<strong>Softs</strong>-Sugar,Coffee rises on weaker dollar, oil rebound

Brazil - * Options expiries a key focus on coffee and sugar

* Cocoa underpinned by industry buying

LONDON, Sept 12 (Reuters) - Coffee and sugar futures were higher on Friday in a modest rebound from steep losses earlier in the week with the market bolstered by a weaker dollar and stronger crude oil market, dealers said.

Cocoa futures on ICE also rose while sterling-denominated cocoa futures in London were slightly down.

"It is a Friday so you may see a bit of a correction to the move of the week and the dollar is a bit easier, but in my view we are going to see another test of the downside soon," one coffee dealer said.

December coffee futures on ICE were up 0.70 cents at $1.3920 per lb at 1157 GMT.

Dealers said ICE coffee prices were likely to be influenced by Friday's expiry of October serial options, for which December is the underlying futures contract.

"New York is gravitating back to $1.40 because it is options expiry today," one dealer said.

Robusta coffee futures in London were also higher with November up $9 at $2,156 a tonne.

Dealers said the market continued to be driven by outside influences such as the dollar and oil with little, if any, impact from news that the International Coffee Organization had raised its forecast for world production.

Global coffee production in 2008/09 is now expected to reach about 131 million 60-kg bags, up from a previous estimate of 128 million, International Coffee Organization executive director Nestor Osorio said on Friday.

Sugar futures were also higher with options again a key focus. Options on the October raws contract on ICE were due to expire later on Friday.

"Options expire today which I think is going to be the most important feature of the week. I think October is going to be nailed to 12 cents," one dealer said.

October raws was up 0.15 cent at 12.09 cents a lb.

OIL HOLDS KEY

Dealers said the market continued to be heavily influenced by trends in crude oil with prices slightly higher on Friday.

"It we hold above $100 (a barrel on crude oil) then psychologically I think that is a bit positive for sugar but any crack through $100 and I think we will see the whole commodity complex lurch (down)," one dealer said.

Sugar output in Brazil's centre-south totalled 14.8 million tonnes by the end of August, down 4.5 percent from 15.5 million tonnes a year ago, the Sugar Cane Industry Association (Unica (nasdaq: UNCA - news - people )) said Thursday.

Asian sugar trading was likely to slow in coming months as major buyers signalled they would not import more sugar since they had ample stocks to satisfy year-end demand, traders said on Friday. Cocoa futures showed mixed trends with prices on ICE edging higher, buoyed by a weaker dollar.

"I think New York is steadier on the back of currency," one dealer said.

December cocoa futures on ICE were up $13 at $2,553 a tonne while December cocoa in London eased eight pounds at 1,497 pounds a tonne.

Dealers said industry buying below 1,500 pounds continued to underpin the market in London.

"That (just below 1,500 pounds) is basically where the industry want to buy it but I think once you get through this bit of buying the market could drop pretty quickly," one London dealer said.

There was little immediate response to reports there could be a prolonged fall in Indonesia output although dealers said it may become a more important factor when U.S. traders become more active later in the day.

Indonesia's cocoa production is seen falling to a "critical level" in the next three-four years unless the industry can train farmers to deal with pests, disease and poor agricultural practices, an industry official said.

source:forbes