US cocoa rises to 1-yr high on Ivory Coast worries

* Concern over cocoa exports from I.Coast boosts prices

* Tight supplies push arabica into a rally (Recasts, updates prices, market activity; adds second byline, dateline, previously LONDON)

By Marcy Nicholson and Sarah McFarlane

NEW YORK/LONDON, Feb 17 (Reuters) - U.S. cocoa futures tiptoed up to close at the highest level in more than a year on Thursday, as more banks suspended operations in Ivory Coast, strangling cocoa trade, and on export ban uncertainty.

Arabica coffee futures soared to close at the highest level in nearly 14 years, buoyed by a shortage of high quality beans combined with investor interest. Sugar futures dropped.

ICE cocoa prices kept rising in thin dealings as more banks ceased operations in top producer Ivory Coast and people rushed to withdraw cash from a banking system paralyzed by the country's post-election power struggle.

Later in the day, the country's cocoa regulator said it would recover export taxes from companies for the cocoa in their warehouses, even if Western sanctions prevent them from exporting it.

"Exporters have no clue (what to do) and that's why the spreads are at premium. The little dips are bought each time," one U.S. broker said.

ICE benchmark May cocoa futures inched up $17 to finish at $3,438 per tonne, the highest settlement for the second position since Jan. 25, 2010. Total volume sat just below 8,000 lots, down 65 percent from the 30-day average, preliminary Thomson Reuters data showed.

The thinly traded March closed at a $44 premium to May, the highest since March 2009, while the May premium to July was at $38, the highest since June 2008, ICE data showed.

Liffe May cocoa finished down 5 pounds at 2,232 pounds per tonne.

The strong sterling against the dollar helped to lift U.S. cocoa and pressure the London market, dealers said.

Dealers expect that large amounts of cocoa will be smuggled from Ivory Coast into neighboring countries after a month-long export ban was imposed in January. The ban was set to be lifted on Feb. 23 although there is uncertainty about whether or not it will be extended.

Nestle, the world's biggest food maker, said strong demand in emerging markets would help it offset a steep rise in input costs in 2011 after it beat sales forecasts for 2010

ICE arabica coffee futures rallied to close at the highest in nearly 14 years with a lift from the weak U.S. dollar and chart-based buying after automatic stops were triggered. A lack of high-quality washed Colombian beans kept lifting the market, with roasters forced to pay up, dealers said.

"There are concerns about supply coming into the market. We're simply not going to have enough beans," said Sterling Smith, analyst with Country Hedging in Minnesota.

ICE May arabicas jumped 7.25 cents or 2.8 percent to close at $2.6885 per lb, the highest for the second position since May 1997. Liffe May robusta coffee traded up $23 to finish at $2,305 per tonne.

"Speaking to roasters it seems...they have to buy," a London-based broker said.

"On top of that, the fact prices are so high forces people to liquidate, because they can't finance their position."

ICE raw sugar futures fell in another highly volatile session, with the most-active May fell 0.36 cent to close at 28.86 cents per lb.

London May white sugar was down $21.90 to settle at $726.80 per tonne.

The global sugar market has been supported by tight supplies due to adverse weather in key producers, and resilient demand, but pressure has recently come to the market ahead of top grower Brazil's harvest next month.

Dealers focused on the expiry of the ICE March raw sugar contract on Feb. 28, with one broker noting that dealers were saying a large Swiss trade house could potentially look to receive up to 800,000 tonnes, including Central American origin.

(Source: http://www.forexyard.com/en/news/SOFTS-cocoa-rises-to-1-yr-high-on-Ivory-Coast-worries-2011-02-17T202839Z-US)