SOFTS-Sugar rises on hurricane threat, funds sell cocoa

Brazil - * Hurricane Ike threatens sugar crops in Caribbean
* Cocoa finds industry support after fund-driven slide

LONDON, Sept 8 (Reuters) - Sugar prices rose on Monday as traders tracked Hurricane Ike as it moved across key growing areas in the Caribbean, while cocoa fell sharply on selling by system funds.

Dealers said sugar also derived support from a rise in crude oil prices inspired by the threat posed by the hurricane ot the U.S. Gulf of Mexico oil hub.

"Some of this hurricane stuff makes people a bit uneasy about being short. While it is still ongoing I wouldn't be a hurry to sell anything," one sugar trader said.

October raw sugar on ICE was up 0.22 cent at 12.76 cents a lb at 1206 GMT.

Dealers said sugar was beginning to find more widespread support after the steep drop in prices during the last couple of weeks. October raws has fallen more than 1.50 cents during that period and key support is now seen around 12.50 cents.

The market is also underpinned by more bullish long-term fundamentals. Last week, brokerage and consultancy Kingsman forecast a global deficit of 3.8 million tonnes in 2008/09.

"Sugar, because it is at or slightly below the cost of production and a lot of farmers are cutting back, looks relatively bullish certainly through 2009 and 2010," said Commerzbank analyst Edward Hands.

White sugar futures in London were also mostly higher although the October contract bucked the trend and weakened slightly as concern about a possible shortage of deliverable supplies waned.

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October whites futures are due to expire next Monday.

"It is going off in a week and now we have found out there isn't a problem with the availability of sugars," one dealer said.

October whites was off $0.50 at $383.50 a tonne while December rose $2.50 to $390.00.

Cocoa futures fell sharply, extending last week's downward trend although trade and industry buying emerged around the day's lows, dealers said.

"I think some system funds have been selling the market, some stops have been triggered and there has been some very good scale-down buying in the market," one dealer said.

December cocoa in London was down 42 pounds at 1,501 pounds a tonne while December cocoa on ICE slipped $90 to $2,546 a tonne.

Dealers said the market should be able to build a base above 1,490 pounds, basis December.

Volume on London cocoa was boosted by a large cross trade of 13,546 lots on September/December at five pounds.

Dealers said a fund may have been rolling forward a position out of the front month.

Coffee prices were little changed with gains erased as the dollar rebounded from early weakness.

November robustas in London were unchanged at $2,166 a tonne, well below its early high of $2,189. December arabica on ICE was up a marginal 0.10 cent at $1.4275 per lb.