SOFTS - Sugar swings up and may rally, coffee retreats

(Recasts with markets closing levels, adds U.S. comment, and NEW YORK dateline/byline)

* Sugar moves up on late fund buying

* Coffee stumbles as surge fizzles out

NEW YORK/LONDON, Nov 3 - Sugar futures clawed their way higher Tuesday and could rally more on bullish fundamentals while coffee slid back because a late surge yesterday was seen as overdone, analysts said.

Cocoa moved up on modest fund short-covering, they said.

New York's March raw sugar contract jumped 0.53 cent to end at 23.97 cents per lb. London's December white sugar contract increased $3.30 to end at $593.80 per tonne.

Sterling Smith, an analyst for brokers Country Hedging Inc in Minnesota, said sugar is poised to move higher given the small cane crop in top consumer India and the excessive rains which have hit the cane crop of top producer/exporter Brazil.

"We have not seen the high price in sugar," he said, adding a move to 32 cents by early next year seems likely.

His views on India were underscored by news that spot sugar prices in that country surged 5 percent to a fresh peak Tuesday due to a rise in retail demand and estimates of a deficit for a second year running.

The Indian government said the worst annual monsoon rains in 37 years could lead to further imports of sugar going into 2010.

The other bullish factor is news that Brazil's Sugarcane Industry Association said heavy rain will result in almost 10 percent of the cane crop in the main center-south region being left unharvested in the fields.

Hussein Allidina, head of commodity research at Morgan Stanley, told Reuters in Paris at the sidelines of an ethanol conference that raw sugar prices could hit 30 cents around December 2009 to February 2010.

Other analysts were more cautious.

"The market is going to stay roughly between 21 and 25 cents (in New York) -- it's a realistic level," said London-based sugar dealer David Sadler.

Raw sugar prices shot up to a 28-1/2-year high during the summer and a move to 30 cents or beyond would represent the highest level in nearly 30 years.

COFFEE PULLS BACK AFTER SURGE, COCOA FIRM

Coffee futures handed back some of the hefty gains posted Monday when it soared on a weaker dollar. The firmer greenback likely dented investor interest in coffee, analysts said.

London's November robusta coffee contract lost $17 to close at $1,414 per tonne. New York's December arabica coffee contract lost 1.25 cents to close at $1.411 per lb, having soared over 5 percent in the previous session.

"Coffee got way ahead of ourselves," said Smith.

"While the market technically wants to go higher, there also seems to be uncertainty at times, as to how far they want to push it," Tom Mikulski, senior market strategist at MF Global Ltd's Lind-Waldock division in Chicago, said.

"It's been a bumpy ride for coffee but I do believe the trend is up," he said.

Cocoa futures moved higher on investor fund short-covering, with the trade focusing on the harvest in top grower Ivory Coast.

London's March cocoa contract added 29 pounds to end at 2,177 pounds per tonne. New York's December cocoa contract rose $24 to finish at $3,274 per tonne.

The spot cocoa contract has fallen back since touching a 30-year high on Oct. 23 at $3,412, especially with bean arrivals in Ivory Coast having surpassed its year-ago levels.

Cocoa arrivals at ports in top grower Ivory Coast reached 166,000 tonnes from the start of the season Oct. 1 and up to Nov. 1, according to exporters.

"That's suggesting that some of the supply concerns were a little bit overstated to that $3,400 level," said Mikulski.