SOFTS-Coffee, cocoa extend gains but sugar rally stalls

* Producer selling overhangs the sugar market

* Arabica coffee underpinned by tight supplies

LONDON, March 23 - Coffee and cocoa futures rose on Monday, extending last week's advance, as U.S. plans to ease its economic crisis sparked a rally in equity markets and prompted renewed concerns about inflation.

Sugar futures eased as profit-taking emerged after last week's gains and producer selling hovered above the market.

"What can certainly be taken from the last several days of strong commodity performance is the sharp appreciation we can expect from sustained positive economic news," fund manager Matthew Sena of Castlestone Management said.

Sena said shortages in supply would also become apparent when growth and demand returned and there was a long-term consensus commodities would perform well when the economy started rolling again.

"All of these things add up to a positive story and this sense of optimism last week and this week is helping the market feel it has found a bottom," he added.

Arabica coffee futures on ICE rose with May up 0.85 cent at $1.1705 per lb by 1752 GMT. May set a contract low of $1.0435 only two weeks ago.

Robusta coffee futures in London also rose with May ending $22 higher at $1,582 a tonne.

"I think there are more fundamental reasons why arabicas should rise. There still seem to be concerns about the milds," one dealer said.

A drop in production in Colombia and some Central American countries had helped to tighten supplies of arabicas.

Dealers said robusta market fundamentals appeared more bearish although the market was underpinned by uncertainty about the availability of deliverable supplies.

"I think people would be expecting the market to be lower than it is at the moment but the bulk of stocks are in strong hands and we are not quite sure what they are going to do with it," one robusta dealer said.

COCOA CLIMBS

Cocoa prices on ICE rose with May settled $8 higher at $2,593 a tonne. The contract had earlier risen to $2,624, its highest in more than one month.

A stronger pound capped prices in London with May ending 1 pound higher at 1,922 pounds a tonne.

Cocoa arrivals at ports in top grower Ivory Coast reached 857,000 tonnes by March 22, exporters estimated on Monday, compared with 1,041,772 tonnes in the same period of the previous season.

Sugar futures were lower, failing to react positively to a rise in the crude oil market. Sugar is used to produce biofuel ethanol in Brazil and its price often tracks energy markets.

"The market is looking stale and is not reacting to the high oil price," one London-based dealer said.

May raws on ICE stood 0.14 cent lower at 13.40 cents a lb, well below the day's peak of 13.67 cents. The contract had risen sharply after trading as low as 12.42 cents two weeks ago.

Dealers said reduced crop prospects in India and the prospect of substantial imports had contributed to the sharp advance in prices.

India is likely to allow mills to import duty-free raw sugar next year as stocks at the beginning of the new season in October would have dropped to a third from a year ago, a top industry official said.

White sugar futures were also easier with May ending $1.60 lower at $406.20 per tonne.