SOFTS-ICE coffee rises ahead of expected index fund buying

* Index fund rebalancing supportive for ICE coffee, sugar

* Speculators cutting net longs in ICE and Liffe cocoa

* Thai sugar crop may fall below previous expectations

(Adds quotes, updates prices)

LONDON, Jan 7 (Reuters) - Arabica coffee futures on ICE rose on Monday with the market anticipating there could be significant buying linked to index rebalancing later this week while raw sugar also advanced and cocoa was little changed.

"A lot of people are buying it (arabica coffee) on the basis of the index rebalancing which is supposed to start tomorrow," one London broker said, noting that index-linked buying could amount to around 11,000 to 13,000 lots.

Index funds rebalance their portfolios in early January, buying those commodities which have become underweight following poor performances during the prior year. Arabica coffee was one of the worst performing commodities in 2012.

March arabica coffee on ICE rose 1.15 cents or 0.8 percent to $1.4850 per lb by 1225 GMT.

The contract has rebounded after dipping to a low of $1.4125 a week ago following a prolonged downward slide driven by surplus supplies.

"ICE arabica is expected to increase during Q1 as attention turns to the Brazilian 2013/14 'off' season, starting in the second half of the 2013 calendar year," said Andrea Thompson, an analyst at Coffee Network, part of INTL FCStone.

"Prices could be expected to move 10.00 cents/lb higher to above 160 cents/lb," she added in a market note.

Brazil has a biennial crop cycle which causes output to rise then fall from one year to the next with variations of up to 20 percent.

A large 'on-year' crop in Brazil helped to propel world coffee production to a record 149.5 million bags in 2012/13, well above global consumption of 142.6 million, according to CoffeeNetwork.

March robusta coffee futures on Liffe rose $16 or 0.8 percent to $1,964 a tonne.

Thompson said domestic prices in top robusta producer Vietnam were currently around 38,600 dong per kilo for the benchmark grade in Dac Lac.

She added that sellers were holding back sales in the hope of a breach of the 40,000 dong per kilo barrier ahead of Tet festivities which in 2013 fall in the second week in February.

"Liffe robusta prices are expected to remain rangebound (between $1,850 and $2,000), with any gains attributed to withholding rather than insufficient supply," Thompson said.

COCOA CONSOLIDATES

Cocoa prices were little changed with the market hovering around recent multi-month lows as speculators reduced large long positions on both Liffe and ICE.

Liffe May cocoa futures were off 3 pounds or 0.2 percent at 1,429 pounds after earlier dipping to 1,426 pounds, equalling Friday's 8-1/2 month low for the second month.

Macquarie analyst Kona Haque said in a report on Monday that cocoa had a "slightly bullish outlook given that the global market will be in a small deficit, as West African production falls and grindings recover."

Ivory Coast expects its cocoa output to dip to 1.289 million tonnes this season from 1.486 million tonnes last season due mainly to a lack of investment in ageing plantations, a top official at the Coffee and Cocoa Council said on Thursday.

Dealers said grindings may recover to some extent in 2013 after a weak performance, particularly in Europe, in 2012.

Fourth-quarter European grind data, to be issued later this month, is expected to show a year-on-year decline of up to 6 percent. Figures for the second and third quarters showed declines of 17.8 percent and 16.2 percent respectively.

ICE March cocoa futures rose $1 or 0.05 percent to $2,221 per tonne.

Indonesia's exports of cocoa beans from its main growing island of Sulawesi dropped 38 percent to 7,508.11 tonnes in December from 12,051.72 tonnes a year earlier, Indonesia Cocoa Association (Askindo) data showed on Monday.

Raw sugar futures were higher as the market moved back up towards the middle of its recent trading range.

Dealers said index fund rebalancing may provide some support for raw sugar prices which fell last year although fundamentals remain bearish with a large global surplus widely forecast for 2012/13.

March raw sugar futures on ICE traded 0.13 cent higher at 18.98 cents a lb. The front month is now around midway between its recent low of 18.31 cents and its recent high of 19.75 cents, a range that has held for more than one month.

Dealers said the market has been buoyed by fund short covering while producer selling has helped to cap advances.

Speculators trimmed their net short position in raw sugar futures and options on ICE Futures U.S. for the third straight week, bringing it to the smallest in two months, U.S. Commodity Futures Trading Commission data showed on Friday.

March white sugar on Liffe rose $2.60 or 0.5 percent to $513.00 per tonne.

The 2012/13 sugar crop in Thailand, the world's second-biggest exporter, could drop below a forecast 9.4 million tonnes due to lower-than-expected yield, a senior government official said on Monday.

(Reporting by Nigel Hunt; Editing by Alison Birrane)