ROME, ITALY — World cereal production in 2016 is set to amount to 2.52 billion tonnes, just 0.2% off last year's large output and the third-highest global performance on record, according to the Food and Agriculture Organization (FAO) of the United Nations  first forecast for the new season, released April 7.

Large inventory levels and relatively sluggish global demand mean that market conditions for staple food grains appear stable for at least another season, the agency's latest Cereal Supply and Demand Brief predicts.

The FAO Food Price Index for March was also released April 7. Overall, the Index rose by 1% compared to February, as soaring sugar prices and continued increase in palm oil quotations more than offset plunging dairy product prices.

The Index averaged 151 points in March, its highest level in 2016, but still some 12% below its level of a year earlier.

The FAO Food Price Index is a trade-weighted index tracking international market prices for five key commodity groups: major cereals, vegetable oils, dairy, meat and sugar. Its decline over the past year reflects ample food supplies, a slowing global economy and a stronger U.S. dollar.

The keystone FAO Cereal Price Index fell slightly in March - marking the fifth straight month of decline - amid a favorable supply outlook in the new season. The drop was far more pronounced if compared to last year, as the sub-index is down 13.1% below its March 2015 level.

The small decline in 2016-17 world cereal production would largely result from a lower worldwide wheat production, which is now expected to amount to 712.7 million tonnes, some 20 million tonnes less than in 2015. The decline mostly reflects smaller plantings in the Russia and Ukraine, both affected by dry weather.

Global output of coarse grains is projected at 1.313 billion tonnes, up about 11 million tonnes from 2015, with expected increases in maize production more than offsetting declines for barley and sorghum.

Maize output is seen growing by 1.1% to 1.014 billion tonnes, driven by recovering yields in the E.U. and expanding plantings in the U.S. At the same time, maize production is expected to fall in Southern Africa and Brazil, due to drought and adverse growing conditions associated with El Niño.

World rice production is predicted to recover with a return to normal weather conditions in northern-hemisphere Asia, where erratic rains have affected planting activity for the past two seasons. Global output, although impacted by unattractive prices, is predicted to rise 1% to 495 million tonnes.

International trade in cereals in 2016-17, however, is poised to decline for the second consecutive season, by 1.4% to 365 million tonnes, due to ample stockpiles and modest demand growth in many importing countries.

Global cereal utilization in 2016-17 is foreseen to grow only modestly, rising by around 1% to 2.547 billion tonnes, according to very preliminary new estimates.

As utilization is anticipated to exceed production, cereal reserves would need to be drawn down to fill the gap. FAO's first forecast for world cereal stocks at the close of seasons ending in 2017 points to a likely 3.9% annual decline to 611 million tonnes. However, the resulting world cereal stock-to-utilization ratio would still approach 23%, well above the historical low of 20.5% registered in the 2007-08 season.