* Cocoa strengthens on trade, industry buying * Expected Thai, Indian exports weigh on sugar (Adds trade comment, updates prices) By Naomi O'Leary and Sarah McFarlane LONDON, May 18 (Reuters) - Robusta coffee hit a fresh eight-month high on Friday, underpinned by strong demand prospects after a week in which the worsening euro zone debt crisis and a stronger dollar weighed on the commodity markets. Cocoa prices also rose, while sugar prices drifted lower on expectations top producers India and Thailand could export sugar into an already well-supplied market. World shares slid and German borrowing costs hit record lows on Friday as a deepening Spanish banking crisis, uncertainty about Greece's future in the euro zone and lacklustre U.S. data bolstered safe-haven assets. July robusta futures set a new an eight-month high, as dealers anticipated tight supplies ahead, due to growing demand for the cheaper bean in emerging markets. "Fundamentally it's being driven by supply tightness," said CoffeeNetwork analyst Andrea Thompson. "Even though you're looking at possibly another bumper crop in Vietnam, the world demand growth has been so strong that the supply-demand balance is going to be tight." London July robusta coffee fell back from the eight-month high of $2,235 per tonne, to trade up $38 or 1.7 percent at $2,225 per tonne at 1435 GMT. Arabicas remained rangebound, weighed by the prospect of a large Brazilian harvest. Thompson noted that the outlook for arabica prices is bearish as a surplus is expected. The poor outlook for key high quality coffee producer Colombia's crop could be offering some support to prices, although some roaster demand had switched to other origins after several disappointing Colombian crops, a London-based broker said. "Roasters seem to have been able to adjust blends in recent years to take less Colombian." Colombia's mid-crop coffee harvest may be so weak this year that total 2012 output could be dragged to a four-decade low, hobbling the Andean nation's bid to recoup historic production levels within four years, growers said. ICE July was up 0.65 cent or 0.4 percent to $1.8075 per lb, above a 20-month low, basis second month, of $1.7220 per lb touched on May 9. COCOA CLIMBS Cocoa futures were higher after volatile trading earlier this week, remaining vulnerable to weakness in outside markets, as investors nervously monitored developments in Europe. Dealers said some trade and industry buying helped support prices, but that euro zone jitters were expected to cap gains. "Everybody's looking at Greece," said VTB Capital analyst Andrey Kryuchenkov. "There's uncertainty about what's going to happen in the euro." Kryuchenkov said he saw key support levels at $2,050 a tonne in July ICE futures, and $2,200 a tonne in the September contract. ICE July futures were up $53 or 2.4 percent at $2,277 a tonne. "It seems to be a little bit more action to the buy side, we seem to be finding some bids," said a London-based broker. "The macro news is going to keep this market down." July cocoa futures on Liffe were up 24 pounds or 1.6 percent at 1,552 pounds a tonne. Sugar futures drifted lower, as expectations of a large global surplus and the gloomy macroeconomic outlook weighed on prices. A London-based broker said the outlook was bearish for sugar as top producers Thailand and India are poised to sell into any rallies and are expected to up their exports. ICE July raw sugar was down 0.17 cent or 0.81 percent at 20.69 cents a lb. The contract dipped to 20.07 cents on Monday, a 20-month low for the front month. "In the short term, the market may be oversold, and is trying to find a bottom," said Jonathan Kingsman, CEO of Lausanne-based sugar and ethanol consultancy Kingsman SA. "A strengthening dollar is going to lead to pressure on commodities prices. It will therefore be difficult for sugar to make much headway into these macroeconomic winds."

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