Europe may, for the first time in decades, face a shortfall in sugar supplies thanks to high prices which have eroded its edge as generous buyer, Tate & Lyle has warned.

The European Union, which has typically faced problems with sugar surpluses, will have to fight for the sweetener with other big importers should prices remain near record highs in London, and 28-year highs in New York.

Sugar's rally has taken prices near to parity with Europe's guaranteed minimum sugar price which, while historically at a considerable premium to the market, fell to E335.20 ($498.46) a tonne this month.

"A prolonged period of high world sugar prices could, over time, increase the likelihood of a deficit in EU sugar markets," Tate & Lyle, the company behind the Silver Spoon sugar brand, said.

Call for rationing 

The last severe sugar shortfall, in 1974, when raw sugar prices rocketed to more than $2.70 a pound in today's terms, saw European supermarkets limiting customers to one bag of sugar each, France complaining about British day-trippers buying sugar at Channel ports, and the UK facing calls for rationing.

A Tate spokesman told Agrimoney.com: "If prices get much higher, it might be more profitable for producers to sell their sugar to someone else other than the EU."

However, some sugar analysts expressed some surprise at the EU's statement.

"The reference price is a minimum, not a maximum," said a spokesman for the International Sugar Organisation.

"They can always pay more."

A City trader said Tate's claim sounded "pretty ambitious" as "history tells us that sugar prices are not going to stay at these very high levels indefinitely".

Commerzbank vs FO Licht 

In a second spat over sugar on Friday, analysts at Commerzbank disputed a forecast by FO Licht that the global sugar deficit would narrow to 5-7m tonnes in 2009-10, from 9.9m tonnes in the 2008-09 marketing year, which closed at the end of September.

"Further, we are concerned that, after ethanol prices in Brazil, denominated in US dollars, more than doubled this year, sugar production from sugar cane may be crowded out by ethanol production," the German bank added.

FO Licht added that it expected New York raw sugar prices to trade between 20-30 cents a pound during the marketing year.

New York sugar for March stood 0.12 cents lower at 22.62 cents a pound in late morning deals.

London sugar for December was down $5.10 at $580.10 a tonne.