SOFTS-ICE coffee falls sharply as key support breached

* Favourable crop outlook in Brazil weighs on coffee

* Global sugar market also remains over supplied

* Dry weather in Vietnam coffee regions monitored

(Adds details, quotes, updates prices)

LONDON, March 5 (Reuters) - Arabica coffee futures on ICE fell sharply on Tuesday with a decline driven by oversupply gathering momentum as key support levels were breached.

Cocoa prices on ICE turned higher, however, after earlier hitting an 11-month low while raw sugar futures also advanced.

ICE May arabica coffee were down 5.30 cents or 3.6 percent to $1.4135 per lb as of 1540 GMT, heading towards a 32-month low of $1.3760 hit on Feb. 19.

Dealers said a wave of automatic sell orders had been triggered when the market breached support at $1.45 and then $1.4250.

The anticipation of another large crop from Brazil in the coming months was also keeping the market on the defensive.

"Brazil is set to achieve a coffee harvest that is expected to be record-high for a low-yield year. This is also likely to continue to weigh on prices in the medium term," Commerzbank said in a commodities note.

Brazil's arabica coffee crop follows a biennial cycle but the gap between on and off year crops has been narrowing.

May robusta coffee futures on Liffe fell $33 or 1.6 percent to $2,089 a tonne with losses limited by concerns about dry weather in top grower Vietnam.

"Weather forecasts do not suggest any improvement in the situation until April," said Commerzbank.

"That said, it remains to be seen whether the 20-25 percent collapse in the harvest feared by growers will actually materialise."

BALANCED COCOA MARKET

Cocoa futures on Liffe were slightly higher after rebounding off an 11-month low hit in early trading.

"The cocoa market has been suffering from weak demand in Europe and a recovery of the supply situation, but the market supply and demand picture right now looks fairly balanced," said Tobias Merath, global head of commodity research at Credit Suisse.

"That would indicate this market is closer to a bottom. At current levels we would argue cocoa is trading a bit below fair value."

May cocoa on Liffe rose 3 pounds or 0.2 percent to 1,391 pounds a tonne, having earlier touched an 11-month low of 1,384 pounds, as improving weather conditions in West Africa aided the development of the mid crop.

A second straight week of abundant showers and sunshine across Ivory Coast's principal cocoa regions is improving growing conditions ahead of the April-to-September mid-crop harvest, farmers and analysts said on Monday.

Last week the International Cocoa Organization forecast a small global cocoa deficit of 45,000 tonnes for the 2012/13 season.

May cocoa futures on ICE were up $10 or 0.5 percent at $2,067 per tonne, after dipping to $2,053 per tonne on Monday, the lowest level since June 2012.

Raw sugar futures on ICE were also higher as expectations that Brazil will reduce or remove taxes on fuel ethanol helped to support prices.

In a move intended to help Brazil's struggling cane industry, the government plans to exempt fuel ethanol from certain taxes that should be equivalent to between 2 percent and 3 percent of the current pump price, two government sources said on Monday.

"The sugar market is still over supplied, there's not a whole lot of reasons to see it a lot higher although there's a floor at one point where the conversion to ethanol kicks in," said Credit Suisse's Merath.

May raw sugar futures rose 0.18 cent, or 1.0 percent to 18.26 cents per lb. The front-month contract dipped to 17.61 cents a lb on Thursday, the lowest level since August 2010.

May white sugar on Liffe was up $1.70 or 0.3 percent to $517.30 a tonne.

(Additional reporting by Nigel Hunt; editing by Jason Neely)