SOFTS-Cocoa sinks but Liffe spot premium widens, arabica down
* Technicals suggest sugar may be set for short rallies
* Large Indonesian crop keeping lid on robusta gains
* Cocoa turning back on Monday's spike
(New throughout, updates prices; adds trade comment, second byline/dateline)
NEW YORK/LONDON, Dec 4 (Reuters) - Cocoa futures tumbled about 3 percent as investors sold to collect profits on Tuesday, while concern about a large amount of cocoa failing grading at Liffe lifted the spot contract's premium to a five-month high.
Arabica coffee futures on ICE Futures U.S. also sank, flirting with a 2-1/2-year low on chart-based sell signals.
Raw sugar futures on ICE crept higher after a surge in open interest in the previous session, approaching the upper end of a recent trading range following poor Indian harvest data.
The Thomson Reuters-Jefferies CRB index, a global benchmark for commodities, fell about 0.8 percent as weak manufacturing data and tense U.S. budget talks stoked worries about the world economy.
Cocoa futures gave back their previous week's gains, extending losses late in the session as investors were seen taking profits, dealers said.
Benchmark Liffe March cocoa futures dropped 43 pounds, or 2.7 percent, to settle at 1,548 pounds a tonne, the lowest settlement for the second position since Nov. 12 and not far above the 200-day moving average at 1,538 pounds.
Dealers eyed the widening premium <LCC-1=R> which closed at 46 pounds, the biggest since July 4, up from 12 pounds at Monday's close.
"When you get to this stage of any delivery the focus is how much graded cocoa is available," said Jonathan Parkman, joint head of Agriculture at Marex Financial.
A large quantity of non-tenderable stock of 16,168 tonnes, which has failed grading on the Liffe exchange, was eyed by dealers with valid cocoa stocks in NYSE Liffe's nominated warehouses falling to 49,170 tonnes as of Nov. 26.
Cocoa futures on ICE also sank, with March closing down $75, or 3 percent, at $2,444 a tonne, extending losses after falling below the 100-day moving average at $2,450.
Open interest in ICE cocoa futures climbed for the ninth straight day on Dec. 3 when it reached 202,902 lots, up nearly 4,000 lots from the previous session, ICE data showed.
Speculators are holding a large net long position on both ICE and Liffe cocoa markets.
Arabica coffee futures sank after triggering automatic sell orders below the previous session's low and as new longs threw in the towel as the market moved downward amid plentiful global supplies, dealers said.
March arabica coffee futures were down 2.80 cents, or 1.9 percent, at $1.4790 per lb by 12:44 p.m. EST (1744 GMT), having hit a session low at $1.4720. The contract fell to $1.4710 last week, the lowest level for the second month since June 2010.
"Trade is very technical at the moment. There's a feeling that we need fresh impetus on either the technical or the fundamental front," Andrea Thompson, analyst at Coffee Network, part of INTL FCStone, told Reuters.
March robusta coffee futures settled down $29, or 1.5 percent, at $1,881 a tonne.
"Reports of the Indonesian crop being larger again this year is keeping the upside intact in the robusta market," Thompson said.
Sugar futures were the quietest on the softs complex, as they dealt in an inside session at the upper end of the range from the previous session, when the market surged.
March raw sugar futures on ICE were up 0.01 cent, or 0.2 percent, at 19.79 cents a lb.
Open interest soared in the previous session, jumping 12,824 lots to 760,615 lots, highest since June 15, exchange data showed.
"I think it's possibly funds bottom picking. Trying to see if they can force the short funds out," said Michael McDougall, a vice-president for Newedge USA in New York.
The increase in the previous session's open interest is believed to have been caused by some short-covering as well as possibly a large amount of new buying by the trade and funds taking on new long positions while the origin and trade took on some new short positions, McDougall said.
"We have been below 20.10 cents for over a month and half now and the downside momentum has slowed with a growing open interest in the fund short position," Nick Penney, analyst at brokerage Sucden, said. "It seems the market may well give us a sell opportunity in the short term."
The sugar harvest in India is down compared to the same point last year, reducing the chance that the world's number one consumer will export any sugar this season.
"There is therefore unlikely to be any noticeable export potential in the current season - in each of the two previous years, over 3.5 million tons had been exported to the global market," Commerzbank said in a note.
However, the bank added it did not expect prices to be pushed up significantly given the ample world supply.
March white sugar on Liffe rose $3.00 or 0.6 percent to $526.40 per tonne.
($1 = 0.6213 British pound)
(Additional reporting by Sarah McFarlane in London; Editing by James Jukwey and Bob Burgdorfer)