By Maytaal Angel

LONDON, June 7 (Reuters) - The United Nations world food

price index rose for a third consecutive month in May, as higher

cereals and dairy product prices outweighed drops in prices for

sugar and vegetable oils.

The U.N. Food and Agriculture Organization's price index,

which tracks the most globally traded food commodities, averaged

120.4 points in May, up 0.9% from its revised April level, the

FAO said on Friday.

The May reading was nonetheless 3.4% below the level seen a

year earlier.

The FAO index hit a three-year low in February as food

prices continued to ease off from a record peak set in March

2022, following Russia's invasion of fellow crop export major

Ukraine.

The uptick in May was supported by cereal prices rising 6.3%

month-on-month amid growing concerns about unfavourable crop

conditions curbing 2024 harvests in key producing areas like

northern America, Europe and the Black Sea region.

Dairy prices increased 1.8% in May from April, the FAO said,

underpinned by increased product demand ahead of the summer

holidays amid worries that milk production in western Europe may

fall.

The FAO's May sugar index fell sharply, decreasing 7.5% on a

monthly basis, as a good start to the new harvest in top

producer Brazil got underway. Vegetable oil prices declined 2.4%

for the month, as palm oil quotations fell amid rising seasonal

output.

In a separate report on cereals supply and demand, the FAO

forecast 2024/25 world cereal production at 2.846 billion metric

tons, roughly on a par with 2023/24's record output, as barley,

rice and sorghum output is seen increasing, offsetting declines

in maize and wheat.

The FAO warned, however, that the "recent adverse weather

conditions in the Black Sea region will likely result in a

downgrade in world wheat production, a possibility not yet

reflected in the forecast".

World cereal utilisation in 2024/25 was seen increasing 0.5%

year-on-year to a new record high of 2.851 billion tons, the FAO

said. World cereal stocks will likely increase 1.5% from their

opening levels to a record 897 million tons, it added.