PARIS, July 5: Drought in the United States affecting mainly corn crops will cut forecast world production of grain this year by 23 million tons to 2.396 billion tons, the Food and Agriculture Organization said on Thursday.

Grain market sources in Paris said that drought was also holding back crops in southern Russia and around the Black Sea.

The FAO cut its forecast for output from the last estimate in June but said that even at this level, world production would be a record at 2.0 per cent more than a peak reached last year.

Three days ago, the International Grain Council also revised down its forecasts, saying that world production of grains would be less than in 2011.

The FAO said in a separate report on Thursday that world food prices fell in June for the third month running, to the lowest level since September 2010.

Prices fell by 1.8 per cent in June from the level in May.

The food index compiled by the FAO, an agency of the United Nations, has fallen by 4.0 points since May to 201 points, and by about 15pc from a peak in February 2011.

The summit reach in 2011 was the highest since the FAO began to monitor prices in 1990.

The FAO said that uncertainty about the economic outlook and forecasts that harvests would be adequate had pushed down international prices for most products.

But recent trading on grain markets points to rising prices because of bad weather, the FAO said.

For just over two weeks, prices of some basic soft commodities, mainly cereals and oil seed crops, have risen by more than 15.0 per cent because the condition of crops in the United States has deteriorated rapidly.

Grain prices in Europe rose sharply again on Thursday owing to a poor outlook for harvests in the United States and in the Black Sea region, market sources said.

Grain farmers in the United States are being affected by hot weather and a shortage of rain. This could reduce yields.—AFP