SOFTS-Liffe cocoa edges above 8-1/2 month low, arabica turns up
* Ivory Coast cocoa production forecast to fall 13 percent
* ICE arabica coffee turns higher late day
* Robusta spot contract premium at near 11-month high
(Updates closing coffee/sugar prices, recasts paragraph 2, adds paragraphs 25-26)
NEW YORK/LONDON, Jan 4 (Reuters) - Cocoa futures on Liffe fell to an 8-1/2 month low on Friday before trimming losses, tracking trends in many other commodity markets as slower U.S. job growth diminished concern that the Federal Reserve may rethink its monetary policy.
Cocoa futures on ICE Futures U.S. dropped for the second straight day, though dealers said the declining production in top grower Ivory Coast underpinned the market.
Sugar markets also extended their losses while arabica coffee flirted with a two-and-a-half year low before turning positive late in the session.
The Thomson Reuters-Jefferies CRB index, a global benchmark for commodities, fell for the second straight day, easing about 1.6 percent from the one-month high hit two sessions ago, as the U.S. dollar rallied.
Some investors were unsettled due to minutes from the Federal Reserve's December policy meeting that showed some policy makers want to slow or stop asset purchases this year due to worries about financial stability.
The firm greenback can attract selling by investors holding other currencies, pressuring dollar-traded markets. The dollar pared its gains after a payrolls report scaled back expectations of a change in U.S. monetary policy.
"I think this is mostly to do with the Fed yesterday," one New York-based trader said, referring to the commodity complex's weakness.
"People are liquidating. I think the Fed surprised people."
May cocoa futures on Liffe closed down 10 pounds, or 0.7 percent, at 1,432 pounds a tonne, after dipping to 1,426 pounds, the lowest level for the second month since April 13.
"The lower harvest in Ivory Coast is likely to contribute to the first supply deficit on the global cocoa market for three years in 2012/13, which should help cocoa prices recover in the coming weeks and months," Commerzbank said in a market note.
ICE March cocoa futures settled down $36, or 1.6 percent, at $2,220 per tonne. The contract hit a session low at $2,210, not far from Monday's tumble to $2,207, the lowest level in more than five months.
The British pound fell to the lowest level in more than three weeks, adding pressure to the dollar-traded ICE cocoa market.
Arabica coffee futures on ICE flirted with the 2-1/2 year low hit earlier this week but then turned higher as the commodity complex pared its losses and the earlier selling pressure dwindled. The market appeared to have found a short-term low at $1.4125, basis March, dealers said.
March arabica futures changed direction to settle up 0.85 cent, or 0.6 percent, at $1.4735 per lb, after hitting a session low at $1.4260. The contract fell after peaking at $1.5195 on Thursday, its highest level in around three weeks.
"It didn't hold that initial support around $1.50 and we find ourselves back towards $1.45 on March. The market feels quite comfortable there," one London broker said.
"There is a lot of arabica around. Certified stocks are still huge," the broker said.
ICE certified stocks reached more than 2.58 million bags on Jan. 3, the highest level since March 2010.
Robusta coffee futures on Liffe were little changed with the market underpinned by renewed strength in the nearby premium <LRC-1=R> linked to low certified stocks. The premium was trading around $51 intraday, the highest in nearly 11 months and a level it has struggled to convincingly reach in recent days, widening from $44 on Wednesday.
"There definitely seems to be someone willing to sell at $50 and the market doesn't seem to break that level for the time being," one broker said.
March robusta coffee futures closed up $3 at $1,948 a tonne after peaking on Thursday at $1,969, the highest level for the contract since Nov. 13.
Raw sugar futures on ICE joined the retreat and dealers said ample supplies and weak demand on the physical market were bearish for the near-term price outlook.
March raw sugar futures on ICE eased 0.25 cent, or 1.3 percent, at 18.85 cents per lb.
Initial support was seen at 18.60 cents while the recent low for the contract was 18.31 cents set on Dec. 13.
"We continue to believe that the market needs to test recent lows...There has been end user interest at these levels and we may see this again, re-establishing a rough early 2013 range of 18.50/20.00 cents to continue for the medium term," Nick Penney of brokers Sucden Financial said in a market note.
In mid-December, the spot contract dropped to 18.31 cents, the lowest in more than two years.
Brazil's Northeast is suffering its worst drought in decades and wiped some 30 percent off sugar cane production in the region responsible for 10 percent of Brazil's cane output.
The market shrugged off the production decline, with one dealer noting that recent estimates for Brazil's main center-south growing region were recently raised.
March white sugar on Liffe dropped $4.20, or 0.8 percent, to settle at $510.40 per tonne.
(Additional reporting by Sarah McFarlane in London; Editing by Alison Birrane, Grant McCool and Marguerita Choy)