SOFTS-Hot Brazil boosts ICE coffee to 8-1/2 month high

* Hottest January on record in Brazil

* I.Coast cocoa weekly arrivals seen at 30,000 tonnes

(Adds details, quotes, updates prices)

LONDON, Feb 3 (Reuters) - Arabica coffee futures on ICE rallied over 7 percent to an 8-1/2 month high on Monday as unseasonably dry weather sparked fears of reduced output from the world's top grower Brazil.

Coffee has been a bear market for almost three years as oversupply has weighed on prices and enabled stocks to build after Brazil produced consecutive bumper crops.

But the recent dry weather could signal a reversal in the coffee price trend, as forecasters predict weather will stay dry until at least the middle of February, after the hottest January on record.

March arabica coffee on ICE was up 7.85 cents or 6.3 percent at $1.3305 per lb at 1529 GMT after earlier peaking at $1.3445, the highest level for the front month since May 2013.

"Because of these dry weather forecasts the market has built up momentum, so we've got a combination of technical and fundamental support," said Andrea Thompson, analyst with CoffeeNetwork, part of INTL FC Stone.

"We are in the critical development stage for the crop."

Dealers said the dry weather in Brazil had led speculators to start covering a net short position.

"The futures market is operating on the idea that we're going to have a dry February already," a European analyst said.

"We're starting to come to the end of the cherry formation. If you have a stressed tree it might drop some of the fruit or the fruit might not fill out as well, then you'll have less yield per tree and less coffee overall."

Liffe May robusta coffee rose $59 or 3.3 percent to $1,838 a tonne, tracking arabica's gains.


ICE March raw sugar futures were up 0.03 cents or 0.2 percent at 15.58 cents a lb. The front month dipped to a low of 14.70 cents last week, its lowest level since June 2010.

Dealers and analysts said the market had rebounded strongly from a 3-1/2 year low as speculators began to cover a huge net short position prompted partly by concerns about dry weather in the centre-south region in Brazil.

"Funds have a gross short position close to a record... anything that suggests to cover, you want to be the first one out the door," the European analyst said, adding that the market was vulnerable to further short covering if dry weather persists.

March white sugar futures on Liffe were up 80 cents or 0.2 percent to $424.80 per tonne.

In cocoa, March futures on ICE were unchanged at $2,911 a tonne.

The latest weekly port arrivals in Ivory Coat were running below year ago levels although the cumulative total remained well above last season.

Exporters estimated around 30,000 tonnes of beans were delivered to Ivory Coast's two ports of Abidjan and San Pedro between January 27 and February 2.

"Even the high arrivals numbers aren't enough to push the market down," the analyst said.

May cocoa on Liffe was up 15 pounds or 0.8 percent at 1,846 pounds a tonne.

(Additional reporting by Nigel Hunt; editing by William Hardy)