European sugar producers will target export markets in addition to looking for new domestic customers when the EU lifts quotas next year and fully embraces free-market farm policies, officials and analysts say.

However, some analysts believe exports will face tough competition in attractive Middle East and North African markets while some producers, especially in Italy, fear they may not survive the transition.

New markets will have to be found inside and outside the 28-nation European Union as production is expected to increase from the cap of 13.5 million tonnes a year to at least 16 million tonnes and possibly 18 million or 19 million tonnes annually.

European agriculture commissioner Phil Hogan has said the bloc has for years carefully prepared for lifting sugar quotas on October 1, 2017.

Careful preparations are all the more necessary given the crises gripping European agriculture, particularly with soft dairy prices due to overproduction 18 months after milk quotas were lifted.

Sugar will be the last of the EU agriculture quotas set over the decades to protect key sectors.

In 2006, the EU launched reforms to boost competition, which forced 83 mills, or 40 percent of the total, to close, according to the European Association of Sugar Producers (EASP).

Producers in the long run should now "be able to survive in an environment of lower prices", said a source at the European Commission, the EU executive.

A handful of producers have held on in Europe, particularly those in France and Germany but also some in Poland and Britain. Firms in Britain, Portugal and Romania meanwhile refine imported raw sugar.

Commission and industry sources predicted that producers, several of whom work short of capacity, will be able to raise output by 20 percent once the quotas are removed.

- Exports 'difficult' -

"Europe, which is today a net importer, will become a net exporter," predicted Gerard Benedetti, the communications director for French sugar heavyweight Tereos.

He estimated that European sugar production will increase to 18 million tonnes or 19 million tonnes a year, above the 16 million tonnes estimate from Claudiu Covrig, an analyst with Kingsman-Platts S&P Global.

Covrig is also skeptical about prospects for EU firms to conquer new markets in North Africa and the Middle East.

"It will be very difficult for them to be competitive," Covrig said pointing out that Iraq and Algeria have built their own refineries in the last few years.

Hungary is meanwhile interested in meeting possible rising demand inside the bloc once the quotas are lifted on the sweetener isoglucose, known as high fructose corn syrup in north America, according to a commission source.

In Italy, however, some producers have expressed fears they will not survive the transition to the free market, the source said.