10/02/2012 (Fox Business) - World food prices increased in January for the first time since July 2011, with an overall gain of almost 2% led by oils and cereals, the Food and Agricultural Organization said Thursday.

Food price inflation climbed toward the top of the international agenda after hitting successive record highs in the early part of last year amid global supply concerns of cereals, sugar and cocoa, before five straight months of decline--the longest slide in over two years. But the FAO's Intergovernmental Group on Grains warned in December that prices could be bottoming out.

The FAO's food price index averaged 214 points in January 2012, four points up from December, the Rome-based United Nations organization said. However, the index remains 7% below its corresponding value a year earlier.

"Firming import demand for palm and soy oil, combined with a seasonal decline in palm oil production and the prospect of below average export availabilities of soy oil were the main driving forces behind the recovery in the index," the FAO said.

In January, prices of all commodity groups that make up the index posted gains, with oils increasing the most, followed closely by cereals, sugar, dairy and meat, the FAO said.

The FAO oils/fats price index rose to 234 points in January, up 3% on December's levels, but remains below levels posted in the same period a year earlier.

The price of cereals, one of the main components of the index, increased 2.3% in January, led primarily by price gains in corn, which rose 6% driven by a tight global supply-demand balance amid concerns over crop prospects in South America.

Wheat prices also gained, but less sharply than those of corn. The wheat index was up 1.5% in January, the FAO said, citing rising corn prices as both are used for feed wheat, reduced Russian export levels and unfavorable weather in several important grain cultivating regions.

Meat prices nudged up half a percentage point in January, although the prices of various meat types followed mixed directions, the FAO said. Pig meat gained almost 3%, led by the anticipation of higher imports by China, but poultry prices fell by 1% weighed by the strength of the U.S. dollar against some major exporter currencies, especially Brazil.

Dairy prices lifted 2.5% in January, marking the first upturn after five months of steady declines.

"A rebounding of butter and cheese prices are behind this month's strength, as prices of both skim and whole milk powder were steady or slightly down," the FAO said. "Relatively low stocks of dairy products in the U.S. along with supply tightness in Oceania have sustained prices in the past two months."

Sugar prices were up 2.3%, albeit to levels 20% lower than in January last year, largely driven by unfavorable weather conditions in top producer Brazil, spurring fears that it could delay its harvest and cut production levels. Still, large harvests in India, the European Union, Russia and Thailand capped the increases.

The World Bank estimates 44 million people may have been pushed into poverty by last year's price rises, and aid agencies warn high food costs threaten millions more.