The United Nations downplayed the prospect of a 2008-style tumble in agricultural commodity values, warning a potential rebound, despite upgrading its forecast for the world grains harvest for a second successive month to a record high.
The UN's food agency, the Food and Agriculture Organization, said that food prices had fallen to an 11-month low this month, undermined by better-than-expected harvests, with "production forecasts for nearly all key food crops in 2011 [improving] steadily".
However, it warned that agricultural commodity supplies "remain fairly tight", sapped by resilient demand from emerging markets and population growth, meaning further output growth was needed in 2012.
"For most food commodities, next year's production will have to increase in order to meet the expected demand, albeit moderately," the FAO said.
Costs risk:
This meant that "while there is some room for optimism" of prices staying below recent highs, "the general picture still points to firm markets well into 2012".
And prices could even rebound if soaring fuel and nutrient costs prompt farmers to cut back production sufficient to render supplies unable to cope with demand.
"Input costs, from fertilizers to energy, remain high, interest rates have climbed in many emerging economies, all of which could dampen production next year and, hence, draw down stocks and boost prices further," the organization.
A number of agribusiness companies have flagged rising prices of farm inputs, with Syngenta raising prices of agrichemicals, while CF Industries earlier this week highlighted that fertilizer prices had, "contrary to normal seasonal parterns", remained strong in the July-to-September quarter because of "constrained global supply and strong restocking demand".
For cereals, the FAO forecast prices "remaining relatively firm" despite a harvest upgraded to 2.33bn tonnes, 15m tonnes higher than an estimate last month.
The price forecast noted the tightness of corn supplies, following a disappointing US harvest which looked set to depress the stocks-to-use ratio of coarse grains as a whole - also including the likes of barley and sorghum - to an historically-low 13.9%, down 0.8 points year on year.
"The general picture points to [cereals] prices remaining relatively firm, although at reduced levels, well into 2012," the FAO said.
Wheat, while in more ample supply, was likely to see its price "remain firm through the remainder of the 2011-12 season", as shortages of other grains boosts its popularity for uses such as livestock feed.
Indeed, the FAO pegged world wheat stocks at 189.7m tonnes at the close of 2011-12, well below the estimate of 202.4m tonnes from the US Department of Agriculture, whose estimates are viewed as benchmarks for grain investors