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UPDATE 1-Avril to cut biodiesel output in France on weak demand

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PARIS, April 20 (Reuters) - French oilseed group Avril plans temporarily to reduce production at its five biodiesel plants in France due to a steep fall in orders, it said on Wednesday.

Under proposals submitted to worker representatives, Avril's Saipol division is to cut biodiesel activity from August until the end of the year, it said in a statement.

"This reduction is the result of market conditions, notably a sharp decrease in orders, with projected sales at Saipol of 928,000 tonnes as of early April 2016 compared with 1.5 million tonnes at the same point in 2015," Avril said.

A spokesman said the size of the reductions would be the decided during subsequent talks with worker representatives.

The decision marks a change of course for Avril which six months ago opened a new biodiesel plant in southern France to target expected additional demand after the government raised blending levels for the biofuel.

The move also comes as Saipol is attempting to change supply contracts with farmers for next season in a bid to cut costs in biodiesel and oilseed crushing, meeting resistance from the crop growers that indirectly control the group.

Avril was faced with overcapacity in the European biodiesel industry against a backdrop of falling fuel prices and fluctuations in the euro-dollar exchange rate that had encouraged fuel companies to import biodiesel made with recycled oils, it said in the statement.

The development of biodiesel using imported palm oil had also hurt European producers at a time when production of rapeseed, the main feedstock used in Europe, had fallen, it said.

Despite last year's increase in France's national blending target, policy uncertainty in the European Union, which has moved to curb the role of crop-based biofuels because of environmental concerns, has limited growth prospects.

Avril and farmers have also criticised plans by oil major Total to convert a refinery in southern France to production of biodiesel using waste oils.

Avril currently has annual biodiesel production capacity of 1.7 million tonnes after adding the 100,000 tonne facility at Sete last year. But its capacity remains below the 2 million tonne level it had before closing two plants in 2013 after the EU moved to curb the contribution of crop-based biofuels.

(Reporting by Gus Trompiz and Valerie Parent; editing by Jason Neely and David Evans)

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