* FAO world food index down 1.4 pct in April
* Soybean prices set for further gains, to drive corn higher
* FAO cuts 2012/13 world wheat output forecast
By Svetlana Kovalyova
MILAN, May 3 World output of key animal feed ingredient soybeans is set to tumble in 2011/12, with prices poised for fresh highs, the United Nations food agency said, showing the resilience of inflation trends fanned by three months of rising food costs.
Record high food prices in February last year helped fuel the Arab Spring uprisings in the Middle East and North Africa. Prices receded in the second half of 2011 but the uptrend resumed in January.
The UN's Food and Agriculture Organisation (FAO) said on Thursday its Food Price Index, which measures monthly price changes for a basket of cereals, oilseeds, dairy, meat and sugar, fell to an average 214 points in April, from a revised 217 in March.
Yet soybean prices - already at their highest since July 2008 - are likely to rise further due to tight supplies, driving corn prices higher, the agency's senior economist said.
World soybean output is estimated to drop 9.5 percent to 240 million tonnes in the 2011/12 year, one of the steepest year-on-year falls on record, hit by poor crops in the United States and South America, the FAO said.
The likelihood that soybeans would have to compete for cropland with maize, especially in the United States, in 2012/13 adds further support to prices, it said.
"We think that the soybean price, reflecting the tightness of the market, has the potential to increase, so there is now a lot of attention to 2012/13 planting intentions," the FAO's senior economist and grain analyst Abdolreza Abbassian told Reuters.
The rise has been driven by Chinese demand and poor yields in key exporter Argentina, after dry weather linked to the La Nina weather phenomenon.
The overall index drop reflected a 2.5 percent month-on-month fall in maize prices, a 1 percent fall in wheat and a 5 percent drop in sugar prices, which offset a 2.2 percent rise in vegetable oils fuelled by soaring soybean prices.
"You would see prices most likely remaining under downward pressure in the next couple of months," Abbassian said, noting weather remained a critical factor.
The index seemed to have stabilised at a relatively high level of around 214 points, the FAO said in a monthly update.
Last week, the World Bank said costlier oil, strong demand from Asia and bad weather had been pushing up global food prices, adding that if current production forecasts for 2012/2013 do not materialize, prices could reach higher levels.
U.S. soybean futures, one of the major drivers on international grain markets in the past few months, have been fuelled by purchases from China, the world's largest buyer.
BIGGER CROPS, TIGHT MARKET
"For the (FAO) index, the conditions associated with oilseeds especially have been supportive," Rabobank senior commodity analyst Keith Flury said.
"Inventory levels around the world are certainly low, but everything is very contingent on how the United States harvest is realised. Currently conditions are supportive for crops. But we are very cognisant of the fact that there still remains a fair amount of weather between now and the fall and (there are) risks associated with that," he added.
In trade, Iran has undertaken a massive grain buying shopping spree, hoarding millions of tonnes against a backdrop of toughened western sanctions, while Syria's cereal import requirement has also increased as the crisis there worsens.
Concerns on meat prices are already surfacing, reflected by an expected fall in European Union pig numbers of up to 10 percent.
While record total cereal crops are expected this year, strong demand coupled with low initial stocks are likely to lead to tight supplies of coarse grains and soybeans, which would support prices, the FAO said in its Food Outlook.
The FAO has cut its outlook for the world new crop wheat output to 675 million tonnes from an earlier forecast of 690 million, down 3.6 percent from last year, citing output falls in Ukraine, Kazakhstan, China, Morocco and the European Union.
International wheat prices in 2012/13 are expected to average lower than in the previous crop year, despite smaller crops and shrinking stocks, due to a fall in consumption and large export supplies, the FAO said.
World cereals output is expected to rise in 2012/13 crop year by 1.1 percent to a record 2.371 billion tonnes, boosting closely watched stocks by 1.7 percent to 524 million tonnes at the end of the 2012/13 seasons, the agency said in its first forecast of new grain crops.
Coarse grains production is seen rising 3.7 percent to 1.207 billion tonnes, driven by a 4.1 percent increase in maize (corn) output to 916 million tonnes, the agency said, citing preliminary forecasts.
But the coarse grains market is set to remain tight due to very low level of stocks, providing further support to prices, it said.
World prices of oilcrops and their derived products, which have been rising since the start of this year, are likely to remain firm due to an increasingly tight supply and demand situation of the current season, it said.
REFILE-Spanish economy expands at 0.7 pct in Q3 amid political deadlock
MADRID, Oct 28 Spain's economy expanded by 0.7 percent in the July to September period on a quarterly basis, according to preliminary data from the National Statistics Institute (INE) on Friday, a slight slowdown from the previous three months.
UPDATE 3-Japan Sept consumer prices fall, weak spending clouds outlook
* BOJ likely to cut price f'casts, stand pat on policy (Adds BOJ's price index)