"World paddy production in 2008 could grow by about 2.3 percent, reaching a new record level of 666 million tonnes, according to our preliminary forecasts," FAO rice expert Concepcion Calpe said in a statement on Monday.

Taken in milled terms, this year's rice output should rise to about 445 million tonnes, above FAO's previous estimate of 441 million tonnes and the 432 million tonnes forecast by the U.S Agriculture Department on Friday.

"For the first time, paddy production in Asia may surpass the 600 million tonne benchmark this year, amounting to 605 million tonnes," Calpe said, adding that major gains were expected all across the region.

In Africa, rice output is forecast to grow 3.6 percent to 23.2 million tonnes in 2008, assuming normal rains in the coming months, while paddy output in Latin America and the Caribbean is seen rising 7.4 percent to 26.2 million tonnes, the FAO said.

The output forecast is negative for Australia, the United States and Europe, due to competition from other crops, the Rome-based agency said.

The current forecast may worsen due to the cyclone which hit Myanmar when paddy farmers were harvesting their dry season crop accounting for 20 percent of annual production, Calpe said.

HIGH PRICES

Rice prices rallied about 76 percent between December 2007 and April 2008, according to the FAO Rice Price Index, and they were expected to remain at relatively high levels because stocks held by exporters were expected to be reduced.

"Prices are expected to remain extremely firm, at least until the third quarter of 2008, unless restrictions on exports are eased in the coming months," Calpe said. "At the moment, only Thailand, Pakistan and the United States, among leading exporters, are exporting rice without any constraints."

World rice trade is forecast to drop about 7 percent to 28.8 million tonnes in 2008, mostly due to export curbs, FAO said.

But even if the weather was favourable in the coming months and export restrictions were lifted, prices were unlikely to return to the 2007 levels as production costs surged on the back of rising fuel, fertilisers and pesticides prices, FAO said.

World rice stocks are estimated at 105.2 million tonnes at the close of 2008 marketing seasons, which is slightly below the previous year's levels, FAO said in a rice report.

World rice consumption is expected to rise 2 percent to 437 million tonnes in milled terms in 2008, with 379 million tonnes expected to be consumed as food. That means consumption per person would rise to 57.3 kg a year from 57 kg in 2007, the agency said.