US sugar futures finished their most volatile year in three decades at a near 30-year high on Friday, while coffee clocked its biggest rise since 1994 in a fund-fueled rally.

Cocoa broke a four-year rising streak with a 7.7 per cent decline, despite political upheaval in top producer Ivory Coast, making it the second-weakest performer in the Reuters-Jefferies CRB index and a rare outlier in a year during which commodities probed new highs and outperformed other assets.

Despite their divergence, common themes buoyed the soft commodities this year, including Latin American weather that threatens to limit the Brazilian sugar crop and curtail Colombian coffee output for a second year, plus political risk from India's export policy to Ivorian turmoil.

While fund investors abandoned sugar in the first half, they flocked to coffee in the second, driving prices to a succession of 13-1/2 year highs notching it up 77 per cent year-against-year and making it the third-best performer in the CRB.

On Friday, ICE March raw sugar futures surged 1.74 cents, or by 5.7 per cent, to settle at 32.12 cents per lb, just below Wednesday's 30-year peak of 34.77 cents. It rose 19.2 per cent from the 2009 settlement of 26.95 cents.

London front-month white sugar futures ended 2010 up 9.5 per cent year-on-year at $777.50 per tonne, compared with a close of $710.20 per tonne on Dec. 31, 2009.

"There was also buying across the board in other commodities as some put on positions early ahead of next week in anticipation of additional capital flowing into commodities," said Bill Raffety, senior analyst at brokerage Penson Futures, referring to the day's move in sugar.

This year has been the most volatile for raw sugar since 1981, after climbing to a 29-year top in February, dropping 60 per cent to a one-year low in May, and then clawing back up to a new peak earlier this week.

Sugar markets are underpinned by tight near-term availability as India, the world's second-largest producer after Brazil, looked poised to permit limited exports in 2011.

Adverse weather in key producing countries such as Brazil and Australia, which has suffered prolonged rainfall, has eroded supply prospects.

"There is a considerable degree of uncertainty over the extent of the crop in India," said Alan Wood, managing director of London-based merchant Czarnikow.

"There is a very tight sugar flow into the first quarter leading up to the March expiry of ICE raw sugar (on Feb. 28). There is every chance that we will see new price highs in 2011."

Looking into early 2011, the market could also find spillover support from the energy market and the possible outcome of a lawsuit between the US Department of Agriculture and sugar beet growers that could affect the ability to plant, Smith said.

Friday was a half-day on the London soft commodities markets as 2010 wrapped up. They will reopen on Tuesday, January 4, for the first trading session of 2011. US ICE sugar, coffee and cocoa markets are also shut on Monday.

Coffee leads complex

ICE spot-contract arabicas finished 2010 up with their biggest annual rise in 16 years, underpinned by a shortage of high-quality Colombian arabica beans and fund interest.

ICE spot-month arabicas closed the day up 4.20 cents at $2.4050 per lb, near last week's 13-1/2 year top at $2.4225.

This settlement was up 77 per cent from the final trading day of 2009 when the spot contract settled at $1.3595 per lb.

London second-month robusta coffee futures rose on quality concerns in top producer Vietnam as the delayed harvest drew to a close, while ICE arabica coffee firmed and neared last week's 13-1/2 year peak.

London second-month robusta coffee futures ended 2010 up 57 per cent year-on-year at $2,097 per tonne on Friday, compared with a close of $1,332 per tonne on Dec. 31, 2009.

"High quality Colombian arabica is definitely going to be the market driver in the New Year -- there just is not enough supply," said Rabobank's Flury.

Cocoa lags

ICE cocoa futures rose on Friday, underpinned by concerns that a power struggle after an election in top producer top grower Ivory Coast could disrupt supplies to the international market, although market reaction was subdued as cocoa continued to be transported, dealers said.

London second-month cocoa futures ended 2010 down 11 per cent year-on-year at 2,029 pounds per tonne on Friday, compared with a close of 2,271 pounds on Dec, 31, 2009.

ICE spot-month cocoa finished 2010 down 7.7 per cent year-on-year, the first yearly decline since 2005 and making it the second-weakest performer on the CRB. The contract traded $35 higher on the day at $3,035 a tonne.

"It has been a bearish commodity in what has been a boom year for commodities in general," said Sterling Smith, analyst for brokers Country Hedging in Minnesota.

Speculators held a net short position for one-third of the year.

"I don't think anyone wants to take an aggressive short position in here right now, given the state of things in the Ivory Coast," Smith said.

Dealers said that if the strife in Ivory Coast escalates, they saw a risk that prices could re-test a four-month high in ICE cocoa futures of $3,140 a tonne touched on Dec. 7, although West African new-crop supplies were ample.

J Peter Pham, an African security adviser, told Reuters, "Although the ports are currently operating, that might change; even if it doesn't, prices may moderate as the larger-than-expected crop comes to market." – Reuters