SOFTS-ICE coffee surges on chart-based short covering

* Brazilian green coffee sales seen lower this year

* Kingsman widens forecast for 2012/13 sugar surplus

* Cocoa market keeps close watch on Liffe Dec premium

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LONDON, Dec 7 (Reuters) - Arabica coffee futures on ICE surged on Friday on a wave of chart-based short-covering after technical indicators showed the selling interest that pressured the market to a 2-1/2-year low hit earlier in the week has dried up.

Raw sugar futures on ICE fell as the prospect of a large global surplus in 2012/13 kept the market on the defensive, while cocoa eased as dealers eyed a widening front month premium in London.

March arabica coffee futures were up 3.65 cents or 2.4 percent at $1.5460 per lb at 1635 GMT, rebounding from a two-and-a-half-year low of $1.4635 touched Wednesday.

"That indicates you could very well have a bottom here in the coffee market," said Spencer Patton, founder and chief investment officer of Steel Vine Investment in Chicago.

"Now that we saw yesterday hold its gains and here today you have a stronger market in the face of weaker outside markets, we could have an acceleration through the rest of the day."

The short-covering is believed to be speculative without any fundamental reason, and the bounce is not expected to last long, Patton said.

Dealers said the market was still struggling to absorb a large Brazilian crop this year while the prospects for next year's harvest in the world's top producer were favourable.

"I don't see $1.50 (a lb) as the end of the potential slide. There is much more coffee coming to the market and $1.50 is still a level at which you can make a profit in Brazil," F.O. Licht analyst Stefan Uhlenbrock said.

"Historically the market has always fallen back to somewhere between $1.20 and $1.40 which is where Brazilian production costs are seen widely," he added.

Arabica coffee prices have been cut in half during the last 18 months with increasing supplies helping to dampen investor appetite for the commodity.

Slow sales by Brazilian producers had helped to underpin the market but could soon turn into a bearish factor with much coffee remaining unsold, dealers said.

Brazil is likely to ship about 5 million fewer bags of green, unroasted coffee this year than in 2011, even though a larger crop was gathered this year, the Council of Green Coffee Exporters said on Thursday, citing slower sales and weather-related delays.

"There is a lot of coffee in the hands of Brazilian producers which still has to find a home," Uhlenbrock said.

March robusta coffee on Liffe rose $7 or 0.4 percent to $1,918 a tonne.

WIDENING SUGAR SURPLUS

Raw sugar futures on ICE were also lower with the market weighed down by excess supplies.

Consultancy Kingsman SA revised up its 2012/13 world sugar surplus estimate to 9.2 million tonnes raw value on Friday, citing increased supply from producers including Brazil and China.

March raw sugar on ICE was off 0.19 or 1.0 percent at 19.17 cents a lb.

"We seem to be range bound 20/30 points either side of 19.50 in the short term but we feel there is more potential downside than upside," Thomas Kujawa of Sucden Financial said in a note.

"We feel it's safer to sell a rally than buy a dip and we expect lower levels in the medium term," he added.

March white sugar on Liffe was off $2.80 or 0.5 percent at $515.70 per tonne.

Cocoa futures were lower with the focus on the recent widening of the front month spread in London <LCC-1=R>.

The premium was trading around 75 pounds on Friday after peaking at more than 80 pounds during the previous session as the open position on December was still well in excess of certified stocks just a few days before Wednesday's expiry.

"If you don't have tenderable cocoa then you already should have focused on the March position," said a European trader.

"If your short is on the December and your cocoa is not tenderable then you have a little bit of a problem. If you start sampling today I don't think you'll get grading sorted out before Wednesday, you could be lucky, but don't count on it."

March cocoa on Liffe fell 4 pounds or 0.3 percent to 1,543 pounds a tonne while March cocoa on ICE stood $15 or 0.6 percent lower at $2,405 a tonne.

(Additional reporting by Marcy Nicholson in New York and Sarah McFarlane in London; Editing by Alison Birrane)