"Cereal prices, particularly for wheat and maize, have reached levels not seen for a decade," the FAO's latest Food Outlook report said.

"Poor harvests in key producing countries and a fast-growing demand for biofuel production have driven up grain prices, while supply constraints have also dominated the rice economy."

As a result,"global expenditures on imported foodstuffs in 2006 could reach a historic high of 374 billion dollars (281 billion euros), over two percent more than the previous year's level."

In developing countries, import bills are expected to rise by almost five percent from last year, "mainly as a result of price increases rather than an increase in the actual volume of food imports".

The FAO said many countries would probably reduce the amount of food they bought, "not always in response to improved domestic supplies but rather because of high international prices.

"Moreover, higher energy costs may force many of the poorer developing countries to curtail expenditures on imported staples to sustain their fossil fuel needs," the report warned.

The agency's latest forecast for wheat production this year is roughly 592 million tonnes, down 5.3 percent from 2005.

But it added that a "turnaround" was likely in 2007 in light of increased winter plantings and improved growing conditions.

World production of coarse grains is projected to come to 981 million tonnes this year, a decline of 2.1 percent from 2005.

In the rice sector, typhoons, flooding, diseases and insect attacks have affected rice output this year, with no growth in global production expected, according to the FAO.

It said a rebound in global meat demand was now possible in response to renewed consumer confidence as outbreaks of aninal disease have eased.

But it added that expectations of high feed costs could delay a rebound in livestock and meat production.

In the dairy sector, the FAO foresaw an end to softening prices on "negative expectations for milk production in Australia and the European Union, which together supply a third of world dairy exports."

Unlike other sectors, world ouput in the sugar sector is seen as outpacing demand this year after a three-year deficit.

Production is expected to increase to 155.5 million tonnes in 2006-2007, the FAO said, adding that prices have now retreated from the 25-year highs of February 2006.