SOFTS-ICE sugar, coffee extend rebounds as commodities climb
* Weakness of sterling boosts Liffe cocoa prices
* Vietnam domestic coffee prices climb to 4-1/2 month high
* Speculators raise net shorts in ICE sugar and coffee
(Adds quotes, byline, updates prices)
LONDON, Feb 25 (Reuters) - ICE sugar and coffee futures edged higher on Monday as prices extended rebounds from multi-year lows set earlier this month, boosted by broad-based gains in oil and other commodity markets and a weaker dollar.
Cocoa prices were little changed.
Dealers said a large speculative short positions in both ICE sugar and coffee meant the markets were susceptible to sporadic short-covering rallies, although fundamentals remained bearish.
Speculators raised their net short positions in sugar and coffee contracts on ICE Futures U.S. to record highs in the week to Feb. 19, U.S. Commodity Futures Trading Commission data showed on Friday.
March raw sugar futures on ICE stood 0.18 cent or 1.0 percent higher at 18.42 cents per lb at 1246 GMT. The contract fell to 17.87 cents earlier this month, the lowest level for the front month since August 2010.
Macquarie Capital analyst Kona Haque said the sugar market had now priced in a large global surplus but was also expecting Brazilian mills to shift production towards ethanol from sugar if low prices are sustained. She also cited expectations for the eventual covering of the huge net short position held by managed money.
"At these prices, risks are more likely to be on the upside, rather than downside, and funds may want to start covering their shorts," Haque said in a research note.
May white sugar on Liffe rose $2.80 or 0.6 percent to $508.30 a tonne.
Arabica coffee futures on ICE edged up as the market extended its rebound from last week's low, with a severe outbreak of roya leaf rust disease in Central America helping to support prices.
May arabica coffee futures on ICE rose 0.40 cent or 0.3 percent to $1.4420 per lb. The contract dipped to $1.3760 on Feb. 19, the lowest level for the second month since June 2010.
Prices had been on a prolonged downward trend driven by last year's huge crop in top producer Brazil and the prospect of another large harvest in the forthcoming season.
Some dealers, however, saw scope for a further recovery in prices in coming weeks.
"Coffee continues to find support at the decade long bull trend line. A bullish breakout is slated for the spring," Shawn Hackett, president of Hackett Financial Advisors, said in a research note.
"The roya infestation for Central America coffee is getting worse and will likely provide the fireworks for a bull move."
May robusta coffee futures on Liffe rose $4, or 0.2 percent, to $2,091 a tonne.
Dealers pointed to a slowdown in robusta coffee exports from top producer Vietnam this month, although cumulative volumes for the first two months of this year are a marginal 1.5 percent below year-ago levels.
A shortage of coffee beans lifted domestic prices in Vietnam, the world's top robusta producer, to their highest in four-and-a-half months on Monday, traders said, enticing some farmers to sell some of their meagre stocks.
Cocoa futures were mixed, with sterling-denominated Liffe futures edging higher, boosted by the weakness of the British currency after rating agency Moody's stripped the UK of its triple-A rating.
May cocoa futures on ICE fell $5 or 0.2 percent to $2,134 per tonne, while May cocoa on Liffe rose 5 pounds to 1,439 pounds ($2,200)a tonne.
Dealers said origin selling, particularly from top grower Ivory Coast, was helping to cap rallies, while the market was also focussing on coming mid-crops in West Africa.
A relentlessly harsh dry season across Ivory Coast's main growing regions is affecting bean quality and threatens to delay early harvesting of the April-to-September mid-crop, farmers and analysts said last week.
"It is still too early to assess the outlook for the mid-crop, with the weather still quite dry and pods still underdeveloped, but there is time still," Macquarie analyst Haque said. ($1 = 0.6551 British pounds)
(Reporting by Nigel Hunt; editing by Keiron Henderson and Jane Baird)