European Agriculture Commissioner Mariann Fischer Boel said Monday that a failure to reduce production quotas under the terms of last year's reform made a output reduction of at least two million tons, or 12 percent of the quota, necessary.

"I have been quite clear that unless much more quota was renounced, the consequences would be serious for everyone," she said.

Such a cut means that part of the sugar produced in the 2007-2008 marketing year will either have to be counted against the quota for 2008-2009 or be sold as out of quota sugar for industrial use, including bioethanol and chemical industry.

The commission will make a proposal in February for such a provisional quota reduction. A definitive figure will be set later this year towards October, once the commission has a clearer picture of the harvest and production of sugar.

The EU executive said it is important to announce this initiative to sugar producers and beet growers at this early stage so that the industry can plan for the coming growing season and the contracting process.

For over 40 years before last July, the EU had been paying out generous subsidies to sugar beet growers and sugar exporters that resulted in high sugar price without the EU and meanwhile a flood of cheap EU sugar into world market.