World cereals output is expected to rise to a new record in 2011 due to more planting and improved yields, the UN’s Food and Agriculture Organisation (FAO) said.

“But low stocks are set to keep prices high and volatile,’’ FAO said on Tuesday in its first estimate of 2011 total global crops.

FAO noted that the global cereals output was expected to rise 3.5 per cent to 2.315 billion tonnes this year, recovering after a 1 per cent fall in 2010.

According to its key Food Outlook report, world wheat output is seen rising 3.2 per cent to 674 million tonnes this year; down from an earlier forecast of 676 million due to unfavourable weather in North America and parts of Europe.

Wheat outlook in the main producing countries is patchy with the European Union’s output seen flat at 137 million tonnes, U.S. crops falling 8.5 per cent to 55 million hit by bad weather.

Russia’s output is expected to jump 32.5 per cent to 55 million, recovering after 2010’s severe drought.

The Rome-based agency said that the weather in the coming months remained critical for shaping final crop outcomes.

The FAO said increasing global grain production this year would not be sufficient to rebuild strong stocks which could stabilise prices, adding that demand growth was expected to slow down this year, especially from the biofuels sector.

World cereals stocks at the end of 2011 and 2012 season were expected to edge 0.8 per cent higher to 494 million tonnes, still well below 534 million tonnes at the end of 2009/10 season.

Wheat stocks are seen down 2.6 percent at the end of 2011/12 season to 183 million tonnes.

“With total cereal production barely meeting consumption, international prices are likely to stay high, especially in the wheat and coarse grain markets,” it said.

It however noted that surging international prices of grains and vegetable oils were likely to help raise global costs of imported foodstuffs by 21 per cent this year to a record of 1.29 trillion dollars.

This it said would surpass the $1 trillion mark for the third time in the past four years.

“The poorest countries are going to be hit hardest because their food import bill is expected to surge 30 per cent and account for roughly 18 per cent of all their import spending.

“That compares to a 20 per cent jump in the food import bill for developed countries.

“But even increased spending on food imports would not guarantee greater food availability in poor countries where bigger imports would only compensate for falling domestic supplies,’’ it said.