Thailand, the world's second-biggest sugar exporter, said on Monday it expected to ship a record 5.3 million tonnes in 2009, up from 5.0 million tonnes last year, despite a drop in output due to unfavourable weather.

Thailand was on track to produce 7.2 million tonnes of sugar in the 2008/09 crop year, down from a previous forecast of 7.5 million tonnes, Prasert Tapaneeyangkul, secretary general of the Office of Cane and Sugar Board, told Reuters.

"Demand remains strong as we can see that several agencies have forecast a world sugar deficit this year," he said in an interview.

"I'm sure that traders will buy from Thailand which has ample supply to sell," he said, adding that improved quality had offset a fall in cane production this crop year.

The board expected 66.5 million tonnes of cane from the 2008/09 crushing season, which is due to end this week, down from a previous forecast of 72 million tonnes.

Thailand, which produced 7.5 million tonnes of sugar in the 2007/08 crop year, allocates 1.9-2.0 million tonnes of sugar for domestic consumption each year. The rest is for export.

In March, the Lausanne-based consultancy Kingsman SA forecast a smaller global sugar deficit of 2.5 million tonnes in 2009/10, compared with 11.56 million tonnes in 2008/09.

Prasert said Thai sugar prices should benefit from rising demand from India, the world's top consumer of the sweetener.

New Delhi allowed duty free white sugar imports this month in a bid to ease domestic prices.

"There is room for Thai premiums to rise further as demand is expected to remain strong this year and also next year," he said.

Last week, premiums for Thai white sugar jumped to a two-month high at $20 over London futures on Monday, up from $15 over London futures in early April as exporters hoped to clinch deals with India. The premium on Thai raw sugar was quoted at 140 points over New York futures on Monday, traders said.

However, there were some indications that Indian demand may be easing. After importing 1 million tonnes of raw sugar, Indian buyers have reduced purchases in the past two weeks as refiners fear the government could force them to sell 10 percent of their output at below cost, trade officials in New Delhi said.