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SOFTS-ICE arabica coffee soars to 8-1/2-month high on Brazil drought

* ICE coffee races to 8-1/2-month high; trade volume spiked

* Dry weather forecast for February after record dry January

* Rally shoots coffee into technically overbought territory

(New throughout, updates prices; adds byline, NEW YORK dateline)

NEW YORK/LONDON, Feb 3 (Reuters) - ICE arabica coffee futures shot to an 8-1/2-month high on Monday and were on track for their biggest one-day gain in over a year as a heat wave in Brazil sparked fears of crop damage and lower output in the world's top grower, triggering short-covering.

The dry weather also lifted raw sugar prices on ICE Futures U.S., and cocoa futures gained.

Traders raced to cover short positions and establish new long ones, as weather forecasters warned the country will not get much-needed rain for another two weeks. January was Brazil's hottest on record.

"This could be a game-changer," said Sterling Smith, a futures specialist at Citigroup in Chicago.

"The forecasts of 60-million bags are looking at least a little high," he said, pointing to trade expectations of another year of huge production.

March arabica coffee on ICE was up 9.4 cents, or 7.5 percent, at $1.346 per lb at 1:17 p.m. EST (1817 GMT) and hit$1.3540, the highest level for the front month since May 2013.

That would be arabica's best daily performance since December 2012. Volumes were extremely heavy, with 62,503 lots traded, compared with the 250-day average of 22,181 lots, preliminary Thomson Reuters data showed.

Technical strength further fueled the rally. The March contract climbed and closed above its 200-day moving average of $1.2374 on Friday.

The gains put arabica on track for its steepest four-day rally in 3-1/2 years and to sharply outperform the other 18 components of the bellwether Thomson Reuters/Core Commodity CRB index.

Even so, with an 14-day Relative Strength Index reading of 77, it may be considered overbought and vulnerable to some profit-taking.

Some forecasters cautioned it may be too soon to determine the impact of the dry weather on Brazil's main coffee growing region, which analysts have expected to produce another bumper crop.

Arabica coffee has soared 30 percent after falling to $1.0095 in November, its lowest in seven years, amid expectations of bumper global output.

The buying spilled over to the London robusta market, with the second-month Liffe contract closing up $60, or 3.4 percent, at $1,839 a tonne and touched $1,856, the highest since August.

Even so, the premium of arabica futures over robusta <KC-LRC1=R> spiked as high as 50.34 cents a lb during the day's trade, up 7.79 cents from the previous session and at its highest since May 2013.

Sugar also found support from the dry weather concerns in the world's top producer and exporter of the sweetener.

The front-month ICE raw sugar contract was up 0.2 cent, or 1.3 percent, at 15.75 cents a lb, climbing further from last week's 3-1/2-year-low of 14.70 cents.

Though dry weather has not affected Brazil's sugar-producing hub as harshly as the coffee regions and has arrived between harvest cycles, a large net short position held by speculators is ripe for a short-covering rally.

"Any slightly bullish news is capable of 'spooking' those who have shorted recently and have come late to the party," Nick Penney, a senior trader at Sucden Financial Sugar, said in a market report.

March white sugar futures on Liffe gained $2.70, or 0.6 percent, to finish at $426.70 per tonne.

In cocoa, March futures on ICE edged up $3, or 0.1 percent, to finish at $2,914 a tonne, supported by signs of slowing supplies from the world's top producer, Ivory Coast.

May cocoa on Liffe settled up 21 pounds, 1.1 percent, at 1,852 pounds a tonne.

The latest weekly port arrivals in Ivory Coat were running below year-earlier 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 Jan. 27 and Feb. 2.

(Additional reporting by Nigel Hunt in London; editing by William Hardy; and Peter Galloway)

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