Cocoa futures gained, recouping losses on the Chinese rate hike, as market participants continued to monitor developments in top grower Ivory Coast. Arabica coffee futures on ICE were slightly lower, slipping further from 13-1/2-year peaks.

China's central bank raised its benchmark deposit rate for the second time in just over a month, sending commodity prices lower as markets worried the decision could slow domestic consumption in the world's No. 2 economy.

New York raw sugar futures fell as much as 5 percent after the Chinese decision, setting off automatic sell stops.

"Every commodity had a kick in the groin when the Chinese raised rates," a senior sugar futures dealer said, adding the decline gathered momentum as key support levels were breached.

The March contract later pared some of its losses to trade down 1.45 cent or 4.4 percent at 31.23 cents per lb at 1607 GMT, remaining below its 30-year peak of 36.08 cents from Feb. 2.

London March white sugar fell $34.00 or 4.3 percent at $765.50 per tonne, below last week's record high of $857.00 per tonne.

"Generally, commodities are under pressure due to the Chinese interest rate increase," said Mike McDougall, senior vice-president of brokerage Newedge USA in New York.

But other analysts said the initial reaction was overstated, as the rate increase was unlikely to impact Chinese growth, or demand for key staples such as sugar.

"The ... fall in ICE raw sugar futures after the Chinese rate decision was a knee-jerk reaction," said James Kirkup, head of sugar brokerage at ABM AMRO Markets (UK) Ltd.

COCOA JUMPS ON IVORY COAST TURMOIL

Cocoa futures turned positive after an initial dip on the Chinese rate hike, with markets focused on whether continued turmoil in Ivory Coast -- which grows a third of the world's cocoa crop -- could lead to civil war or an extension of a call for a month-long cocoa export ban.

A Reuters witness said at least two floors of Ivory Coast's Treasury building were in flames on Tuesday, although the cause for the fire remained unclear.

"Anything that reflects tensions or disturbances in Ivory Coast is not ignored... and could be supportive," a London-based trader said.

ICE benchmark May cocoa futures climbed $17 or 0.5 percent to $3,240 per tonne, while London May cocoa rose 15 pounds or 0.7 percent to 2,115 pounds a tonne.

Coffee futures fell in choppy trading, though prices remained supported by a shortage of high-quality arabica beans.

"Brazil had a big crop. The question is whether the market has sufficient quality coffee," a London-based broker said, after lower-than-normal production in Colombia, the top producer of high-quality washed arabica beans.

ICE March arabicas traded down 1 cent or 0.4 percent at $2.4875 per lb at 1611 GMT, below their 13-1/2-year peak of $2.5360 a lb from last Thursday.

Liffe May robusta coffee was down $11 or 0.5 percent at $2,232 per tonne, below its 2-1/4-year high of $2,287.