The United Nations said a jump in food prices had run out of steam, even as it ditched expectations of a rise in world grains production, and inventories, citing droughts in Russia and the US.

The UN's food agency, the Food and Agriculture Organization, said that food prices, which "spiked" 6% in July, remained unchanged last month, as a rise in dairy and meat prices was cancelled out by an 8.5% tumble in sugar values.

The "sharp" fall in sugar prices reflected "improved production outlook amid more favourable weather conditions in Brazil, the world's largest sugar exporter, which was supportive to sugarcane harvesting, and recovering monsoon rains in India", the FAO said.

Cereals prices ended little changed, "following heavy rains in areas hardest hit by drought in the US and the announcement that the Russian Federation would not impose export restrictions" on grains.

Jose Graziano da Silva, who on Tuesday warned of the risk of a food "catastrophe", said that the price stability was "reassuring", adding that current values "do not justify talk of a world food crisis".

'Negative effects of drought'

Nonetheless, the organisation scrapped estimates of world grains production rising in 2012-13, cutting its harvest forecast by 100m tonnes to 2.295bn tonnes.

The downgrades reflected in part a downgrade to 40m tonnes in the estimate for Russia's wheat crop, blamed on "the negative effects of drought", and ideas that the Kazakh harvest is set to near-halve.

However, the biggest cuts were to hopes for the coarse grains harvest, following the "widespread and severe" US drought, which has left the country facing a 40m-tonne decline in corn output.

Six-year low

The world harvest of coarse grains, including corn, will drop by 17.4m tonnes, the FAO said, wiping more than 80m tonnes from its previous forecast.

Expectations to consumption too were lowered, with a hit to consumption from high grain prices, "seen as curbing demand, especially for production of fuel ethanol from corn".

Nonetheless, the estimate for world coarse grain stocks at the close of 2012-13 was cut to 164.4m tonnes – the lowest for six years.

The ratio of stocks to disappearance in major exporting countries, a much-watched pricing metric, was estimated at 9.2%, indicating the tightest stocks in at least a decade.

Rice 'deterioration'

The UN cut its estimate for rice output and inventories too, although stocks, at 165.0m tonnes, still look comfortable, representing an eighth successive season of increase.

The harvest downgrade "stems from a deterioration in crop prospects in a number of Asian countries, mostly as a result of unfavourable climatic conditions," the FAO said.