ROME, June 22: World-wide cereal output is expected to decline 2.8 per cent this year from record levels in 2004 in response to decreases in the United States and Europe, the UN Food and Agriculture Organization said on Wednesday.

The agency also foresaw a 1.3 per cent fall in world grain trade in the 2005-2006 marketing season to 230 million tons in the face of lower demand for wheat.

The FAO in the latest edition of its Food Outlook publication said prospects for global grain production remained “favourable,” according to a statement issued here. The expected output of 1.996 billion tons would be just 2.8 per cent below record levels achieved in 2004.

“The bulk of the decrease is expected in coarse grains production in the United States and Europe, where yields are expected to return closer to average after record levels last year,” the FAO said in Food Outlook.

It added that African output could fall for the second straight year reflecting drought in the north that would offset a slight increase expected in sub-Saharan Africa.

For all developing countries the report forecast a “marginal increase in the 2005 aggregate cereal output, mostly on account of better prospects in parts of Asia.”

Production is predicted to rise “only marginally” in low-income food deficit countries in 2005.

While world cereal use is seen as rising only 0.3 per cent this year, “if production forecasts hold, world cereal output would not meet next year’s projected needs without dipping into global stocks.”

The report added that cereal prices were currently well below levels of a year ago in the face of significant export possibilities.

It found that coffee prices surged in the first quarter of 2005 and by May were nearly 60 per cent higher than a year earlier.

“The early outlook for 2005-2006 points to a further reduction in output, which could support a continuing upward price trend for the rest of the year, further increasing revenues in exporting countries,” the report said.—AFP