About half of the Iraqi population is in need of food assistance, two U.N. food agencies said Tuesday, blaming the war and years of economic sanctions and drought.

Of these, some 3.5 million Iraqis -- vulnerable groups such as malnourished children, pregnant women and nursing mothers -- will need supplementary food rations next year, at an estimated cost of $51 million.

The figures were part of a joint report by two Rome-based agencies of the United Nations, the Food and Agriculture Organization (searchand the World Food Program (search). The agencies sent a mission to Iraq in June and July to assess the food situation.

The report said that starvation has been averted, but warned that chronic malnutrition persisted among the 25 million population, despite a better cereal harvest this year compared to 2002.

This year's cereal production is forecast at 4.1 million tons, 22 percent more compared to last year's estimated harvest. Cereal imports for 2003/2004 are estimated at 3.4 million tons, of which 3.2 million tons are likely to be purchased commercially and about 244,000 tons are food-aid pledges.

Production has increased mainly due to rains in the north, increased irrigation and distribution of agricultural assistance such as seed or fertilizer in the main producing areas.

However, the report said that food will still need to be distributed in the short and medium term while the agriculture sector recovers.

The agencies urged the country to devolve all returns from oil sales to the Development Fund for Iraq -- a recently established fund for financing humanitarian and reconstruction efforts -- with special consideration for the agriculture sector.

The report singled out water availability and sanitation as the two major problems in postwar Iraq. Currently a daily maximum of 18 gallons per person is available to the 5 million residents of Baghdad -- about half of prewar availability. The situation is even worse in southern cities.

The agencies said the U.S. military occupation and postwar turmoil has taken a toll on the sowing of summer cereal and industrial crops, as well as on the capacity to produce fertilizers.

Two fertilizer factories are apparently not working, said the report, raising the question of where next year's estimated 600,000 tons of fertilizers for cereals alone will come from.

Livestock conditions are generally stable in most parts of the country, having benefited from good pastures and the availability of grain.

In the wake of the Iraq crisis, the United Nations appealed for a total $2.2 billion, possibly the biggest humanitarian operation in history.