Hopes of a return to a meaningful world sugar surplus this year have evaporated with dry weather in Russia and Thailand, Czarnikow said, warning over the rising prominence of weather setbacks.
The sugar merchant cut by 2.6m tonnes to 14.8m tonnes its forecast for the rebound in world sugar output in 2010-11.
That leaves output, at 172.2m tonnes, less than 1m tonnes higher than demand in calendar 2011 � and this before making any allowance for losses to the floods in Pakistan until the extent of damage becomes clear.
"The increase in global production will now not be enough to build a surplus in the coming year," Czarnikow said in a report.
"This means the 2010-11 balance sheet is more likely to be in equilibrium than surplus."
'Unprecedented demand'
And, on a physical basis, even this equilibrium may "prove to be illusive", given the stampede for exports from Brazil, the top sugar producer, to replace stocks drawn down as prices ran up to a 29-year high earlier this year.
"Brazilian new crop production has been drawn back to meet residual demand from the 2009-10 season," the briefing said, noting "unprecedented levels of demand" for the country's sugar supplies.
The comments come at a sensitive time in sugar markets, which have yet to fulfil expectations of a surge in fund buying following the return of closing prices above 20 cents a pound in New York last week.
The October raw sugar contract stood 0.3% lower at 19.75 cents a pound. London's October white sugar contract finished $1.40 higher at $578.70 a tonne.
'Higher level of weather risk'
Czarnikow singled out in its production downgrade Russia's drought, which had, in some regions, cut beet weights to half their size a year before, with sucrose contents lower too.
"These poor results are a consequence of more than four months without meaningful rainfall and peak temperatures of more than 40 degrees Celsius," the report said.
In Thailand, the world's second-ranked exporter, "adverse" weather and lower use of fertilizers and cut production hopes to 7.6m tonnes, from the 8.4m tonnes previously forecast.
Outlooks were cut for production in the European Union, Indonesia and South Africa too.
"It is becoming increasingly apparent that the sugar market is carrying a higher level of weather risk than in the past," the merchant said.
While in part due to the longer crushing season in Brazil, opening up the potential for weather setbacks, the change was "also a reflection of the more turbulent weather patterns that we are seeing".
The prospect of climate change disrupting crop production has been raised by researchers warning over the world's limited abilities to meet food demand.
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