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SOFTS-ICE coffee edges higher; cocoa rallies on bargain-hunting

* Arabica crawls toward 2-yr high on Brazil weather worries

* C. America leaf rust losses may be less than expected -ICO

* Cocoa recovers previous day's sharp losses

* China's industrial output growth below forecasts

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

NEW YORK/LONDON, March 13 (Reuters) - ICE arabica coffee futures rose and traded near a two-year high on weather-related crop concerns in top grower Brazil, while cocoa rallied the most since January and recovered the previous day's sharp losses on bargain-hunting.

Raw sugar on ICE Futures U.S. edged up, consolidating after the previous session's sharp rout.

Concerns over Chinese growth capped upside potential across commodities markets. China's industrial output growth came in below forecasts for the combined January/February period, with retail sales also weaker than expected, stoking worries that growth could slow as Beijing pushes for economic reforms

In coffee, second-month May arabica futures on ICE finished the day up 0.65 cent, or 0.3 percent, at $2.0595 per lb, hovering below Wednesday's two-year peak of $2.0975.

Arabica coffee prices have surged this year as unseasonably dry weather in Brazil prompted traders to cut their output outlooks and drove speculators to pile into the market.

Brazil's Agriculture Ministry declared a state of emergency in the country's main coffee-growing region due to insect threat, according to the government's national gazette.

The news buoyed prices but failed to drive steeper gains as the market digested coffee's 80-percent year-to-date surge.

"This may be a sign that much of the losses in coffee (output) that people have been speculating about have already been priced into the market," said Hector Galvan, senior softs broker at RJO Futures in Chicago.

Still, trade-buying could lift prices further, he said.

Crop damage from Central American coffee leaf rust may not be as bad as expected, the International Coffee Organization (ICO) said.

May robusta coffee futures on Liffe closed down $11, or 0.5 percent, at $2,189 a tonne. The second-month hit $2,218 on Wednesday, a 17-month high.

In cocoa, the second-month May contract on ICE notched its biggest one-day rally in weeks and recovered Wednesday's losses to end the session up $60, or 2 percent, at $3,006 a tonne.

The second-month struck a high of $3,027 on Tuesday, a 2-1/2-year high, supported by expectations for a global deficit and strong demand.

The benchmark May cocoa contract on Liffe closed up 24 pounds, or 1.3 percent higher, at 1,875 pounds a tonne, climbing toward Tuesday's 2-1/2-year high on 1,888 pounds.

"Cocoa is pushing higher as the trade is finding good buying opportunities" after yesterday's sell-off, RJO's Galvan said.

May raw sugar futures on ICE closed up 0.15 cent, or 0.8 percent, at 17.82 cents a lb, consolidating after the previous day's losses as expectations of reduced supplies in key regions continued to underpin prices.

The market began to climb in late January as dry weather diminished prospects for Brazil's next cane crop, lifting prices to a four-month peak of 18.47 cents last week.

Even so, Brazilian sugarcane mills began their cane crushing early this season as they struggle with growing debt burdens.

Liffe May white sugar futures edged up $1.80, or 0.4 percent, to settle at $463.70 per tonne.

(Editing by Keiron Henderson and Marguerita Choy)