World cereals markets face a second season of deficit as early forecasts for crops in Europe and the U.S. this year have been lowered "significantly" cutting hopes of a rebound in output, the United Nation's food body said on June 22.

Food prices are expected to stay high and volatile into 2012, putting growing pressure on poor importing countries and causing headaches for policy makers, the Food and Agriculture Organization said in a report.

"With total cereal production in 2011 below the anticipated utilization, international prices are likely to remain high, especially in the wheat and coarse grain markets," it said.

The warning comes as agriculture ministers for the Group of 20 developing and developed nations are meeting in Paris to negotiate a deal on how best to rein in near record-high food prices and damp volatility.

Food-price inflation has been blamed for sparking the wave of unrest which has rocked the Arab world this year and the FAO warned that Libya, hit by months of civil unrest, is facing serious shortages.

The FAO cut its forecast of world cereals output to 2.302 billion metric tons in 2011-12 from an earlier estimate of 2.315 billion tons, driven by a downgrade in output from the U.S and Europe.

Wheat output is expected to come in "significantly" below earlier forecasts at 671 million tons, including 134 million tons from Europe, after drought cut hopes for yields. That still marks a 2.8% rise compared with 2010, however, due to a rebound in output from the Black Sea.

World cereal stocks are expected to suffer as a result, falling to 486.2 million tons and cutting the world stocks-to-use ratio by 2.3% to just 20.7%.

"With grain inventories remaining at low levels, especially for maize, international grain prices are expected to stay not only high, but also volatile in the 2011-12 marketing season," said the report.

Still, the FAO said favorable weather means North African countries--including the world's largest wheat importer Egypt--are likely to have to rely less on world imports. Output from the region is expected to rise 14% to 18 million tons in 2011, it said.