LONDON: ICE raw sugar futures extended gains to hit a 3-1/2-month high on fund and investor buying into producer selling on Monday, with March's premium remaining firm.
Arabica coffee and cocoa were little changed weighed by a stronger dollar.
Dealers said the sugar front-month premium indicated potential for a large delivery against expiry of the March ICE raw contract on Wednesday Feb. 29.
London-based brokers said the delivery, likely to go to a sole receiver, was expected to stand at between 500,000 and 1 million tonnes.
"If the dollar gets stronger, there is a risk of a technically driven selloff," one broker said.
Another broker said the likely origins of the sugar were top producer Brazil, Thailand, and Central America.
European shares and other risk assets like the euro and precious metals fell on Monday while the US dollar gained as investors worried that higher oil prices could flatten the fragile global economic recovery.
A European broker said the cane crop in the centre-south of Brazil, the main growing region, was progressing smoothly in generally favourable weather, noting expectations for centre-south production of 510-540 million tonnes of cane.
ICE March raw sugar futures traded at 1.01 cent premium to May at 1519 GMT, up from 0.93 cents at the close on Friday.
March raw sugar on ICE rose 0.3 cent or 1.2 percent to 26.49 cents a lb, after hitting a 3-1/2-month high of 26.53 cents earlier in the session.
"We're vulnerable to the risk of a correction (down)," said James Kirkup, head of sugar brokerage at ABN AMRO Markets.
Nick Penney of brokerage Sucden Financial said, "We suspect that the market is now in overbought territory."
London May white sugar futures climbed $7.00 or 1.1 percent to $668.40 per tonne in thin volume of 1,615 lots.
Iraq has issued a tender closing March 4 for a minimum of 25,000 tonnes of white sugar, the Trade Ministry said on Monday.
Robusta coffee futures on Liffe dipped with May down $19 or 0.9 percent at $2,037 a tonne in modest turnover of 4,628 lots.
TIGHT ROBUSTA PREMIUM
Dealers kept a close watch on the front-month robusta premium which has seen sharp volatility in recent weeks.
The March futures traded at a premium of $17 to May.
Andrea Thompson, analyst with CoffeeNetwork, a subsidiary of INTL FCStone, said the market was focused on the extent of origin selling from top producer Vietnam, adding there was a risk the front-month premium could widen again in the next few weeks.
Arabica coffee futures on ICE edged up, with upside capped by the firmer dollar.
"The dollar is weighing - there is general commodity selling, with oil going down," Thompson said.
May arabica coffee futures traded up 1.1 cent or 0.5 percent to $2.0470 per lb.
Speculators raised their net short position in arabica coffee futures and options on ICE Futures US to the biggest level in six months, in the week ended Feb. 21, as the market tumbled to a 15-month low, US Commodity Futures Trading Commission (CFTC) data showed on Friday.
Cocoa futures on ICE edged higher, with May up $25 or 1.1 percent at $2,382 a tonne. Prices were underpinned by recent tight arrivals of beans in West Africa. The firmer dollar limited upside potential.
"Generally speaking volume is light. Structure (rolling of positions) is probably the only thing that's featuring a little bit, you're seeing the July structure a little firmer, as is September's structure," a London-based dealer said.
"In a broad sense the market is tracking sideways."
London May cocoa was up $21 or 1.4 percent to $1,534 per tonne in light volume of 2,380 lots.
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