SOFTS-Liffe cocoa turns up, lifts premium to near 2-1/2-yr high
* Arabica prices seen rangebound-Barclays
* Sugar underpinned by talk of Brazil gasoline price rise
* Liffe cocoa front-month premium widens to 79 pounds
(New throughout, updates prices; adds analyst comment, second byline/dateline)
NEW YORK/LONDON, Dec 6 (Reuters) - Cocoa futures on Liffe turned firm on Thursday after hitting their 200-day moving average and pushing the spot contract's premium to the highest level in more than two years.
Arabica coffee futures climbed from a two-and-a-half-year low on light short-covering, while sugar eased but remained well within its recent range amid a lack of new fundamentals.
Cocoa futures trading on Liffe climbed on support from the weak pound against the U.S. dollar. Dealers also said the high failure rate of cocoa being graded on the exchange, where certified stocks are at historically low levels, was supporting prices.
"Most of what has failed recently has been fresh cocoa, and obviously if it had passed certified stocks would be higher," said a London-based dealer.
Liffe March cocoa futures gained 7 pounds, or 0.5 percent, to settle at 1,547 pounds a tonne after briefly falling below the contract's 200-day moving average at 1,537 pounds.
The premium on December cocoa over March <LCC-1=R> widened to 70 pounds from 48 pounds at Wednesday's close, ahead of December's expiry next week. This is the spot contract's biggest premium to the second position on a continuation chart since August 2010.
Cocoa futures on ICE were weak for most of the session on pressure from the weak sterling, but pared their losses during the settlement window, with March closing flat at $2,420 a tonne.
Analysts at Commerzbank see prices remaining steady, writing in a research note published on Thursday that most supporting news had already been factored in by the market.
"Given the still high price level by past standards, we therefore do not see much upside potential for prices unless unexpected and significant production losses occur ... For Q4 2013 we expect a cocoa price of $2,600 a tonne."
Coffee futures climbed on light short-covering after hitting a 2-1/2-year low on Wednesday, despite the firm U.S. dollar , which often pressures the commodity.
"We saw some good followthrough buying after we made those lows, and we had some short-covering come in, moving the market higher," said Sterling Smith, futures specialist for Citigroup in Chicago. "I do see overhead resistance coming into the market around today's highs."
March arabica coffee futures were up 1.35 cents, or 0.9 percent, at $1.5045 per lb by 12:34 p.m. EST (1734 GMT), consolidating above the two-and-a-half-year low of $1.4635 touched in the previous session.
"We've seen prices start to consolidate at lower levels and we think that in the very short term there isn't any real compelling fundamentals to support prices. So, if anything, we expect this recent sideways trend to continue," Sudakshina Unnikrishnan, an analyst at Barclays, told Reuters.
"We think that prices have bottomed out for now, but that does not preclude the fact that we could see some modest short-covering."
However, she said any rallies would likely be capped by producer selling from Brazil, which still has coffee to sell following a bumper 2012 crop in its biennial harvest cycle.
The market is expected to stay at current levels until more information on the progress of the next Brazilian crop, one of the producer's two-yearly lower harvests, becomes available.
"Going through to the end of this year and early next year, we don't really expect any meaningful moves in prices. The next move will be looking into the next Brazilian crop, where crop prospects are not looking that good," Unnikrishnan said.
March robusta coffee futures were up $27, or 1.4 percent, at $1,913 a tonne.
SUGAR MARKET MAY SOFTEN
March raw sugar futures on ICE were down 0.12 cent, or 0.6 percent, to 19.45 cents a lb, remaining stuck in the middle of their recent range of 19 to 20 cents.
"Given our expectations of a third consecutive year of a global sugar surplus, the market is expected to remain under pressure. To resolve the surplus, the market structure will need to soften to pay for restocking," said Jack Hannon, an analyst at ED&F Man.
Downside remains limited by expectations that Brazil will increase its ethanol-gasoline blend at the pump to 25 percent ethanol, from 20 percent, next June.
"The speculated rise in the price of gasoline in Brazil is a potential bullish story for sugar, although low economic growth and high inflation makes any decision to increase prices politically difficult," said Hannon.
March white sugar on Liffe eased $1.90, or 0.4 percent, to $518.60 per tonne.
($1 = 0.6214 British pounds)
(Additional reporting by Sarah McFarlane in London; editing by James Jukwey and John Wallace)