ROME, June 7, 2012- Global food prices dropped sharply in May due to generally favorable supplies, growing global economic uncertainties and a strengthening of the US dollar, the United Nations’ Food and Agricultural Organization (FAO) said on Thursday. 

The FAO food price index fell by four percent in May. The index, which measures the monthly change in international prices of a basket of food commodities, averaged 204 points and was down from 213 points in April, the FAO said in its monthly index update.

This was the lowest level since September 2011 and about 14 percent below its peak in February 2011, the United Nations agency said.

"Crop prices have come down sharply from their peak level but they remain still high and vulnerable due to risks related to weather conditions in the critical growing months ahead," said FAO's grain analyst Abdolreza Abbassian.   

FAO at the same time raised the forecast for world cereal production by 48.5 million tons since May, mainly on the improved expectations for the U.S. corn crop. 

FAO's latest forecast for world cereal production in 2012 stands at a record level of 2.4 billion tons, 3.2 percent up from the 2011 record.

The bulk of the increase is expected to originate mainly from corn in the United States amid an early start of the planting season and prevailing favorable growing conditions. As a result, the global coarse grain production is forecast at 1.2 billion tons, a huge 85 million tons increase from the previous year, FAO reported.

However, with planting still to be completed and much of the crop at very early stages of development, the final outcome will depend greatly on weather conditions in the coming months, the agency said. 

With the main northern hemisphere rice crops now in the ground in several countries, the forecast of global rice production in 2012 is firmer and points to a 2.2 percent increase from 2011, to some 490 million tons, mostly reflecting larger plantings in Asia.

For wheat, latest indications point to a decrease of about three percent in production in 2012, to 680 million tons, still well above the average of the past five years.

The global cereal utilization is forecast to expand by at least two percent in 2012/13, to 2.3 billion tons, with feed utilization growing by 3.8 percent, while food consumption is expected to increase by just over one percent, largely keeping pace with world population growth, according to the FAO update.

At the current forecast level, world cereal production would exceed the anticipated utilization in 2012/13 (which has been revised up since last month by 19 million tons or one percent) and lead to a significant replenishment of world cereal stocks, up seven percent from the previous season.


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