SOFTS-ICE cocoa higher after nine-month low; sugar, coffee gain
* Large cocoa mid crop expected in West Africa
* Lower dollar helps support cocoa market
* Brazil 2013/14 sugar/ethanol mix eyed - analyst
(New throughout, updates prices; adds byline and NEW YORK dateline)
NEW YORK/LONDON, March 7 (Reuters) - Cocoa futures on ICE posted the largest daily gain in a month near midday, after sinking to a nine-month low early on Thursday, supported by a weaker dollar and by ideas recent declines were seen as overdone amid expectations of an impending supply deficit.
ICE raw sugar futures rose on expectations that an increase in ethanol production in top producer Brazil would deplete a global sugar surplus. ICE arabica coffee prices also gained.
May cocoa on ICE Futures U.S. gained $20, or 0.98 percent, to settle at $2,062 per tonne, after earlier falling to $2,034, the lowest for the second-month contract since June 2012. It was the second-month contract's largest daily gain since Feb. 5.
"We're at a spot where the downside is running out of steam, and some of these lower levels are starting to spark demand," said Jack Scoville of the Price Futures Group in Chicago.
Expectations for a small global cocoa deficit raised talk that the recent move lower was overdone.
Last month the International Cocoa Organization (ICCO) forecast a global cocoa deficit of 45,000 tonnes for the 2012/13 season with production set to decline and grindings expand.
"The ICCO expects a deficit this year, that's a reason why it's surprising that prices continue to slide. We think cocoa prices will rise in the course of the year from current low levels," said Carsten Fritsch, an analyst at Commerzbank.
A weaker dollar, as the dollar index fell against a basket of six other currencies, helped support ICE cocoa, raw sugar and arabica coffee futures, Scoville said.
Cocoa prices had dropped sharply recently, pressured by a combination of favourable weather aiding West Africa's mid crop development and lagging forward sales from top growers Ivory Coast and Ghana, traders said.
"There's going to be a big mid crop so the market has taken a bearish tone," said a London-based broker.
May cocoa on Liffe gained 11 pounds, or 0.8 percent, to finish at 1,401 pounds per tonne.
SUGAR, COFFEE GAIN
May raw sugar futures on ICE gained 0.45 cent, or 2.5 percent, to 18.65 cents per lb at 12:22 p.m. EST (1722 GMT).
Dealers said sugar prices were supported by a combination of rising diesel prices and the expected removal of taxes for ethanol in top producer Brazil.
Any move away from sugar into ethanol production could help deplete a large global surplus of the sweetener, which has been pressuring prices to recent 2-1/2-year lows.
Climbing diesel prices have increased the cost of getting sugar to port, and are expected to have an impact on the sugar/ethanol production split in Brazil, said a European sugar analyst.
"The question is what is the production mix going to be in Brazil in 2013/14," said the analyst, noting that in 2012/13 49.6 percent of Brazil's center-south cane was directed into sugar production but this could drop as low as 40 percent as ethanol becomes more attractive.
Meanwhile, the Brazilian government plans to exempt fuel ethanol from certain taxes at the pump to help the country's cane industry.
"Brazilians will soon start diverting sugar into ethanol in a bigger way, and that's support to this market," Scoville of Price Futures Group said.
Recent dips to the 18-cent level have inspired buying, and raw sugar prices on ICE have been recovering after they have reached those levels.
May white sugar on Liffe increased by $10.30, or 1.99 percent, to $528.50 a tonne.
ICE May arabica coffee rose 1.2 cents, or 0.8 percent, to $1.4235 per lb.
Prices continued to hover near the low of $1.3760 hit on Feb. 19. Expectations of a large crop from top grower Brazil pressured prices to their lowest levels since June 2010.
"There's probably going to be plenty of coffee around, but there are going to be fewer bags than originally thought," Scoville said, pointing to concerns over Central America's production.
The leaf disease roya has been threatening coffee crops in Central America and Mexico and could reduce 2013/14 production in those regions by up to 7 million 60-kg bags.
May robusta coffee futures on Liffe climbed $44, or 2.1 percent, to $2,157 a tonne.
(Editing by Alison Birrane and Helen Massy-Beresford; Editing by Bob Burgdorfer)