The surplus in global sugar supplies "is nothing like as large as it is assumed to be", Czarnikow said, warning that investors were underestimating the boost to consumption from lower prices.
The London-based sugar merchant slashed to 2.0m tonnes, from 3.9m tonnes, its forecast for the world sugar surplus in 2013-14, a figure well below that from other commentators.
The International Sugar Organization two weeks ago forecast a surplus of 4.5m tonnes, while an analysts' poll taken in late July put the figure at 4.0m tonnes – although some care must be taken in making comparisons given that commentators start marketing years in different months.
Czarnikow's downgrade reflected in part a weaker forecast for output, reflecting in Europe a drop in beet sowings and a "tough growing season", and a 10m-tonne reduction, to 585m tonnes, in the estimate for the cane harvest in Brazil's important Centre South region.
The Centre South is responsible for nearly 90% of sugar output in Brazil, the top producer and exporter of the sweetener.
'A lot stronger than expected'
However, Czarnikow also raised its forecast for consumption growth, to 2.3% in 2013 and 2% next year, adding that even after these upgrades it was likely "still being conservative".
"Demand for sugar has been a lot stronger than we had been expecting," the broker said, saying that it had been "consistently surprised the strength of physical demand" over the last 12 months.
"What we believe has happened is that the falls in price and increases in affordability have been enough to encourage a sharp rise in marginal demand."
The broker cited in support of its argument that supplies are tighter than thought sugar prices which, while down some 15% so far in 2013 on New York's futures market, have not fallen "anything like the extent predicted".
Furthermore, the New York futures curve had remained unusually flat, rather than showing the typical spread of some 0.6 cents per pound between October and March contracts, Czarnikow senior analyst Stephen Geldart told Agrimoney.com.
And, in the physical market too, Brazilian mills were not offering the discount, of some 1 cent a pound to futures, typical at this time of year, when sugar output is at a seasonal high.
"Our view is that the explanation has to be logical - the surplus in sugar is nothing like as large as it is assumed to be."
And consumption data, which the merchant said are "very difficult to verify", looked likely a source of surprise given indications from trade data.
"The strength of global trade in physical sugar, which is up over 10% year-on-year, is a good indicator of the way in which consumers have reacted to low prices."
Mr Geldart said that, if the surplus was as strong as suggested, there would be more evidence of rising inventories, with Brazilian producers, for instance, offering discounts to get shot of supplies.
Instead spot sugars are actually trading at a premium.
"As it is, China is the only real destination for world market sugar that has built stocks," he said.
"China aside you have to look at the US, the European Union and India to see good stocks and those markets are not really that fungible with the global market for all sorts of reasons."