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23 March 2010 (Reuters) By Nigel Hunt

Raw sugar futures on ICE fell to the lowest levels in more than eight months on Tuesday, weighed by investment fund position unwinding against a backdrop of improving crop prospects in top consumer India.

Analysts said that even though prices are now more than 40 percent down from multi-year highs hit in early February, technical chart signals are pointing to further steep losses.

Coffee prices were little changed while cocoa edged higher, boosted partly by signs of a revival in demand.

May raws on ICE stood 0.39 cents or 2.2 percent lower at 17.45 cents a lb at 1307 GMT after earlier trading at 17.19 cents, the lowest level for the front month since July 13, 2009.

A significant improvement in prospects for the 2009/10 crop in India, the world's top consumer, and an expected sharp rise in output in 2010/11 have helped propel the market on a downward course which shows no signs of slowing down.

Stefan Uhlenbrock, senior commodity analyst with F.O. Licht, told Reuters in Brazil that India's crop was seen around 17-18 million tonnes in 2009/10 and forecast to rise to 25-26 million tonnes in 2010/11.

A few weeks ago, some estimates for India's 2009/10 crop had fallen as low as 13.5-14 million tonnes.

Dealers noted a prolonged decline, which has seen prices tumble as much as 43 percent from a 29-year high of 30.40 cents set on Feb. 1, has also generated bearish technical signals.

Sucden UK, in a report on Tuesday, noted these included the decline this week in the 40-day moving average below the longer-term 100-day moving average.

"The technical indicators have been giving very negative signals...this is no doubt encouraging further long liquidation as well as short selling from funds and specs," Sucden said.

Dealers said the failure of expected strong physical demand to materialise in the last few weeks had also led to a sharp decline in nearby premiums.

For a graphic on the decline in both raw sugar prices and the nearby premium click on: http://r.reuters.com/nec84j

White sugar futures on Liffe broke below $500 with May down $16.10 or 3.2 percent at $491.40 after earlier trading at $487.40, the lowest level for the front month contract since July 29, 2009.

ROBUSTAS REBOUND

Robusta coffee futures on Liffe were higher as the market continued to rebound from contract lows set early last week.

"I have a sense the market feels that the downside has been played out for the time being and we will have a bit of a look to the upside," one dealer said, noting system funds remained heavily short but may look to scale back positions soon.

Dealers continued to keep a close watch on defaults in Vietnam but said it did not appear to be having a major impact on the market on Tuesday.

Weak coffee prices are taking a toll on the industry in Vietnam, the world's second-biggest producer, as shipments get delayed, farm incomes drop and defaults rise in trends expected to worsen, traders said on Tuesday.

"It causes massive problems for the trade but I don't think it is directly the cause of what is going on today," one dealer said, adding there was likely to be a pick-up in price fixing of Vietnamese coffee if the rebound were to gather momentum.

May robustas rose $8 or 0.6 percent to $1,281 a tonne while May arabicas on ICE stood a marginal 0.05 cent or 0.04 percent lower at $1.3295 per lb.

Cocoa futures were slightly higher, underpinned by signs that demand may be beginning to improve.

Fortis Nederland noted in a report on Tuesday that there had been an increase in buying of cocoa butter in the last six weeks.

"Chocolate manufacturers and cocoa processors have also been willing to talk more hopefully than for some time about glimmers of improving consumption," the report said.

May cocoa futures on ICE stood $19 or 0.7 percent higher at $2,892 a tonne while July cocoa on Liffe rose 12 pounds or 0.5 percent to 2,230 pounds a tonne.

* Prices as of 1306 GMT Product Last Change Percent Move End 2009 Ytd Percent ICE sugar 17.46 -0.38 -2.13 26.95 -35.21 ICE coffee 134.45 -0.25 -0.19 137.60 -2.29 ICE cocoa 2915.00 16.00 +0.55 3310.00 -11.93 Liffe sugar 492.50 -15.00 -2.96 710.20 -30.65 Liffe coffee 1279.00 6.00 +0.47 1332.00 -3.98 Liffe cocoa 2229.00 11.00 +0.50 2271.00 -1.85 CRB index 272.23 -0.05 -0.02 283.38 -3.93 Crude oil 81.51 -0.09 -0.11 79.36 2.71 Euro/dlr 1.35 -0.01 -0.60 1.43 -5.57 * ICE sugar and ICE coffee in cents per lb, ICE cocoa, Liffe sugar and Liffe coffee in dollars per tonne. Liffe cocoa in pounds per tonne (Editing by Veronica Brown and Sue Thomas)

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