Sugar rallies, arabicas below 13-1/2-year peak

MARKETS/SOFTS (UPDATE 1)

* Trade focused on Ivorian cocoa export outlook

* ICE raw sugar could soon test 32.0 cts/lb - trade

* Arabicas supported by tight supplies of high-quality beans

(Adds trade comment, byline, updates prices)

By Sarah McFarlane and David Brough

LONDON, Feb 16 (Reuters) - ICE raw sugar futures rallied on Wednesday, trading below a 30-year high hit earlier this month, as the market remained volatile after weeks of choppy trading.

ICE arabica coffee were steady, below Tuesday's 13-1/2-year peak, buoyed by tight supplies of beans, while cocoa remained near Monday's one-year high, as political tensions in Ivory Coast kept dealers on edge about future supplies.

ICE March raw sugar was up 0.78 cent or 2.5 percent at 31.60 cents a lb at 1218 GMT, below the Feb. 2 30-year high of 36.08 cents a lb, while London May white sugar was up $12.30 or 1.7 percent at $737.60 per tonne.

The global sugar market has been supported by tight supplies due to adverse weather in key producers, and resilient demand.

"So far this morning we have bounced and it seems that we are looking to get above 32.00 cents," said Thomas Kujawa of broker Sucden Financial.

"The standout feature of the day seemed to be the spread structure on New York, as the March/May spread went to a convincing premium to the May/July."

Barclays Capital said in a market note on Wednesday, "We remain positive on sugar prices, expecting a (global) deficit in 2010/11 of 0.3 million tonnes."

New York sugar is expected to rebound sharply to 33.35 cents per lb, as a downtrend failed to develop on Tuesday, Reuters analyst Wang Tao said.

ICE arabica futures prices were little changed, hovering near Tuesday's 13-1/2-year high.

ICE May arabicas traded down 0.75 cent or 0.3 percent at $2.6035 per lb at 1219 GMT. Liffe May robusta coffee traded down $8 or 0.35 percent at $2,287 per tonne in modest volume of 3,390 lots.

"There's an awful lot of money that's flooded into the market... a lot of these (agricultural) markets have been swept along with the inflationary bubble as funds pile in," a London-based broker said.

"If the funds ever pull the rug for any particular reason the gravy train will be finished for the origins, although the roasters would be pleased," the broker said.

While there is a shortage of high quality arabica beans, some dealers believe the market has become overvalued, as funds have added long positions.

"A lot of this rally is built on the funds, they exacerbate the situation and for the time being the line of least resistance is on the upside," the broker added.

Striking Colombian truckers blocked some roads in the Andean nation on Tuesday, forcing thousands to walk, and exporters said the effects of the 13-day walkout were worsening each day without an agreement.

ICE cocoa futures rose, creeping closer to Monday's one-year high of $3,444 a tonne, as the cocoa industry remained concerned about future supplies from Ivory Coast.

"The underlying strength in cocoa prices will remain as long as there's unrest in Ivory Coast," a London-based broker said. "The situation looks as if it will get worse before it gets better."

ICE May cocoa traded up $26 or 0.8 percent at $3,394 a tonne at 1222 GMT.

Liffe May cocoa was up 21 pounds or 1 percent to 2,212 pounds per tonne in thin turnover of 1,359 lots.

Two weeks of rain in Cameroon's main cocoa growing areas, which farmers are calling unprecedented for this time of year, have boosted hopes for a strong mid-crop harvest. (Reporting by Sarah McFarlane and David Brough; Editing by William Hardy)

(Source: http://www.forexyard.com/en/news/SOFTS-Sugar-rallies-arabicas-below-13-1/2-year-peak-2011-02-16T131334Z)