* FAO's food price index falls 2 pct to 205.9 points in July
* Index has declined for three months in a row
* Economist sees room for more falls on good supply prospect
By Catherine Hornby
ROME, Aug 8 Global food prices could decline
further in coming months after hitting their lowest level in
more than a year in July, the United Nations' food agency said
on Thursday, pointing to prospects of abundant grain supplies.
Food prices surged during the summer of 2012 due to a
historic drought in the United States but improving prospects
for cereal supplies in 2013/14 are fuelling the opposite trend
this year, the Food and Agriculture Organisation (FAO) said.
"Supplies are proving to be much better than anticipated a
few months ago. The weather has been pretty good in many cases
and is giving hope for higher production," FAO senior economist
Abdolreza Abbassian said.
He said good prospects for maize output in the United
States, Argentina and the Black Sea region meant corn prices
could lead other markets down this season, reversing their
supportive influence on higher prices last summer.
Food prices could face further downward pressure if the U.S.
dollar strengthens, he said. A stronger dollar weighs on
dollar-traded commodities as it makes them more expensive to
holders of other currencies.
"There is an extent to which prices could fall," Abbassian
said. "But I'm not sure we are going to see as much of a decline
in coming months as we saw in the past few months."
FAO's food price index, which measures monthly price changes
for a basket of cereals, oilseeds, dairy, meat and sugar, fell
nearly 2 percent in July, declining for the third month running
to 205.9 points compared to 210.1 in June.
The fall was driven mainly by lower international prices for
grains, soy and palm oil, FAO said, while sugar, meat and dairy
quotations also declined.
The Rome-based agency raised its forecast for global cereal
production in July, expecting it to increase more than 7 percent
to 2.479 billion tonnes in 2013/14. Its next output forecast
update is due in September.
FAO's price index hit a peak of 238 points in February 2011,
when high food prices helped drive the Arab Spring uprisings in
the Middle East and North Africa.
In the summer of 2012 it began surging to levels close to
those seen in 2008, when riots, some deadly, broke out in
several poor countries.