REFILE-SOFTS-ICE coffee turns lower, supplies seen ample

(Refiles to include dropped words in paragraph 10)

* Coffee turns lower, fundamentals seen mildly bearish

* Rains in Brazil, India export outlook keep lid on sugar

* Cocoa little changed as demand concerns weigh

By Nigel Hunt

LONDON, Jan 17 (Reuters) - Arabica coffee futures on ICE turned lower on Tuesday as a short covering rally quickly ran out of steam with supplies ample, while cocoa and raw sugar remained little changed.

ICE futures markets had been closed on Monday for a public holiday in the United States.

Dealers said coffee had rallied early on short covering by funds, driven partly by more constructive economic news and the weaker dollar.

"I think the funds are short in London, short in New York. You get these little rallies fuelled by these positions but optimism for higher prices is very low at the moment," one London coffee dealer said.

Dealers said fundamentals remained mildly bearish.

The International Coffee Organization on Monday raised its estimate of the global coffee crop in 2011/12 to 132.4 million 60 kg bags as Ethiopia overtook Colombia as the world's number three producer.

March arabica coffee futures on ICE fell 3.25 cents or 1.4 percent to $2.22 per lb by 1543 GMT while March robusta coffee on Liffe dipped $10 to $1,844 a tonne.

Raw sugar futures on ICE fell back to little-changed levels after the market had earlier risen to the highest level in nearly two weeks, buoyed by more constructive economic data.

March raw sugar futures on ICE stood 0.03 cent of 0.1 percent higher at 23.87 cents a lb after climbing to a peak of 24.09 cents, the highest level for the front month since Jan. 5.

"The fundamental backdrop is not as supportive as the macro (backdrop)," he added, noting rains in Brazil had improved the crop outlook while there was also the prospect of further exports from India, the world's number two producer," James Kirkup, head of sugar brokerage at ABN AMRO Markets (UK) Ltd, said.

INDIA MAY LIFT CONTROLS

"India looks to be making noises about exports and perhaps the end of the current price regime. Those aspects (developments in India and Brazil) are not bullish," Kirkup said.

India's food minister will soon discuss with the finance minister lifting controls on sugar, K.V. Thomas said on Tuesday, a day after industry officials lobbied the government to free the sector.

Cocoa futures on ICE were little changed as concerns about the demand outlook after last week's lower-than-expected 1.8 percent rise in the European cocoa grind in the fourth quarter of 2011 weighed on the market.

Demand for chocolate is improving by the month, even in the more difficult markets of southern Europe, the chief executive of chocolate-maker Barry Callebaut said in an interview on Tuesday.

"From a strategic point of view, I think the price will have to go up again because demand will outpace supply but at the moment our experts believe the price will move sideways," Barry Callebaut Chief Executive Juergen Steinemann told Reuters.

The market remained underpinned by fears that dry winds in Ivory Coast may curtail production.

Strong harmattan winds and dry weather in most of Ivory Coast's cocoa growing regions, which have hurt development of the main crop, could also harm its mid crop, farmers in the top producing country said on Monday.

March cocoa on ICE eased $8 or 0.35 percent to $2,261 a tonne while May cocoa on Liffe rose 9 pounds or 0.6 percent to 1,503 pounds. (Additional reporting by David Brough in London and Silke Koltrowitz in Zurich; Editing by Anthony Barker and Alison Birrane)