The United Nations sided with ideas of the world in 2013 enjoying its second-biggest wheat crop on record, despite predicting a far smaller rebound in Australian output than domestic officials foresee.

The UN food agency, the Food and Agriculture Organization, revealed an "overall favourable outlook" for this year's world wheat harvest, pegging it at 690m tonnes, a result second only to that of 2011.

The estimate was identical to that from Abares, the Australian commodities bureau, earlier in the week, although the International Grains Council has forecast a smaller harvest, of 682m tonnes, which would rank only as the fourth biggest.

The US Department of Agriculture, whose estimates are particularly closely watched, will not release its forecast until next month, although its chief economist Joe Glauber has signalled that a record crop could be in the offing, implying one of at least 697m tonnes.

'Sharp increase'

The FAO forecast factored in a 15.0m-tonne recovery in the harvest in Russia from last year's drought-diminished levels.

"Although winter plantings have decreased, this is expected to be more than offset by an increase in the spring wheat area," the agency said, in comments which contrast with an observation by consultancy Sovecon that Russian spring sowing area has historically been remarkably stable.

"Assuming yields recover from last year's drought-reduced levels, output is forecast to increase sharply," the FAO said.

In neighbouring Ukraine, "a large recovery in wheat output is forecast", to 19.5m tonnes, "as the winter wheat area recovered from last year's reduced level and winter conditions have been generally satisfactory".

'Much more precipitation needed'

For the European Union, the world's biggest wheat producer, the FAO forecast a rise of 6.0m tonnes to 138.0m tonnes in output, lifted by "an expansion in area in response to high prices, and a recovery in yields from below-average levels in some parts last year".

The forecast is nonetheless a little below figures of just over 140m tonnes forecast by the European Commission and Strategie Grains, when combining estimates for soft wheat and the hard, durum varieties used in making pasta.

And the FAO was more gloomy than Canberra's Abares commodities bureau on ideas for the Australian harvest, pegging it 1.9m tonnes lower at 23.0m tonnes, talking of "uncertain" prospects ahead of the planting period, which starts next month.

 "Tight supplies and strong prices are expected to provide incentive to farmers to increase plantings, but soil moisture reserves have been severely depleted by the summer heat wave in some major producing areas," the agency said.

"Much more precipitation is needed to ensure satisfactory planting conditions."

'Too late to make a full recovery'

Among top producers the only countries viewed as seeing lower harvests were India, where the crop is nonetheless expected to come in historically high, and the US, where drought hurt early development.

"Although good precipitation in February has greatly improved the outlook in previously drought-affected winter wheat areas, it is likely too late for the stressed crops to make a full recovery" the FAO said.

"Thus, despite an estimated 1% increase in winter wheat plantings and the likelihood that spring plantings will at least match last year's level, if not expand slightly, aggregate wheat output is tentatively forecast to decrease by about 6% to 58m tonnes, below the average of the past five years."

That estimate, equivalent to some 2.13bn bushels, is in line with the 2.10bn bushels forecast by the USDA.

'Supply limitations'

The comments came as the FAO revealed that its world food price index had remained stable last month, at levels down 2.5% year on year.

"Since November 2012 the Index has moved within a narrow 210-212 point range, as increases in the prices of dairy products and oils/fats were largely balanced out by declines in the prices of cereals and sugar."

Indeed, dairy prices rose 2.4% month on month, "principally a reflection of recent hot and dry weather in Oceania, leading to milk production falling off steeply and a concomitant reduction in the processing of dairy products.

"Supply limitations combined with firm international demand have caused the prices of all milk products, in particular butter and milk powder, to move upwards," the agency said, in comments which follow a sharp rise in prices this week at GlobalDairyTrade auction.

World cereals prices eased 1%, the FAO said, noting a drop in wheat values, "reflecting improved crop prospects in the US, while corn prices remained firm, on tight old crop availabilities".