London, Aug 29 - The International Sugar Organization on Thursday forecast a world sugar deficit of 3.90 million tonnes in 2008/09 compared with a surplus of 7.25 million in 2007/08.
The ISO's first assessment of the 2008/09 balance saw production falling to 161.65 million tonnes from 169.00 million and consumption climbing to 165.55 million from 161.75 million.
"The distinctive global surplus phase has ended and the market is likely to move into a deficit phase," the ISO said in its quarterly market outlook.
The deficit follows two consecutive years of large surpluses and the ISO said most of the production shortfalls in exporting countries are expected to be covered from stocks accumulated during the previous two seasons.
"A significant production shortfall in India and a continuing contraction of production in the EU are two major supply features of 2008/09," the ISO said.
"The combined effect is a massive 7.4 million tonne reduction in world sugar output in 2008/09. Global sugar consumption, on the other hand, will continue to rise."
The ISO forecast India's production would fall to 23.915 million tonnes, raw value, down 4.59 million tonnes from the previous year. A reduction of 2.90 million tonnes was anticipated for the European Union "after a further tuning of the rules for quota renunciation."
The European Union has been scaling back sugar production in accordance with trade pacts in which it agreed to no longer export a large surplus onto the international market.