* Forecasts for 2016/17 Thai crop revised down
* High Thai physical premiums likely to continue - trade
By David Brough
LONDON, May 11 (Reuters) - High prices paid by a global trade house at a Thai sugar auction reflect expectations of tight supplies and buoyant premiums in the world's second biggest exporter due to drought, European traders said on Wednesday.
State-run Thai Cane and Sugar Corp said on Tuesday it had sold 72,000 tonnes of raw sugar to Bunge BG.N at a premium of 137 points over global futures following a tender.
The agency sold 36,000 tonnes of the widely traded high polarization, or hipol, sugar for shipment from March 1 to May 15, 2017, and another 36,000 tonnes of hipol sugar for shipment from May 1 to July 15, 2017.
"Considering that the last bid heard for March 1-May 15 2017 was March 2017 plus 60 points, the awards seem quite high," one European trade source said.
"One of the main reasons for the high price is the disappointing 2015/16 Thai crop which has caused downward revisions to forecasts for 2016/17," the source added, referring to the impact of drought.
A senior analyst with a Western trading firm said the auction had set a high premium due to expectations of moderate Thai output.
"It was consistent with the view that the successful bidder had a pessimistic outlook for the coming season," the analyst said.
Another analyst referred to a tight sugar supply outlook across Asia into next season.
"If we are in a deficit situation in 16/17 (and I think that is highly probable) then Asia should be tight," the analyst said. "If white sugar is in reasonable demand, and the Thai crop is not much better than this year, I suspect there will continue to be relatively strong demand into 2017 for Thai raws."
Trade sources referred to expectations of a moderate Thai cane crush of 85-95 million tonnes next season, compared with 94 million this season.
The first analyst cited expectations for continuing strong physical premiums if dry weather persists in Thailand until the next harvest.
Traders referred to market talk that Australia could negotiate a free trade agreement (FTA) with Indonesia, that would boost supplies of Australian raw sugar to Indonesia, the world's number 2 buyer, dampening Thai physical premiums.
Thai raw sugar exports benefit from a reduced duty into Indonesia under ASEAN rules.
"The likelihood of an Australian-Indonesian FTA being done any time soon is remote," the first analyst said.