SOFTS-White sugar hits 2-1/2 year low on excess supply

* Speculators increase net short in Liffe white sugar

* Cocoa butter stocks may need to be replenished

* Indonesia coffee harvest may start earlier than normal

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LONDON, Jan 21 (Reuters) - White sugar futures on Liffe set a 2-1/2 year low on Monday as the market continued to be driven down by abundant supplies, while cocoa fell back to little changed levels after earlier equalling a four-week high.

Robusta coffee futures on Liffe were slightly lower while ICE raw sugar, arabica coffee and cocoa contracts were shut due to a holiday in the United States.

March white sugar on Liffe stood $2.20 or 0.45 percent lower at $489.80 per tonne at 1428 GMT after earlier slipping to $489.50, the lowest level for the front month since June 2010.

Dealers said the market remained susceptible, however, to sporadic short covering rallies with speculators holding net short positions on both Liffe whites and ICE raws.

"We are technically oversold on all sorts of indicators and, even though we have posted a new low, I would like to see a bit more follow through selling to really crystallise the bearish technical price action," said Sucden analyst Jack Pollard.

"I would like to see a fresh low on raws as well (to confirm a bearish outlook)," he added.

March raw sugar futures on ICE traded as low as 18.33 cents last week but managed to hold above last month's low of 18.31 cents, the weakest level for the front month contract since August 2010.

Speculators increased a net short position on white sugar futures and options on NYSE Liffe in the week to January 15, exchange data showed on Monday.

A speculative net short position in ICE raw sugar contracts also rose, U.S. Commodity Futures Trading Commission data showed on Friday..

Bearish sentiment has been fuelled by the prospect of another substantial global surplus in 2012/13.

"Although global demand growth is accelerating, the supply outlook is favourable as global investment over the past few years continues to bear fruit and weather risks diminish," Macquarie said in a market note.

"We are forecast the 2012/13 season (Oct-Sep) to end in another sizeable surplus of five million tonnes. Producers will have to compete with each other in finding homes for their shipments, and in the process, drive prices lower."

COCOA GRIND TO RECOVER

Cocoa futures on Liffe fell back slightly after earlier equalling a four-week high with the market underpinned by an improved outlook for grindings.

Grindings data for the fourth quarter of 2012, issued last week for Europe and North America, helped to reinforce sentiment that a recovery was underway after very weak figures for the second and third quarters.

The North America quarterly grind showed the first year-on-year rise since the last three months of 2011 while the European grind showed a much more modest year-on-year decline than the prior two quarters.

"Overcapacity amongst processors and unattractive butter ratios led to very weak grindings in 2012, with grinders destocking amidst sluggish chocolate and confectionary sales in Europe and North America," Macquarie said.

"Those inventories, especially of butter, now need replenishing and we expect to see grindings pick up."

May cocoa futures on Liffe fell 3 pounds or 0.2 percent to 1,478 pounds a tonne after equalling last week's four-week high for the second month of 1,490 pounds earlier in the session.

Dealers said they were keeping a close watch on March's premium to May <LCC-1=R>, which rose to a peak of about 10 pounds last week but has since fallen back to level money.

There has been concern that the current low level of Liffe-certified stocks could lead to a significant widening in the premium.

March robusta coffee futures were off $10 or 0.5 percent at $1,966 a tonne with the market looking to consolidate after last week's run-up.

The contract rose to a peak of $1,989 on Friday, the highest level for the second position since Nov. 2, boosted by strong roaster demand.

The "fly crop", a minor coffee crop, has started in Indonesia's key growing island of Sumatra, and the main harvest is likely to start earlier than usual because of good weather.

(Reporting by Nigel Hunt; editing by Jane Baird and Keiron Henderson)