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EU to cut sugar production by at least 2 mln tons - extended

The European Union, the world's second-biggest sugar exporter, cut the amount of the sweetener that can be produced in the bloc, a decision that will force beet farmers and companies such as Suedzucker AG to scale back their output.

The yearlong reduction in production quotas, used by the 27-nation EU to limit output, will apply from September and amount to 2 million metric tons, or 13.5% of output. Twelve countries will be totally or partially exempt, based on the percentage of their quota they already gave up voluntarily, the EU said yesterday in an e-mailed statement. „Without this measure, the Community sugar market would suffer a major surplus,” the Brussels-based European Commission, the EU's regulator, said in the statement. „It is now hoped that sugar producers and beet growers will make a common effort.” The EU wants to produce and export less sugar after the WTO ruled that it must cut the amount of subsidized sugar it sends abroad. The bloc has slashed its guaranteed price by 36% and is offering to pay companies to relinquish some of their production quotas. Yesterday's decision comes after European sugar growers applied to pare production by 660,000 metric tons in exchange for one-time payments in the 2007-2008 marketing year. That's well below the EU's target of 1.2 million tons.

Greece, Ireland, Italy, Latvia, Slovenia and mainland Portugal all are exempt from the one-off cut announced yesterday, since all have given up 50% or more of their quota in exchange for one-off payments. Cuts imposed on the Czech Republic, Spain, Hungary, Slovakia, Finland and Sweden, will be less than 13.5%, in recognition of their respective achievements in voluntarily renouncing part of their production quota. Even with the exemptions, total EU output will still fall by 13.5% due to yesterday's decision, regulators said. In the event that yesterday's cuts aren't respected, companies will have the option of selling excess sugar at the world price for industrial uses such as making biofuels, or counting their excess production against next year's quota.

White sugar gained in London after the European Union, the world's second-biggest exporter of the sweetener, announced a cut in production. The EU wants to produce and export less sugar after the WTO ruled that it must cut the amount of subsidized sugar it sends abroad, following a dispute with Brazil. Refined, or white, sugar futures rose $1.10, or 0.3%, to $334.60 a metric ton as of 10:50 a.m. on Euronext.liffe in London. They have dropped 25% in the past year. „A shortage of good quality sugar for March delivery” is also driving prices higher, Miller said. Contracts for March delivery expired February 13 and require first delivery by March 1. Refined-sugar supply is „likely to be tight” this year due to a lag between new processing capacity and cuts in the EU exports, according to a January report by C. Czarnikow Sugar Ltd, the world's biggest sugar broker. (Bloomberg)