SOFTS-Cocoa jumps over 5 pct in short covering rally

* Rains aid Ivory Coast cocoa crop

* Brazil expected to have front-loaded coffee exports (Adds details, quotes, updates prices)

By Sarah McFarlane

LONDON, Jan 24 (Reuters) - Cocoa futures rallied by more than 5 percent on Tuesday as dealers noted short covering activity, while ICE sugar hovered around a two-month high, supported by concerns about delays to Brazil's harvest.

Coffee consolidated after falling more than 3 percent on Monday as investors liquidated long positions.

March cocoa futures on ICE traded up $124 or 5.5 percent at $2,393 a tonne at 1544 GMT, after hitting a two-month high of $2,400 earlier in the session.

"There are major shorts around and when these funds decide to short cover who is going to be selling to them?," said a London-based dealer.

"People are sitting short and caught at the moment."

Liffe March cocoa futures were up 81 pounds or 5.5 percent at 1,564 pounds a tonne.

Demand for cocoa, the key ingredient in chocolate, is widely expected to surpass supply in the current crop year, helping prices to recover some of the ground lost last year, a Reuters poll of 20 analysts and dealers showed.

The poll forecast a global 2011/12 cocoa deficit of 100,000 tonnes.

Dealers watched the development of Ivory Coast's mid crop, where light, patchy rains fell in the eastern and southern cocoa growing regions last week, raising hopes for output, while drought and wind continued in most other areas of the West African country.

"The risk of damage has receded, because the weather has improved. There's been much needed rains over the past few days, and I'm not aware of anyone who's seen a real deterioration in mid crop prospects," said a European commodities fund analyst.

Ivory Coast continued to push ahead with its cocoa sector reforms, appointing former agriculture minister Lambert Kouassi Konan as chairman of the new cocoa marketing and stabilisation body, the CCC.

WEATHER WATCH

Raw sugar futures inched higher as dealers eyed weather in top producer Brazil for signals of when harvest might begin.

"Weather-related concerns about the new crop in South Brazil and a possible slow start to the crush have supported the market, but I think it's far too early for those concerns," said James Kirkup, head of sugar brokerage at ABN AMRO Markets.

March raw sugar futures on ICE rose 0.08 cent or 0.3 percent to 25.04 cents a lb, just below the two-month peak of 25.15 cents a lb hit earlier in the session.

The March contract traded at a 0.66 cent per lb premium to May SBH2-K2, having widened from 0.51 cents a week ago, as dealers focused on the availability of sugar.

"Downgrades to Mexico's production have meant that some of the sugar that might have been available for delivery for March may no longer be available," said Kirkup.

London March white sugar futures were up $2.90 or 0.5 percent at $654.10 per tonne.

Arabica coffee prices edged higher as dealers said a slowdown in coffee exports from top producer Brazil this month could indicate the crop had been sold aggressively early in the season, after the government announced in September an end to a tax rebate for coffee exporters from January. [ID: nS1E78T14L]

Benchmark March arabica coffee futures on ICE were up 0.25 cent or 0.1 percent to $2.1970 per lb.

"There was always a suggestion that because of the tax rebate issue the exports were front-loaded. If they weren't, people's crop estimates were too low. However, January's weak exports suggest that maybe it was front-loaded. That may cause supply issues for the next six months," said the fund analyst.

"If you're not going to get good arabica supply out of Brazil for the next six months, (and) Colombia is looking disastrous, and while Central America looks OK, it raises questions about the supply side for arabica."

March robusta coffee on Liffe was up $4 at $1,893 a tonne. The contract hit $1,712 on Jan. 9, the lowest level for the benchmark second month since October 2010. (Additional reporting by David Brough; editing by James Jukwey)