ISLAMABAD: The ‘Food Price Index’ dropped for the fourth month in a row in August reaching its lowest level since June 2012, the United Nations Food and Agriculture Organisation (FAO) announced on Thursday.

The index, which measures the monthly change in the international prices of a basket of food commodities, averaged 201.8 points in August 2013, nearly 4 points (1.9 per cent) below its July value and 11 points (or 5.1pc) less than in August 2012.

Last month’s decline was mainly driven by continued falls in the international prices of cereals and oils. Dairy, meat and sugar prices rose slightly. The FAO Cereal Price Index averaged 210.9 points in August, down 16.4 points (7.2pc) from July and 49.4 points (or 19pc) from August 2012.

The steep decline reflects expectations for a strong growth in world cereal production this year and, especially, a sharp recovery in maize supplies.

Together with the Food Price Index, FAO also released a new forecast of world cereal production in 2013 which is expected to rise to 2,492 million tonnes. The forecast has been revised upwards by 14m tonnes (or 0.5pc) from the July forecast as a result of higher maize crops officially reported in Argentina and improved prospects in the EU and Ukraine.

At the latest forecast level, global cereal production would be 179m tonnes (7.7pc) higher than in 2012 and a new record. The recovery is predicted to be driven by a 10.5pc expansion in coarse grain output to 1,285m tonnes as well as a 7.6pc rise in wheat production to 710m tonnes.

World rice production is set to increase by 1.3pc, reaching a new high of 497m tonnes, in milled equivalent. Global cereal utilisation in 2013/2014 is projected at 2,413m tonnes, down marginally from the previous forecast, but still 3.2pc higher than in 2012/2013. Most of this increase would be driven by higher feed use, especially of maize, given prospects of more abundant supply availabilities compared to the 2012/2013 marketing season.

The increase in global maize use is expected to boost total utilisation of coarse grains by more than 5pc in 2013/2014; this compares to a forecast rise of 2.5pc in rice consumption and a mere 0.6pc increase in wheat use. Based on the latest forecasts, total use of cereals for direct human consumption is set to expand by 1.2pc to 1,094m tonnes. This would result in global per caput cereal consumption remaining steady at just over 152 kg, with wheat at 67kg and rice at close to 57kg.

The forecast of world cereal stocks at the close of seasons in 2014 has been raised slightly since July, to 569m tonnes, primarily on expectations of higher maize inventories. The revised forecast puts world cereal stocks 13pc (65.5m tonnes) above their low opening levels and at their highest since 2001/2002. Based on the current projections of overall demand, the increase in stocks would drive up the global stock-to-use ratio to 23.3pc, the highest since 2002/03.

World wheat stocks are forecast to register an 8pc expansion, to 170m tonnes while rice inventories could increase to 181m tonnes, up 4pc from their opening levels. The global stock-to-use ratios for wheat and rice are foreseen to hover around relatively comfortable levels of 24pc and 37pc, respectively.

The forecast for world cereal trade in 2013/14 marketing season has been raised by nearly 4m tonnes since the July report, to 310m tonnes, 1pc (3m tonnes) above 2012/13. The upward revision mostly reflects prospects for higher wheat imports by China and Egypt than anticipated earlier. The forecast expansion in world trade in 2013/14 would be mainly driven by a notable increase in world trade in coarse grains, to a record 133m tonnes, up nearly 2pc from 2012/13.