(Amends company identifier to SZUG.DE)

By Sybille de La Hamaide

PARIS (Reuters) -Sugar maker Saint Louis Sucre, owned by Germany’s Suedzucker, asked French farmers not to increase their beet output in 2024 to avoid a fall in prices amidst hefty competition from Ukrainian sugar, copies of a letter seen by Reuters show.

European sugar prices have hit record highs, well above soaring global markets, due to a sugar deficit in the bloc, linked notably to falling output in France where farmers have been deterred by poor harvests in recent years.

But the war in Ukraine has led to large imports of sugar into the bloc, raising fears of a surplus, such as in 2017 after the European Union lifted production quotas, which led to a collapse in prices.

“Our ambition to increase surface areas…finds itself in competition within the framework of the EU solidarity effort in favour of Ukraine,” Saint-Louis Sucre (SLS) said in a letter dated Sept. 6.

“Our objective is to ensure that each ton of sugar produced in France responds perfectly to demand and is valued at best on the European market in order to serve the best possible beet income,” it also says.

“In this unexpected context, we are counting on you, historic SLS planters, to maintain your 2023 tonnages in 2024,” it said.

Ukraine’s sugar imports into the EU rose to 390,000 tonnes between October 2022 and July 2023, up from 25,000 tons over the same period the previous season, EU data showed.

Responding to a request for comment on the letter, a Suedzucker spokesperson said that Ukrainian sugar, which has the potential to disrupt EU markets, should be re-exported to third countries, which are need of food.

French farmers are in the process of choosing their crop rotations for next season, with rapeseed sowings already over and wheat due to start later this month.

High sugar prices at a time when grain prices have fallen could make farmers favour beets in their rotations, sugar beet growers said. The French sugar beet crop area fell to a 14-year low this year.

European sugar was trading at 915 euros ($983.17) per ton on July 2023, the most recent EU data showed, up 57% on the previous year and twice the price recorded in July 2021.

“We must be careful not to fall into the opposite extreme,” Franck Sander, chairman of French sugar beet union CGB, told Reuters, warning that a rise in area could make EU prices slump.

“A turnaround could happen very quickly, prices could fall 30%, especially since there are large supplies in Ukraine.”

Saint Louis Sucre closed two factories in 2019 as part of a wider restructuring plan at Suedzucker, Europe’s largest sugar refiner. It still has two in northern France.

The European Union’s sugar output is expected to rebound in 2023/24 from the previous year, mainly due to a larger crop in Poland where farmers, attracted by higher prices, had boosted the area sown.

($1 = 0.9307 euros)

(Reporting by Sybille de La Hamaide, additional reporting by Nigel Hunt in London and Michael Hogan in Hamburg; Editing by Sharon Singleton)

---