SOFTS-Sugar holds steady, underpinned by Brazil rains

* Brazilian sugar yields seen lower after heavy rains

* Strong start to Ivory Coast main crop weighs on cocoa

LONDON, Nov 24 - Sugar prices held steady on Tuesday with the impact of a firmer dollar offset by reduced crop prospects in Brazil and expected strong demand from India.

Coffee and cocoa prices eased, however, as oil and many other commodity markets declined.

Dealers said the sugar market has been losing ground in the last few weeks, weighed down partly by an expected supply response to high prices but now appeared to be consolidating.

"I think there has been a slight refocus back to short-term fundamentals and the support that should give to prices to go higher," said Barclays Capital analyst Nick Snowdon.

Brazilian sugar yields are expected to drop to around 130 kg/tonne in 2009/10 from 142 in the previous season, due to excessive rain, the head of the Datagro consultancy Plinio Nastari said on Tuesday.

"There are still concerns over wet weather in Brazil and how it is going to cut back final estimates for the Center-South crop," Snowdon said.

March raw sugar on ICE stood 0.02 cent lower at 22.12 cents a lb at 1624 GMT while March whites in London were unchanged at $598.70 per tonne.

Heavy demand from India, Pakistan and Bangladesh could propel white sugar futures to record highs in coming weeks, and Thailand was positioned to win much of the business, trade sources said on Tuesday.

Sugar crushing has started in Thailand, with at least 7.1 million tonnes likely to be produced by the world's second-largest exporter after Brazil in the new season, industry sources said on Tuesday.

KEY SUPPORT

Sucden Financial, in a market note on Tuesday, said there was key support at 22.00 cents on the March raws contract and also at a double bottom at 21.78 cents.

"One feels that the market will now have to overcome and close above the 100 day moving average (around 22.39 cents) before it will be able to challenge the 23.00 area," Sucden Financial said.

Sugar prices may slip next year as a recent rally to 28-year highs appears to be running out of steam, while arabica coffee is expected to get a boost due to supply concerns in South America, Standard Chartered said on Tuesday.

Arabica coffee futures were slightly down, weighed by broad-based losses in commodity markets.

Dealers noted some concerns that wet weather may diminish the outlook for Brazil's 2010/11 crop, a higher output year in the country's biennial cycle.

Snowdon said, however, the general expectation was still that Brazil would still harvest a bumper crop in 2010/11.

"Without any significant evidence of a lower than expected Brazilian crop (in 2010/11) it is difficult to justify prices going much higher than where we are currently," Snowdon said.

ICE March arabica futures fell 1.30 cent to $1.3610 per lb, while Liffe January robustas were off $16 at $1,332 per tonne.

Dealers said the robusta market was still focused to the prospects in Vietnam where the harvest is in full flow.

Domestic coffee sales in Vietnam strengthened in the past week as trading houses started stockpiling in anticipation of world prices rising because of a weak dollar and a supply shortfall this year, traders said.

Cocoa prices were lower, weighed partly by a strong start to the main crop season in Ivory Coast.

"Cocoa arrivals (in Ivory Coast) are still coming through reasonably well," one dealer said, adding industry buyers were about 100 pounds below current levels.

ICE March cocoa was down $24 at $3,269 per tonne, while Liffe March cocoa eased 15 pounds to 2,156 pounds per tonne. (Editing by James Jukwey) (