One of the main reasons is the extreme heat. High temperatures worsen the condition of sugar beet crops, reducing yields and sugar content in the root vegetables. At the same time, the current weather problems have only intensified a trend that had formed earlier. European farmers have been reducing the area under beets for the second consecutive year after several seasons of high yields. The paradox of the situation is that not long ago, producers were hindered by an excess of sugar. Large volumes of production led to falling prices and reduced profits, prompting farmers to decrease their plantings. Now, the market may face the opposite problem — a shortage of products. **Prices Up** The reduction in European production occurs against the backdrop of additional risks for the global market. Weather conditions associated with the El Niño phenomenon could negatively impact sugar cane yields in major producing countries, including India and Thailand. Thus, problems may arise simultaneously in several key regions. Market participants are already factoring in a potential reduction in supply into raw material prices. Since the beginning of August, London and New York sugar futures have risen by about 5%. In Europe, prices have increased by 9% since June. Analysts allow for further price increases if the actual harvest turns out to be lower than forecasts. The shortage could be particularly noticeable in the first and second quarters of next year. **As an Importer** For the European sugar industry, the decline in production has ambiguous consequences. On one hand, a poor harvest means less raw material for processors. On the other hand, a reduction in supply could rid the market of the excess product that has been pressuring prices for several consecutive seasons. However, for consumers, the situation looks less optimistic. If production indeed falls to a ten-year low, the European Union may need to increase imports to compensate for the lack of domestic sugar with supplies from other regions. As a result, Europe risks shifting from an exporter position to that of a net importer. An additional problem lies in the weather. Even an increase in planted areas next season does not guarantee a recovery in production: if extreme heat persists, yields will again be at risk. For now, there is no talk of sugar disappearing from European shelves. But the market is clearly moving in the opposite direction from the one it demonstrated not long ago. After several years of battling excess production, Europe now has to prepare for a shortage. If analysts' forecasts prove correct, the main consequence will not be a lack of sugar in stores, but its further price increase.