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World food prices rise, stay close to crisis levels: FAO

By Catherine Hornby

ROME (Reuters) - World food prices rose in September and are seen remaining close to levels reached during the 2008 food crisis, the United Nations' food agency said on Thursday, while cutting its forecast for global cereal output.

The worst drought in more than 50 years in the United States sent corn and soybean prices to record highs over the summer, and, coupled with drought in Russia and other Black Sea exporting countries, raised fears of a renewed crisis.

Grains prices have retreated in recent weeks due to rapid harvest progress and concerns about weak demand in a slowing global economy.

But the FAO Food Price Index, which measures monthly price changes for a food basket of cereals, oilseeds, dairy, meat and sugar, rose to an average of 216 points in September after remaining stable at 213 points in August, the FAO said in its monthly update.

The rise reflected mainly higher dairy and meat prices, with more contained increases for cereals, it said.

"Prices are remaining high... prices are sustained, it's highly unlikely we will see a normalization of prices anytime soon," FAO senior economist Abdolreza Abbassian told Reuters in a telephone interview.

He added however that it was not clear whether the small increase in September meant prices were now on an upward trend, but he expected volatility in markets could intensify in coming months.

FAO's index is below a peak of 238 points hit in February 2011, when high food prices helped drive the Arab Spring uprisings in the Middle East and North Africa, but current levels are very close to those seen in 2008 which sparked riots in poor countries.

The Rome-based agency said it had cut its 2012 world cereals output forecast by 0.4 percent to 2.286 billion metric tonnes (2.519 billion tons) from a previous estimate of 2.295 billion tonnes, mainly due to a smaller maize crop in central and southeastern parts of Europe, where yields have been hit by prolonged dry conditions.

Despite the rise in food prices, the United States Mission to the UN Agencies in Rome released a statement on Thursday saying it had agreed with other countries that a meeting of the emergency Rapid Response Forum under the G20 agriculture body AMIS was not necessary at the moment.

"Agricultural commodity markets are functioning," the mission said.

Abbassian said a ministerial meeting that goes beyond the G20 to discuss food prices was still planned for Oct 16.

French President Francois Hollande has launched a global campaign to win support for strategic stocks of agricultural commodities, but EU development Commissioner Andris Piebalgs said this week that was not the best way to tame food prices, advising a focus on agricultural investment to boost production.

(Editing by Veronica Brown and James Jukwey)

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