SOFTS-Liffe cocoa turns lower after setting 4-week high

* ICE cocoa, coffee set for modest weekly gains

* North America cocoa grind near top end of forecasts

* Lower prices trigger pick-up in demand for sugar

(Adds quotes, updates prices)

LONDON, Jan 18 (Reuters) - Cocoa futures on Liffe turned lower on Friday as origin selling emerged after the market had earlier climbed to a four-week high, while ICE raw sugar edged up on signs of renewed physical demand and arabica coffee eased.

May cocoa futures on Liffe were off 6 pounds or 0.4 percent at 1,475 pounds a tonne at 1450 GMT after rising earlier to a four-week peak for the second month of 1,490 pounds.

Dealers said fourth-quarter North America grind data was mildly supportive, while the market was also buoyed by the nearby premium linked to the current low level of certified stocks.

North American cocoa grindings rose 0.95 percent in the fourth quarter of 2012 to 120,053 tonnes from the last quarter of 2011, data from the National Confectioners Association said on Thursday.

Expectations had ranged from 5 percent lower to 1 percent higher so the figure was at the upper end of forecasts.

"I thought it might support prices a bit but we've hit a wall of selling again. There is some cocoa above the market," said one broker, referring to origin selling which capped an early advance in prices.

Front-month March was trading at a premium to May <LCC-1=R> of around 3 pounds, down from 9 pounds at the close on Thursday but compared with a discount of around 5 pounds to 15 pounds for much of this month.

"You've seen a bit of panic short covering of the spread (this week). There are shorts around and they don't want to get caught after the way December went," one broker said.

The December 2012 contract soared to a premium of more than 70 pounds in the run-up to expiry late last year.

Liffe certified stocks were at 43,020 tonnes, as of Jan. 7, less than half the year earlier total of 93,510 tonnes.

ICE March cocoa futures were off $16 at $2,284 per tonne. The contract was on track for a modest weekly gain of around 1.2 percent.

DEMAND REVIVES

Raw sugar futures edged up but remained within striking distance of last month's two-year low.

March raw sugar futures on ICE were 0.11 cents or 0.6 percent higher at 18.53 cents a lb as the market continued to hover just above a two-year low of 18.31 hit in December.

Dealers said the recent decline in prices did appear to be triggering a pick-up in physical offtake with talk that China may have bought some sugar in the last few days.

The market was also underpinned by lower-than-expected production in key exporter Thailand.

"Fundamentally, the market is in oversupply, but concerns about the Thai crop, ethanol demand in Brazil and production in India are expected to constrain selling and price moves below 18 cents a lb," Rabobank said in a research note.

Dealers were waiting for the release later on Friday on updated Commitment of Traders data with the report expected to show an increase in the speculative net short position.

March white sugar on Liffe fell $0.90 or 0.2 percent to $496.60 per tonne.

Arabica coffee futures on ICE were slightly lower but remained on track for a weekly gain with the market deriving support from reports of coffee leaf rust in Central America.

ICE March arabica coffee was off 0.50 cent or 0.3 percent to $1.55 per lb. The contract was on track for a weekly gain of 1.1 percent.

Central American farmers who produce some of the world's most sought-after coffee beans are grappling with the re-emergence of a merciless old foe: a tree-killing fungus spread by the wind.

"Disciplined grower selling coupled with increasing concerns about 2013/14 Central American output are forecast to reduce speculators shorts and drive prices higher in the first quarter of 2013," Rabobank said.

"The supply of arabica remains currently plentiful due to a record 2012 crop, but as this is absorbed and the prospects of tighter supply in the new season increase, speculator positioning will be less bearish."

Robusta coffee futures on Liffe were also lower with the market slipping back from the prior session's 2-1/2 month high.

March robusta coffee futures were off $7 or 0.35 percent at $1,971 a tonne. The contract rose to a peak of $1,988 on Thursday, the highest level for the second position since Nov. 2, boosted by strong roaster demand.

(Reporting by Nigel Hunt; Editing by Alison Birrane)