"Buyers retreated from the (physical) market after they saw the drop in Tokyo raws, but the offers have not tumbled drastically since there is support from protests by (Thai) producers and those holding quota B sugar (for export)," said a trader at a major Japanese trading house.

Premiums for Thai raw sugar over Coffee, Cocoa and Sugar Exchange prices for January-March were unchanged at 45 points (100 points=1 US cent) bid from Wednesday.

March/May and May/July deliveries were offered at around 60-70 points from 60-70 bid on Wednesday, as buyers stayed on the sidelines, traders said.

On Wednesday, most Tokyo raw futures closed down by their limit maximum of 800 yen, probably as sagging demand for imports was reinforced by the inflow of domestic sugar which is expected to start soon, physical traders said.

The market recovered on Thursday, and on Friday, benchmark January on Tokyo's raw futures market closed at 23,650 yen, down 200 yen from the previous day.

Traders said they did not foresee large fluctuations in Thai premiums in the following days, as the uncertainty over Thai farmers' protest over government prices and bullish quota B holders would continue to act as support.

Unhappy sugar planters in Thailand blocked millers' warehouses on Wednesday after the government postponed a decision on initial 1998/99 (November-May) prices and set final 1997/98 prices well below expectations.

"It's difficult to remain short since we don't know what will happen in Thailand," the first trader said.

On a possible commodity swap between Thailand and Iran, Japanese traders said such a move would be possible, but added that it was difficult to estimate the amount of sugar they would decide to trade.

Iran tends to buy about 30,000 tonnes of inexpensive sugar every month from various origins, they said.

On Wednesday, Thai Industry Minister Suwat Liptapallop said Thailand and Iran were discussing a possible swap of Thai rice and sugar for Iranian crude oil.