MARKETS/SOFTS (UPDATE 2)
* Sugar supply outlook tightening after Australia cyclone
* Cocoa market focused on Ivorian export ban
* Arabicas buoyed by tight supplies of high-quality beans
(Adds comment, updates prices)
By Sarah McFarlane and Marcy Nicholson
LONDON/NEW YORK, Feb 9 (Reuters) - Arabica coffee rallied to a 13-1/2-year high on Wednesday, buoyed by tight supplies of high-quality beans, while sugar fell as the market tried to re-connect with cash buyers, and cocoa firmed in thin volumes.
Arabica coffee hit a 13-1/2 year peak on heavy spread dealing, fund buying and a lack of origin selling, supported by a shortage of high-quality beans.
"There's very little selling and funds are buying," said Rodrigo Costa, vice-president of institutional sales for Newedge USA in New York.
ICE March arabicas traded up 5.55 cent or 2.2 percent at $2.5315 per lb at 1619 GMT, having earlier touched $2.5395 per lb, the highest level for the spot contract since June 1997.
Liffe May robusta coffee, infected by the surge in arabicas, was up $20 or 0.9 percent at $2,245 per tonne.
Sugar futures fell as the market responded to a lack of physical offtake.
"This morning's bounce in sugar has faded, though we held a previous chart point of 30.40 cents a lb (from February 1, 2010)," said James Kirkup, head of sugar brokerage at ABN AMRO (Markets) UK Ltd.
"The market has been challenged by a lack of physical demand."
Dealers said Tuesday's decline saw raw sugar break the uptrend it had followed since November.
"If the broken uptrend continues to limit sugar's gains then the technical pressure could see a decline in May prices towards 28 cents a lb," said Brenda Sullivan, technical analyst at Sucden.
"Whereas climbing above the trend line which is around 30 cents a lb would suggest that sugar may be in a range with some intermediate resistance near 31.6 cents a lb," Sullivan said, adding today's high seems to be re-testing the uptrend.
ICE March raw sugar was down 0.40 cent or 1.2 percent to 30.76 cents per lb at 1615 GMT, remaining below the 30-year peak of 36.08 cents touched last Wednesday.
London March white sugar fell $12.70 or 1.7 percent at $756.00 per tonne, below last week's record high of $857.00 per tonne.
Sugar market fundamentals remained bullish with a tightening supply outlook following last week's cyclone in Australia.
Up to a quarter of the sugar cane crop in Australia's Queensland state may be have been lost after Cyclone Yasi struck the region, the chairman of industry group Canegrowers told Reuters on Wednesday after early assessments of the damage.
Cocoa firmed, consolidating after sharp losses last week, as concerns over the political standoff in top producer Ivory Coast supported the market.
"Nothing seems to be resolved in Ivory Coast and until it is cocoa is going to remain steady," a London-based broker said, adding any dips are likely to attract buying which will limit the downside.
"Trade are more favourable to potential on the upside," the broker added.
ICE benchmark May cocoa futures rose $36 or 1.1 percent to $3,296 per tonne, while London May cocoa edged up 15 pounds or 0.7 percent to 2,138 pounds a tonne. (Editing by William Hardy)
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