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SOFTS-Sugar edges higher, bucks recovery concerns

LONDON, 27th August 2009 (Reuters) By Sharon Lindores

Sugar futures rose to one-week highs on Thursday as the market edged closer to the upper end of a consolidation range, underpinned by strong demand which buffeted it from a commodity-wide fall.

Cocoa and coffee futures dropped on doubts about a global economic recovery, traders said.

Sugar has been trading in a range since whites hit record highs and raws touched 28-1/2 year peaks in mid-August, supported by tight supplies in major growers Brazil and India and strong global demand.

The supportive supply and demand dynamics make sugar more resilient to the unpredictable nature of macro economic sentiment, said Gary Mead, a commodity analyst with VM Group.

"Everybody knows India's sugar output for 2009/10 will be insufficient to meet domestic demand," Mead said.

"Brazil should be able to compensate for India's shortfall, but there are doubts about that so sugar prices are at their highest in almost three decades," he said, noting Brazil's output is at the mercy of weather.

But dealers said there was still strong demand for Brazilian sugar with China and Pakistan as well as India among potential buyers.

"The record line-up currently in Brazil's Center South ports with 80 vessels waiting to load some 2.3 million tonnes of sugar suggests that someone wants it," Sucden Financial said in a daily market report.

ICE October raw sugar futures SBV9 were up 0.20 cent at 22.57 cents a lb at 1451 GMT after touching a one-week high of 22.82 cents. Liffe front-month white sugar futures LSUc1 were up $8.20 at $559.50 per tonne.

SOFTS FALLING

The Reuters-Jefferies CRB index .CRB, a global commodities benchmark, fell 2.13 points or 0.83 percent to 254.05 points.

"A lot of money has flowed into these commodities (softs and metals) in anticipation of a strong recovery," VM Group's Mead said, adding on days such as Thursday investors question their assumption of a swift recovery.

"They think maybe I'll pull back from the edge and take a few profits," he said, noting this appeared to be the case in cocoa and coffee, although cocoa, which is in deficit, has some stronger fundamentals.

Cocoa futures fell sharply after a strong advance earlier in the week to a one-year high on ICE and five-month peak in London.

Dealers said, however, the mood remained bullish.

"Cocoa seems to be going from strength to strength," the dealer said, adding ICE December cocoa CCZ9 could test the key $3,000 a tonne level soon.

ICE December cocoa CCZ9 was off $65 at $2,893 a tonne. Liffe December cocoa LCCZ9 fell 31 pounds to 1,871 pounds a tonne.

Robusta coffee futures also fell, after a strong advance on Wednesday.

"Today is a quiet day after the storm," a coffee trader said.

Commerzbank said in a recent report that robusta prices have fallen close to 10 percent since the beginning of the month.

Liffe November robusta coffee futures LRCX9 eased $17 to $1,406 a tonne, while ICE December arabicas KCZ9 fell 2.95 cents to $1.2155 a lb.

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