“First forecasts for the 2013 wheat harvest point to production increasing to 690 million tonnes – 4.3 per cent up on 2012,” according to FAO’s quarterly ‘Crop Prospects and Food Situation’ report.

“This would be the second largest crop on record,” FAO noted in a press release, below the record harvest of 700 million tonnes in 2011.

The hike is expected mostly in Europe, driven by an expansion in wheat planting areas in response to high prices and a recovery in yields from Russia and some other countries, FAO said.

The outlook in the United States, dampened by earlier drought conditions, has improved somewhat, the UN agency said.

Coarse grains and paddy crops are not yet planted making it too early for even a preliminary global cereal forecast, but FAO expects “generally favourable” prospects for the first 2013 coarse grain crops in the southern hemisphere. Rice prospects are also encouraging in several countries below the equator.

The report also surveyed the food security situations in developing countries, including several hotspots. Of the countries cited, FAO noted that insecurity in northern Mali has disrupted food commodity flows worsening an “already precarious” food situation created by a drought in 2011.

Meanwhile, FAO’s Food Price Index – which measures monthly changes in international prices of a basket of meat, dairy, cereals, oils and fats, and sugar – remained at 210 points for a second straight month.

The FAO Cereal Price Index dropped less than 1 per cent to 245 points in February, but still 8 per cent higher than last year at this time.

Prices for oils and fats averaged 206 points, up 0.4 per cent from January. The rise was driven mainly by palm oil, reflecting the expected seasonal production slowdown and reduction in inventories.

Dairy prices rose five points, or 2.4 per cent, to 203 points. Meat prices averaged 178, the same as in January, with marginally higher pork prices offsetting a slight dip in poultry.

Sugar prices declined for a fourth consecutive month on the expectation of a relatively large world production surplus. The FAO Sugar Price Index averaged 259 in February, down 3 per cent, or 8.6 points, from January.

The July 2012 issue of the Rice Market Monitor, released by FAO today, says that production is expected to total 724.5 million tonnes – a 7.8 million tonne downward revision compared to the original forecast in April. But global output should still slightly surpass the results achieved in 2011.

“The downward revision was mainly the result of a 22 per cent lower-than-average monsoon rainfall in India through mid-July, which is likely to reduce output in the country this season,” FAO stated in a news release.

Production forecasts were also reduced for Cambodia, the Democratic People’s Republic of Korea, the Republic of Korea, Nepal and Taiwan, Province of China, all of which may see a production drop in 2012, the agency added.

Also, unlike with maize and wheat, rice prices have remained “surprisingly stable” after gaining two per cent in May. “Amid abundant rice supplies and stocks, the likelihood of a strong price rebound in coming months is minimal, but the future direction of rice prices remains uncertain,” said FAO.

Some countries are expected to see production gains, including China, Indonesia and Thailand, along with several other Asian nations. Production in Africa may increase by as much as three percent, while Australia’s rice harvest was 32 per cent higher than last year.

Prospects are also good for Bolivia, Colombia, Guyana, Peru and Venezuela, but poor precipitation and shifts towards more remunerative products in Brazil, Argentina, Paraguay and Uruguay are behind a seven per cent drop of production in Latin America and the Caribbean as a whole.

FAO expects that Asia – the world’s leading rice producer – will reap 657 million tonnes in 2012, up 0.4 per cent from last year.