SOFTS-ICE sugar hits 3-week high, cocoa sets new low
* Raw sugar upside seen capped by global surplus
* Arabica coffee could fall if Brazil sales pick-up
* Cocoa downside limited with market seen balanced
(Adds quotes, updates prices)
LONDON, Dec 28 (Reuters) - Raw sugar futures on ICE rose to a three-week high on Friday as the market extended a rebound after falling to the lowest levels in more than two years earlier this month.
Arabica coffee prices on ICE were also higher, while cocoa fell to fresh multi-month lows.
March raw sugar futures on ICE were up 0.05 cent or 0.3 percent at 19.50 cents a lb at 1512 GMT after hitting a three-week high of 19.58 cents.
Dealers said the sugar market had breached some key resistance levels during the run-up in prices this week, including 40-day and 50-day moving averages, but producer selling above 19.50 cents threatened to cap the advance.
"Sugar prices have seen a bit of a rebound, but our outlook for the market remains quite negative," Credit Suisse analyst Tobias Merath said.
The market sank to 18.31 cents earlier this month, its lowest level since August 2010, weighed by rising stocks as production outpaces demand.
"We think the market is very well supplied, and there is very little potential for any rebound to be sustained," Merath said, adding his three-month price forecast was 18 cents.
March white sugar on Liffe rose $0.60 or 0.1 percent to $523.00 per tonne.
Arabica coffee futures on ICE were higher, with the market also rebounding after falling to the lowest levels in more than two years earlier this month.
March arabica coffee futures on ICE rose 0.40 cents or 0.3 percent to $1.4830 per lb, while May climbed 0.30 cents or 0.2 percent to $1.51 per lb.
The second month contract hit a low of $1.4220 earlier this month, its weakest level since June 2010.
"We have seen a little bit of a rebound, but it hasn't gone very far ... This is a market where fundamentals are deteriorating," Merath said.
Brazil has harvested a large crop this year, but exports so far have lagged last year's pace, he said.
Dealers have cited a reluctance of producers in Brazil to sell following a sharp decline in prices as one factor in the slow pace of exports.
"Our concern is that at one point in time the good crop will arrive in the market ... The downtrend (in prices) is likely to continue," Merath said, adding his three month price forecast was $1.40 per lb and 12-month forecast was $1.30 per lb.
March robusta coffee futures were off $1 or 0.05 percent at $1,919 a tonne.
Certified coffee stocks held in NYSE Liffe nominated warehouses rose to 106,540 tonnes as of Dec. 24, up from 105,140 tonnes on Dec. 10, exchange data showed.
Cocoa prices were slightly lower with March futures on ICE off $4 or 0.2 percent at $2,251 a tonne after touching $2,246, the lowest level for the front month since July 26.
Merath said cocoa had the potential to move a bit higher with economic indicators stabilising and the global market expected to be roughly in balance in 2012/13.
Liffe May cocoa fell 4 pounds or 0.3 percent to 1,444 pounds a tonne after hitting 1,442 pounds, the lowest level for the second month since June 1.
Valid cocoa stocks in NYSE Liffe's nominated warehouses rose to 51,070 tonnes as of Dec. 24, from 48,330 tonnes on Dec. 10, exchange data showed.
(Reporting by Nigel Hunt; Editing by Anthony Barker and Jane Baird)