Sugar crawls higher on cash buying, India

MARKETS-SOFTS (UPDATE 3)

* Sugar's retreat boosts physical demand

* Dealers await news on Ivory Coast cocoa bean exports

(Recasts, updated prices; adds second byline, dateline, previously LONDON)

By Rene Pastor and Anna Yukhananov

NEW YORK/LONDON, Feb 7 (Reuters) - Raw sugar futures sprang higher on Monday, buoyed by lower output forecasts in India and steady consumer buying as the market sought to establish the groundwork for another challenge of 30-year highs.

Arabica coffee futures also rose as high-quality beans remained in short supply, while cocoa dipped slightly on technical factors, falling further from one-year peaks.

Business in all three markets were running slightly above their respective 30-day norms, Thomson Reuters preliminary data showed.

The key March raw sugar contract on ICE Futures U.S. went up 0.04 cent to settle at 32.68 cents per lb. London's March white sugar futures added $5.10 to end at $799.50 per tonne.

"Sugar is recovering from its momentary swoon," said Sterling Smith, senior analyst for brokerage Country Hedging Inc. in St. Paul, Minnesota.

"There's probably a bit of buy-back after that major drop at the end of last week," said Keith Flury, analyst at Rabobank in London. "And as long as the supply situation is pretty bullish, (sugar) is still able to maintain that upward trajectory."

Markets were also boosted after an Indian state cut its outlook for the country's 2010/11 sugar crop to 24 million tonnes, below government estimates.

India, the world's second-largest producer after Brazil, will only approve 500,000 tonnes of sugar exports if there is enough sugar for domestic consumption. India is the world's biggest consumer of the sweetener.

COFFEE UP, BUT COCOA STUMBLES

Coffee futures were higher as better quality beans continued to be hard to find. Smith said the arabica market is still showing "plenty of upside."

Arabica coffee also saw some position rolling out of March ahead of first notice day Feb. 17, into May. The market moved up as tight supplies propped up prices, but hesitated below last week's 13-1/2-year high at $2.536, basis March.

New York's March arabica coffee futures increased 0.45 cent to close at $2.4975 per lb. London's May robusta coffee contract gained $6 to finish at $2,243 per tonne.

Cocoa futures remained transfixed by the political deadlock in top producer Ivory Coast.

Markets were focused on whether the African Union (AU) could find a diplomatic resolution to Ivory Coast's political turmoil, and whether the ban would be extended, dealers said.

The May cocoa contract in New York declined $25 to finish at $3,239 per tonne. London's May cocoa contract dropped 25 pounds to close at 2,100 pounds per tonne.

"In the cocoa market, you're just seeing a little bit of selling because we haven't had any kind of new news. I think this is just lightening up on these longs," said Brian Booth, senior market strategist at MF Global Ltd's Lind-Waldock division in Chicago. (Additional reporting by Marcy Nicholson in New York; Editing by Marguerita Choy)

(Source: http://www.forexyard.com/en/news/SOFTS-Sugar-crawls-higher-on-cash-buying-India-2011-02-07T192901Z)