SOFTS-ICE arabica coffee climbs, dry weather stokes Brazil crop worry

* Arabica coffee gains for fourth straight day

* Stronger Brazil real fuels sugar, coffee gains

* Weak demand for sugar weighs on nearby contracts

(Updates close for coffee, sugar, adds U.S. domestic sugar prices, details)

NEW YORK/LONDON, April 8 (Reuters) - ICE arabica coffee climbed on Tuesday, extending gains seen since late last week, as dry weather forecasts for Brazil exacerbated worries over crop damage in the world's top producer.

Sugar futures rose, bolstered by a stronger real and weather worries in Brazil, as cocoa climbed ahead of the latest quarterly grind data, an indicator of demand.

The benchmark May arabica coffee contract on ICE Futures U.S. hit a more than three-week high of $2.028 before settling up 3.15 cents, or 1.6 percent, at $1.965 cents per lb.

The return of dry weather has compounded concerns over crop damage after a record hot January and February that shot front-month prices to a two-year high of $2.0755 on March 11.

"Throughout this week, we should have little or no chances of rain in most coffee areas," Brazil forecaster Somar said in a daily note.

Worries also mounted over bean quality and the extent of crop damage in Brazil.

"The damage is irreparable. We have never had such a situation. Within each region you have completely different scenarios," Joaquim Leite, director of exports for Terra Forte, one of Brazil's top exporters, said this week.

July robusta coffee futures on Liffe jumped $54, or 2.6 percent, to finish at $2,166 per tonne after striking a three-week high of $2,180.


Sugar futures climbed as a stronger Brazilian real supported prices, as it encourages millers to divert output to the domestic biofuels market over the dollar-traded sugar export market.

Even so, discounts on the front-month contracts for both the raw and white sugar markets widened, indicating there may be limited appetite for taking delivery.

Front-month raw sugar futures on ICE rose 0.22 cent, or 1.3 percent, to finish at 17.16 cents a lb.

The May contract to July fell to a discount of 0.62 cent a lb, from 0.44 cent a lb last week, seen as evidence of available supplies.

May white sugar futures on Liffe closed up $4.60, or 1 percent, at $460.40 a tonne. May's discount to August widened to $15 a tonne from $12.40 last week.

"It does look as though further weakness may be seen, as no obvious buyers appear to want to step up to the plate and take delivery, especially whilst end destination demand remains quite weak," a London-based broker said.

The U.S. domestic raw sugar market posted its third gain of the past four sessions, as traders scrambled to cover short positions on mounting worries that an escalating trade battle between the United States and Mexico could result in a sharp drop in supplies.

The second-month July No. 16 raw sugar contract on ICE Futures U.S. finished up 0.23 cent a lb, or 0.9 percent, at 24.65 cents a lb, after having struck a fresh 18-month peak of 25.50 cents a lb on Monday.

In cocoa, New York and London futures gained in rangebound trade as dealers awaited demand data due this week.

Dealers said the market lacked clear technical or fundamental direction, although the upcoming quarterly grind data could help provide this.

Traders and analysts have pegged Europe's first quarter grind, due Thursday, up around 3 percent compared with the same period a year ago.

July cocoa on Liffe edged up 6 pounds, or 0.3 percent, to finish at 1,881 pounds a tonne.

"It's stuck ... the balance of power between buyers and sellers is pretty evenly matched," said a London-based broker, adding that industry was buying on any dips, while speculators were selling.

May cocoa futures on ICE closed up $33, or 1.1 percent, at $2,992 a tonne. The weaker U.S. dollar supported buying in the New York market as it makes the greenback-traded commodity less expensive relative to its London counterpart.

(Additional reporting by Gustavo Bonato in Sao Paolo; Editing by Jonathan Oatis and Bernadette Baum)