SOFTS-Cocoa bounces but demand outlook still weighs

* Industry buying and origin selling of robustas

* Soft commodities seen oversold

LONDON, March 3 - Cocoa and arabica coffee futures bounced on Tuesday after a rout across the complex on Monday but sugar eased further with markets weighed down by bearish demand prospects as the economic crisis deepened, dealers said.

"If the macro picture continues to dominate, and we see more gloom and doom, then markets could go lower," said James Kirkup, senior sugar broker with Fortis Commodity Derivatives.

Kirkup said he believed equity markets were driving sentiment in soft commodities.

World stocks took yet more losses on Tuesday, with European shares hitting a record low, a day after most equity markets suffered a thorough battering at the hands of investors fearful for the global financial system.

Dealers said soft commodity futures appeared to be oversold and some were now undergoing a technically driven bounce.

ICE May raw sugar was off 0.10 cent at 12.65 cents per lb at 1750 GMT, while London May white sugar settled $1.50 lower at $377.70 per tonne.

Dealers saw support in ICE May raw sugar at 12.50 cents.

Dealers said if sugar futures fell further, physical buying was bound to pick up.

South Korea has bought at least 50,000 tonnes of raw sugar from Brazil, encouraged by cheaper freight rates to make its first imports of the sweetener from South America since 2002, dealers said on Tuesday.

In cocoa, traders talked of a technical recovery from oversold positions and said the market appeared to be extremely volatile, with sentiment shifting to worries over demand prospects due to the global economic slowdown.

"After yesterday's action, it's (the bounce) not surprising," one senior London cocoa dealer said.

"We have seen industry buying in the last couple of days. Near term, we might see a bit more on the downside."

SUPPLY DEFICIT

Dealers were focused on signals of poor demand and also watching carefully for fresh data to give a clue as to the tightness on the supply side, which has been dogged by slow bean arrivals to ports in Ivory Coast, the world's top producer.

Dealers digested the latest figures from the International Cocoa Organization (ICCO), which anticipated a big global deficit for 2008/09, wider than the gap for 2007/08.

The International Cocoa Organization on Tuesday forecast a wider global cocoa deficit of 193,000 tonnes in 2008/09 with a drop in production only partially offset by lower grindings.

ICE May cocoa settled $69 higher at $2,282 per tonne while London May finished up 45 pounds at 1,758 pounds per tonne.

Abundant rains mixed with sunny spells last week in Ivory Coast's cocoa regions bode well for the development of the 2008/09 cocoa mid-crop which runs from April to September, farmers and analysts said on Monday.

Barry Callebaut, the world's largest chocolate maker, has signed an agreement with Spanish food group Natra that would see the Swiss group moving its consumer chocolate unit Stollwerck to Natra.

In coffee, arabicas rose in a technical correction after the recent slide but robustas eased under pressure from origin sales against light industry buying, dealers said.

"I think we had some activity from origin on robustas," one dealer said.

London May robusta coffee futures ended down $17 at $1,504 per tonne having earlier hit a contract low of $1,488, while ICE May was up 0.95 cent at $1.0665 per lb.

Declines in London robusta futures drove Vietnamese coffee export prices down by 4 percent in the past week and sales slowed as farmers borrowed more from a state soft loan scheme to fund cultivation.