higher than previously forecast, FAO said.

— Reporting for Reuters by Steve Scherer in Rome.

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