The letter was composed by Melvin Burgess, who was approached to judge the prize. Burgess, who won the Carnegie Medal and The Guardian fiction prize for his hard-hitting young adults' fiction, said: "Supporting a prize financially is one thing, but promoting a corporate brand is quite another.
"However, the work of Booktrust is much respected and they've asked us for some time to take this on board. We're hoping for a response in the next couple of weeks," he said.
Nestle bought the Rowntree company in 1989 and, in doing so, inherited sponsorship of the prestigious Smarties Book Prize. The prize is administered by Booktrust, which is also involved with literary prizes such as the Orange Prize for Fiction, the Commonwealth Writers' Prize and the Sainsbury's Baby Book Award.
A spokeswoman for Booktrust defended the decision to look again at the sponsorship deal: "Before we accept any corporate sponsorship, we look at any issues that might have an adverse effect on Booktrust's public image.
"We assumed it would be reasonable to talk to Nestle about a new prize, particularly as it grew out of an existing prize (Smarties Book Prize).
Nestle has been one of our loyal supporters for 10 years.
"We are not scrapping this award, but there can't be a book prize without the support of the authors. We're in discussions with Nestle, but we don't know if the prize will go ahead in its current form," she said.
Mike Brady, campaigns and networking co-ordinator of the charity Baby Milk Action, which is critical of Nestle for violating the World Health Organisation's International Code of Marketing Breast-milk substitutes, said: "Burgess contacted us for information on Nestle and we were happy to help. We are concerned about corporate involvement in such events, particularly those aimed at children.
"However, we asked the authors to take the issue up directly with Booktrust.
Our priority is working with our partners in developing countries and the boycott is only a small part of what we do. We certainly wouldn't criticise the work of Booktrust, but we don't believe that Nestle is a suitable sponsor for this prize."
This is not the first time that authors have raised objections to corporate arts sponsorship.
Last year, the runner-up in the Smarties Book Prize, Richard Platt, donated his £750 prize to Baby Milk Action. Germaine Greer and Jim Crace cancelled their appearances at the 2002 Hay-on-Wye literary festival in protest at Nestle's involvement, and the Perrier Comedy Festival, another arts sponsorship deal inherited by Nestle, has also been the subject of controversy.
Nestle has issued a press statement to say it is discussing the position with Booktrust.