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Ukrainian sugar rush has EU producers fretting over prices

FILE PHOTO: Sugar products are seen at a supermarket in Kiev

By Sybille de La Hamaide

PARIS (Reuters) - A surge in EU imports of Ukrainian sugar is expected to continue for at least for another season, weighing on prices in the bloc. While this may be good news at a time of food price inflation, the EU sugar industry and farmers are demanding action.

As with other commodities, the EU lifted import duties on Ukrainian sugar after the start of the war with Russia. This prompted Ukrainian sugar imports into the EU to grow tenfold to more than 400,000 metric tons last season.

Imports extended their rise at the start of the current season and Ukrainian producers estimate that they could reach 650,000 tons in 2023/24 and more than 1 million the following season as Ukrainian farmers increase production due to lower profitability of grain and oilseed.

"Spot prices have already started coming down because of Ukrainian imports, from about 1,000 euros a ton - a record - to about 800 euros, while global prices continued to rise," Timothé Masson, analyst at sugar beet growers group CGB, said.

When the EU faces a sugar deficit and has to import, as it has this season and is likely to next, prices within the bloc trade at a premium over global prices to reflect the cost of transport and import duties.

If there are fewer imports entering the EU with a duty, there is less reason for a premium.

The drop in EU spot prices was recorded before this week's slump on global sugar markets, after India said it would direct sugar mills to focus on sugar output instead of ethanol.

The fall in prices worries sugar beet growers who had seen their income rise again after several difficult harvests, and producers who have posted record profits thanks to high prices.

"I can understand that there is a war and that we have to defend Ukraine, but it is not up to farmers and the industry alone to pay the bill," Guillaume Wullens, a sugar beet farmer said at the CGB annual meeting in Reims, northern France.

EU sugar producer group CEFS called on the European Commission to convince Ukraine to set up a sugar export quota to the EU and ask Kyiv to ensure that the sugar coming out of the country is produced locally, similar to environmental regulation imposed on EU farmers.

"If the European sugar market remains in deficit, we are nevertheless worried about the massive arrival of Ukrainian sugar in the European Union. Not regulating European imports from Ukraine will necessarily weigh on sugar prices," Olivier Leducq, CEO of France's largest sugar maker Tereos, said.

European industry players and farmers say privately they realise their calls may not resonate with politicians as Ukraine is at war and consumers are still suffering from a sharp jump in sugar prices, directly or when processed.

Leducq stressed, however, that lower prices would only have limited impact on reducing inflation as sugar represents only a very small part of the costs of most agri-food producers.

(Reporting by Sybille de La Hamaide; Editing by Alexander Smith)