The EU — a major grower — sees its output dropping 7% this season to 15.5-million tons after summer heat and drought affected crops. Plantings fell 20% in the past five years after historically low prices prompted farmers to switch to more lucrative crops like grains. 

“We are deeply concerned that we have entered a longer-term deficit situation,” CIUS president Yury Sharanov said at a seminar in London. “If adequate measures are not put in place, the same situation will repeat itself in the next marketing year.”

EU sugar output has slid about a quarter since jumping in the 2017-18 season, when the removal of sugar quotas allowed the region’s firms to produce and export as much as they want. That’s helped European prices to rebound, exacerbated by an energy crisis that’s forced producers to pass on costs to consumers.

In some places in Europe, food manufacturers are paying more than £1,000 a ton to buy sugar in the spot market, much more than usual, traders say. In London futures, the March contract’s premium over May prices has climbed in the past month, another indication of a tighter market.

They’re not the only signs of worries over shortages. The EU said imports in the final quarter of the season that ended in September rose from a year earlier. European producers are already exporting less to focus on supplying local buyers, said Josh Gartland, deputy director-general of the manufacturers group known as CEFS.

Despite expectations for the world market to flip into surplus this season, S&P Global Commodity Insights forecasts global supplies to persist until the second quarter.

To ease that crunch, Europe could buy from countries in places like Africa and the Caribbean, whose shipments had fallen in recent years but which could now be more attractive at current prices, CEFS said. 

Another option is more trade with key exporters Brazil and India. However, Indian quotas put a cap on how much millers can ship out, while higher ethanol prices have spurred Brazil’s mills to divert more cane to making the biofuel.

Bloomberg News. More stories like this are available on bloomberg.com