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SOFTS-Sugar, cocoa fall as commodities retreat
* Ample sugar supplies cap upside price potential
* Robusta fell in line with commods complex despite demand
* Cocoa caught in broader commodity weakness (Adds arabica and sugar closing prices, paragraph 13)
By Marcy Nicholson and Sarah McFarlane
NEW YORK/LONDON, Sept 18 (Reuters) - Sugar, cocoa and robusta coffee fell along with the commodity complex on Tuesday as doubts over Spain's willingness to seek international aid refocused investors' attention on the euro zone debt crisis, hitting riskier assets including commodities.
Arabica coffee turned higher on short-covering after dropping more than 2 percent.
The Thomson Reuters-Jefferies CRB index, a benchmark for commodities, dipped roughly 0.8 percent to a one-week low as oil futures dropped, with investor focus shifting from the likely economic benefit of the U.S. Federal Reserve's third round of bond buying, known as quantitative easing (QE3), to concerns about sputtering global economic growth.
"I think what we're seeing is that the initial support that some of the softs markets got following the announcement of QE3 has petered out at this point," said Sudakshina Unnikrishnan, commodities analyst at Barclays Capital.
"The broad-based weakness is primarily on a slightly more cautious attitude on risk."
Raw sugar futures on ICE dropped around 3 percent in heavy volume, under pressure from the weak commodity markets and bearish fundamentals with expected global supply surpluses in both 2011/12 and 2012/13.
ICE October raw sugar futures fell 0.59 cent, or 3 percent, to close at 19.44 cents per lb, the lowest one-day tumble since Aug. 21. The contract traded above a two-year low of 18.81 cents touched on Sept. 6. Total volume exceeded 140,000 lots, more than 35 percent above the 30-day average.
"Whenever I see any price weakness, I'm not surprised as the surplus numbers for the coming quarter justify a reduction in prices," said a London-based broker.
Supply worries in top producers Brazil and India have eased in recent weeks as weather conditions have improved crop prospects in both countries.
"At one point in time, people weren't sure what was happening in India because the monsoon was looking terrible, but there was quite a bit of recovery in the rains in the last couple of weeks in August and in September as well. I don't think there's as much concern now over supply," the broker added.
December white sugar on Liffe fell $12.40, or 2.2 percent, to close at $563.30 per tonne.
COCOA EXTENDS DROP
Cocoa futures fell for the second straight day, caught up in the wider commodities selloff, with the focus remaining on top grower Ivory Coast's reforms as the market awaited the publication of the fixed farmer price for the season starting Oct. 1.
There are fears that an unevenly managed reform, which has overhauled the Ivorian cocoa sector and includes a new regulatory body, will cause chaos in its exports as well as increased smuggling of the beans out of the country.
Improved crop weather in Ivory Coast also weighed on the market, dealers said.
"The market had an extended rally and then it just got a little bit overdone on the upside. Now the market is finding some long liquidation rolling in," said one U.S. dealer, referring to the 10-month high reached on Sept. 6.
"The market really just lost its momentum on the upside. Yesterday's macro meltdown triggered today's secondary fall."
ICE December cocoa fell $52, or 2 percent, to settle at $2,532 per tonne, its lowest close since Aug. 27.
"Cocoa fundamentals are still fairly firm (supportive) due to the supply side concerns," said Barclays' Unnikrishnan.
"The biggest factor has been concerns on the quality of parts of the West African crop," said Unnikrishnan.
Liffe December cocoa ended down 30 pounds, or 1.8 percent, at 1,633 pounds per tonne.
Robusta coffee closed down 1.9 percent, weighed down by the weak market sentiment, though dealers said firm demand should underpin prices in the London market.
November robusta coffee futures fell $40 to end at $2,024 a tonne.
Arabica coffee futures on ICE, however, bucked the trend lower across softs markets and turned higher after briefly falling below the 100-day moving average and climbing on investor short-covering, with dealers noting roaster buying.
"European roasters have started buying around these levels which has pushed the market slightly higher," said a second broker.
ICE December arabica coffee futures closed up 1.85 cents, or 1.1 percent, to close at $1.7750 per lb, after trading on both sides of the 100-day moving average at $1.7330. The contract hit a session low at $1.7165 per lb, choppy after last week's short-covering rally that pushed prices up around 10 percent last week. (Editing by William Hardy, Jim Marshall and Marguerita Choy)
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