SOFTS-ICE sugar cuts loss after Brazil's Unica reports output drop
* Unica: Brazil's center-south late May sugar output falls 11 pct
* Brazil's mills allocate 41.8 pct cane to sugar, 58.2 pct to ethanol
* Favorable WAfrica crop arrivals, weather weigh on cocoa
* Robusta coffee at lowest in 18 mos for benchmark contract (Rewrites; Adds Unica data, comment, updates with closing prices)
NEW YORK, June 11 (Reuters) - ICE raw sugar futures pared some early losses on Tuesday after a much-awaited report from Brazil's cane industry group showed a sharp drop in sugar crushings and that mills favored ethanol production over cane sugar during the second half of May.
But sugar prices failed to rally when Unica also said it expected the fast pace of cane crushings in the world's largest producer to resume in June with the return of dry weather.
"The weather has turned drier again and if that continues to be the case, we should see a resumption of the strong pace we've been seeing all year long," said Jack Scoville, vice president of The Price Futures Group in Chicago.
"This (drop in sugar output) would appear to be a temporary hiccup and the market appears to be taking it that way," he added, noting that sugar prices had returned to pre-report lows.
Elsewhere, arabica coffee dropped under pressure from surplus supply, and ICE cocoa was down against a backdrop of favorable crop weather and crop arrivals in West Africa.
July raw sugar futures ended on ICE down 0.09 cent at 16.29 cents a lb, having earlier fallen to 16.18 cents, the lowest for the front month since July 2010 in anticipation of higher sugar crushings in Brazil.
Late May rains and a shift by Brazilian cane mills to increased ethanol production dragged on sugar output in the main center-south cane region, the industry association said in its latest report.
It said sugar output in the cane region fell 11 percent in the second half of May, and that mills allocated 41.8 percent of their cane to sugar and 58.2 percent to ethanol in late May.
Some traders said beforehand that they wanted to see sugar at well below 42 percent to prove millers were favoring ethanol.
"Everyone's been saying ethanol prices are better. So it could continue to be a trend that we see more ethanol produced at least until the ethanol price breaks," Scoville said.
August white sugar on Liffe closed down $2.80, or 0.58 percent, at $476.40 a tonne in robust volume.
July arabica coffee futures on ICE lost 1.05 cent, or 0.82 percent, to close at $1.2770 per lb.
The contract fell to $1.2505 per lb on May 31, the lowest level for the front month since September 2009, driven down by plentiful supplies.
Despite Monday's gains in coffee, dealers said arabica prices remained pressured by expectations of a huge off-year crop in top grower Brazil.
September robusta coffee futures on Liffe fell $35, or 1.92 percent, to settle at $1,822 a tonne, having earlier fallen to a contract low at $1,820 and the lowest level since January 2012 for a second-month contract.
Robusta weakened under the weight of plentiful supplies from top producer Vietnam and lower prices in the arabicas market.
Cocoa on ICE edged lower on signs of healthy supply, with September finishing down $4 at $2,364 a tonne. Late volume came to 20,613 lots.
Cocoa arrivals at ports in top grower Ivory Coast reached around 1,260,000 tonnes by June 9, since the start of the season in October, exporters estimated on Monday, up from 1,190,000 tonnes in the same period of the previous season.
"Solid cocoa arrivals and good weather have reinforced the idea that the supply side is not problematic," said Eric Sivry, head of agri options brokerage at Marex Spectron.
Liffe September cocoa dipped 5 pounds, or 0.32 percent, to end at 1,554 pounds a tonne in volume of 7,996 lots. (Reporting by David Brough in London and Carole Vaporean in New York; editing by William Hardy, Marguerita Choy and Maureen Bavdek)
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