Low cereal stocks, extra demand keep prices high: FAO

World food prices were steady between July and August but extra demand for cereals kept their price high, the latest figures from the UN's Food and Agriculture Organization showed Thursday.

The FAO Food Price Index averaged 231 points last month compared to 232 points in July. It was 26 percent higher than in August 2010 but seven points below its all-time high of 238 points in February this year.

Cereal prices rose, as even though production is expected to increase, it will not do so by enough to offset the additional demand, the FAO said.

"Stocks continue to be low and prices continue to be high and volatile," the organisation said.

The Cereal Price Index averaged 253 points in August, up 2.2 percent, or five points, from July and 36 percent higher than in August 2010.

The rise was largely offset by declines in international prices of most other commodities included in the index, oils and dairy products in particular, the FAO said.

Cereal production is now this year forecast to reach 2,307 million tonnes, three percent higher than in 2010.

The FAO said maize supply was a cause for concern following downward revisions to crop prospects in the United States, the world's largest maize producer, because of hot weather in July and August.

Average wheat prices were also up nine percent in August as a result of the strong demand for feed wheat and shrinking supplies of high quality wheat.

Rice prices, too, increased, with the benchmark Thai rice price up five percent from July, driven by a policy change in Thailand, the world's largest rice exporter, where the rice paddy will be purchased from farmers at above market prices.

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