Farm ministers will assess proposals in the coming months on how to make it easier for sugar beet farmers to leave the sector, as well as how to make the sector more competitive once market-proctective measures are cut.
"We need to reduce our sugar output dramatically if we are to give the sector in Europe a sustainable future," EU Farm Commissioner Mariann Fischer Boel said. She said there need to be more financial incentives to leave the bloated sector.
The EU had already offered help to leave the sector, but far fewer than expected had done so.
Over the last two years, the EU had hoped to cut sugar production by 5 million tons but ended up cutting only 700,000 tons.
"Regrettably, it hasn't proved as attractive as we had hoped," Fischer Boel said, and stressed the need to get out while it was still going good.
"As the price falls, life will get tougher. And after 2010, there won't be any money to help producers who have to bow out."
The EU reformed its sugar subsidy program in 2005, ending the dumping of cheap sugar on the world market. The reform has caused job cuts at refineries and forced many farmers out of growing sugar beet and sugar cane.
Under the old system, production was supported by generous EU subsidies and import tariffs that guaranteed and inflated price for sugar. That will now be phased out.
EU sugar prices are more than three times higher than the global market rate. The EU also pays out export subsidies to get millions of tons of sugar off its market every year.