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SOFTS-Raw sugar bounces off 3-week low, arabica coffee up

Sarah McFarlane and Clare Hutchison
Thursday, 25 Oct 2012 | 11:21 AM ET

* Large number of Brazil mills still open for crushing

* ABN Amro sees coffee prices near current level for Q4

(Adds details, quotes, updates prices)

LONDON, Oct 25 (Reuters) - ICE raw sugar futures bounced off a three-week low on Thursday, although the upside was capped by fast progress in Brazil's harvest and surplus supplies, while coffee and cocoa also edged higher.

March sugar futures were up 0.12 cent or 0.7 percent at 19.81 cents a lb at 1102 GMT, rebounding from Wednesday's three-week low of 19.45 cents.

Dealers noted that the large number of mills still open for crushing in Brazil should aid sugar production for the tail end of the crop, assuming the weather remains favourable.

Brazil's production accelerated in October, but rains that have already hit the main centre-south growing region are set to make work difficult for mills in the coming weeks, cane industry association Unica said on Wednesday.

December white sugar on Liffe was up $2.70 or 0.5 percent at $548.40 per tonne.

Dealers said that surplus sugar supplies and lower prices could trigger the channelling of more cane into ethanol production.

``An ample supply of sugar on the market, and the resulting drop in prices, makes ethanol production more attractive,'' Commerzbank said in a daily commodities note.

``The price of sugar will therefore probably not remain ... below 20 cents per pound for long. There is no sign yet, though, of demand picking up much in response to lower prices.''

ARABICA NUDGES UP

Arabica coffee futures on ICE were higher, with December up 0.75 cent or 0.5 percent at $1.6055 per lb. The contract hit $1.5715 last week, the lowest level for the front month since Sept. 6.

A global 2012/13 surplus of arabica beans is expected to weigh on prices.

``Production and consumption forecasts point to a production surplus; global stocks will be rebuilt,'' ABN Amro said in a commodities note, forecasting that coffee prices would remain near current levels for the fourth quarter.

Strong demand for robusta coffee from emerging markets continued to be the main driver for overall coffee demand growth, dealers and analysts said.

``Coffee consumption in emerging markets is benefiting from a growing private consumption, rising levels of urbanisation and also a developing coffee culture,'' ABN Amro said.

``In traditional markets, coffee consumption will decrease slightly due to market saturation and poor macroeconomic growth prospects.''

January robusta coffee futures were unchanged at $2,057 a tonne.

Dealers said Vietnam had harvested around 10 to 15 percent of its crop and hedging pressure was expected to weigh on the Liffe market in the coming weeks.

ICE December cocoa edged up $12 or 0.5 percent to $2,411 per tonne, digesting losses after tumbling more than 4 percent the previous session, when sell stops were triggered by technical selling.

``It's very quiet considering the mayhem and volatility we had yesterday,'' a London-based broker said.

``I'm not surprised the market is now taking a little pause to consolidate ... trying to find the next daily direction.''

Liffe March cocoa futures were off 1 pound at 1,558 pounds ($2,500) per tonne.

``I suspect the market will generally hold its ground at this level,'' the broker added.

(Editing by Jane Baird)