World food prices held steady in February as falling wheat and sugar offset gains in vegetable oils and dairy prices, the United Nations' food agency said on Thursday, forecasting increased cereals production in 2013.

Global grains prices have eased in recent months due to optimism that forthcoming harvests will replenish supplies after producers were hit by the worst U.S. drought in more than 50 years, which sent food prices surging in mid-2012.

The U.N. Food and Agriculture Organisation said its index, which measures monthly price changes for a basket of cereals, oilseeds, dairy, meat and sugar, averaged 210 points in February, unchanged from January.

The index has hovered in the range of 210 to 212 for the past four months after easing back from a strong surge over the summer months, fuelled by dry weather in the United States and other key grains producers.

The FAO raised its view for world cereal output in 2012 by 4 million tonnes to 2.306 billion tonnes and said all signs pointed to higher production in 2013.

"It increasingly looks like the 2013 cereal crops are going to be far better than 2012. As far as wheat is concerned, we are expecting quite a rebound ... and the corn situation is improving as well," FAO senior economist Abdolreza Abbassian said.

"Things could still turn quite nasty with the weather, but everything else seems to be pointing to better prospects in the grains sector," he said.

The Rome-based agency forecast world wheat production in 2013 at 690 million tonnes, up 4.3 percent from the 2012 harvest and the second-largest crop on record after that of 2011. Prospects for the South American corn crop in 2013 also remained favourable, it said.

World cereal stocks at the close of crop seasons ending in 2013 are now seen at 499 million tonnes, FAO said, up about 4 million tonnes from its last forecast in February.

The FAO's index is below a peak of 238 points hit in February 2011, when high food prices helped drive the Arab Spring uprisings in the Middle East and North Africa.

In the summer of 2012 it began surging to levels close to those seen in 2008, when riots, some deadly, broke out in several poor countries. – Reuters