ROME — The good news: The global food supply looks less vulnerable to shocks than it was during last year’s food crisis, with the second-highest recorded cereals crop expected this year and stocks replenished, the Food and Agriculture Organization of the United Nations relayed in its recently published Food Outlook. The bad news is that some potential threats remain.

"In spite of strong gains in recent weeks, international prices of most agricultural commodities have fallen in 2009 from their 2008 heights, an indication that many markets are slowly returning into balance," the reported reveals.

Easing of market conditions was apparently reflected in the benchmark F.A.O. Food Price Index, which had decreased by one-third since its peak in June 2008 at the height of the world food crisis. But food prices remained high in many developing countries, and access to food by the poor also continued to be threatened by loss of employment, income and other effects of the global economic crisis.

Meat, fish and milk prices have fallen and were driven down by slowing demand as economies slowed and by recurring outbreaks of animal diseases. Prices have plummeted in the dairy sector, in particular.

With the new 2009-2010 marketing season commencing, prospects continue to be positive as world cereal production is expected to be the second largest, after last year’s record, the forecast stated. World production was forecast at 2.219 million tonnes as compared with 2 287 million tonnes in 2008/09.

Although falling prices were expected to save importing countries as much as $226 billion in food imports in 2009 compared to 2008, "the deteriorating economic environment ... could offset much of the benefit," the Food Outlook warned.

Eroding purchasing power through a combination of falling incomes and real exchange rates over much of the past 12 months negatively affects the affordability of food, regardless of how cheap it has become on the international marketplace, the study stated.

Concern had now shifted from high food prices to the global economic downturn’s potential impact on demand for food, especially higher-value-products, the Food Outlook relayed. But growing linkages between the agricultural sector and the energy, financial and currency markets made food prices increasingly vulnerable to external shocks.

Renewed upward pressure on international prices could be exerted by the continuing weakening of the U.S. dollar and the sharp rebound in energy prices witnessed in recent weeks, the report cautioned.

"However, barring major crop setbacks, with world staple food stocks at more comfortable levels than in 2008, the food economy looks less vulnerable to those external developments than it was last year," the report concluded.