NY cocoa jumps to one-year peak on tight spreads

MARKETS/SOFTS (UPDATE 2)

* Cocoa March/May spread tightens to as high as $24

* ICE recommends automated price generation for sugar

* Weak macro picture, strong dollar weigh on coffee

(Adds comment, recasts, updates prices)

By Anna Yukhananov and Sarah McFarlane

LONDON, Feb 10 (Reuters) - Cocoa futures on ICE leapt to their highest in over a year on Thursday as investors scrambled to cover short positions after the March/May spread tightened, dealers said.

Sugar surged in volatile trading but remained within its recent range, with investors eyeing developments in India. Arabicas nudged lower as weak global equity markets and a firmer dollar led some investors to close out positions following Wednesday's 13-1/2-year peak.

ICE cocoa futures for May jumped 4.5 percent to $3,431 a tonne, the highest level for the second position since late January 2010, before retreating to $3,375 a tonne at 1556 GMT, which was still up $92 or 2.8 percent.

Backwardation on ICE, with the March position spiking to as high as $24 above May, versus a small discount during the prior session, suggests renewed concerns about supply tightness, with the Jan. 23 call for a month-long export ban in top grower Ivory Coast continuing to underpin markets.

"We're in the middle of an export ban, so from a fundamental point that's clearly taking its toll," said Kona Haque, an analyst with Macquarie Bank. "But the recent rally has been more about short-covering, and there's a lot of spread trading going on.

"When you have so much risk premium associated with the world's biggest producer, no one wants to go short."

Heavy March/May spreading has also boosted the May contract in recent days ahead of the March first notice day on Monday.

London's May cocoa contract rose 48 pounds or 2.3 percent to 2,182 pounds per tonne, still below its six-month peak of 2,269 pounds a tonne.

A halt to cocoa-buying in Ivory Coast is leaving beans to rot in farm warehouses, while smuggling through Ghana intensifies and some growers switch to other crops, farmers said on Thursday.

SUGAR MARKETS FOCUS ON INDIA, VOLATILITY

Sugar climbed as investors continued to fret about exports from India, the world's No. 2 producer after Brazil, but remained in a tight range, below recent peaks and lows.

The key March raw sugar contract on ICE rose 1.18 cent or 3.8 percent to 32.68 cents a lb at 1556 GMT after jumping as much as 5 percent on investment fund buying.

But it stayed below its 30-year peak of 36.08 cents from Feb. 2 and above Wednesday's three-week low of 30.43 cents a lb.

London's March white sugar futures were up $28.50 or 3.7 percent to $790.00 per tonne, below the record high of $857.00.

Investors were focused on recent volatility, given that sugar prices have surged or tumbled as much as 10 percent in a single day.

The ICE Futures U.S. exchange has recommended reverting to automated price generation for sugar contracts from March 1, after top market players complained about wild price swings caused by algorithmic traders.

Extreme price volatility in sugar will also be a focus of the Feb. 19-22 Kingsman trade conference.

Emmanuel Jayet, head of agricultural commodities research at Societe Generale, said uncertainty about India's sugar output had also added to the wide price fluctuations in recent weeks.

"These sugar price moves were driven by these Indian exports, so that's a big part of the volatility," he said.

"It seems unlikely these exports will appear before the end of March, or even before May, so in the short-term, this tightness can only continue."

Top sugar consumer India will export raw sugar only if there is enough availability for domestic consumption to avoid aggravating high domestic inflation.

Sugar output in the centre-south of Brazil, the top sugar producer, was up 17.8 percent year-on-year.

In coffee, ICE futures were slightly down in choppy trading, just below Wednesday's 13-1/2-year high, their fifth fresh peak this year, as the market tracked wider macroeconomic trends.

Weak corporate results weighed on global equities on Thursday, while the dollar rose, making dollar-denominated commodities more expensive in terms of other currencies.

Dealers said, however, that limited supplies of washed arabica coffee from top producer Colombia, a lack of producer selling, roasters being behind in their pricing and the current popularity of commodities were underpinning prices.

New York's benchmark May arabicas eased 0.15 cents or 0.1 percent to $2.5550 per lb at 1607 GMT after touching $2.56 a lb on Wednesday, their highest since June 1997.

Liffe May robusta coffee was largely steady at $2,253 per tonne, below its 2-1/4-year high of $2,287.

* Prices as of 1610 GMT Product Last Change Percent Move End 2010 Ytd Percent ICE sugar 32.66 1.16 +3.68 32.12 1.68 ICE coffee 255.40 -0.25 -0.10 241.80 5.62 ICE cocoa 3374.00 91.00 +2.77 3052.00 10.55 Liffe sugar 787.30 25.80 +3.39 777.50 1.26 Liffe coffee 2253.00 -1.00 -0.04 2097.00 7.44 Liffe cocoa 2181.00 47.00 +2.20 2029.00 7.49 CRB index 340.73 1.30 +0.38 332.80 2.38 Crude oil 86.88 0.17 +0.20 91.38 -4.92 Euro/dlr 1.36 -0.01 -0.88 1.34 1.73 * ICE sugar and ICE coffee in cents per lb; ICE cocoa, Liffe sugar and Liffe coffee in dollars per tonne; Liffe cocoa in pounds per tonne (Editing by Jane Baird)