Arabica coffee futures on ICE rose on Wednesday, closing at a 3-1/2 month high on Wednesday, finishing August with their biggest monthly gain in 2011 after rising for 17 days straight, on tight supplies and broad-based gains in commodities.

Cocoa futures on ICE also rose along with other commodity markets, after US data showing new orders for factory goods in July rose more than expected.

Raw sugar closed up a shade after a choppy session.

"The macro situation seems to be developing a bullish scenario for commodities as the market anticipates stimulus from the central banks," brokers Sucden Financial said in Wednesday market note.

Some technical analysts view arabica coffee futures as overbought after they climbed 22 per cent in the 17-day rise due to tight supplies.

Market watchers said origin sellers either were short of washed beans or were waiting for prices to rise further. Many investors have been covering short position this month, dealers said.

"There is still a scarcity of high quality arabica beans. The expected recovery later in the year in Colombia's main crop, which is harvested from October, now seems to be in doubt," said F.O. Licht analyst Stefan Uhlenbrock.

Colombia, a key supplier of high-quality arabica beans, has also seen crop prospects diminished by heavy rain caused by the La Nina weather anomaly.

"I still think coffee, out of the softs, is the shining star because there's more potential to the upside there. I wouldn't be surprised if we start seeing $3 coffee in September," said Nick Gentile, lead trader at Atlantic Capital Advisors in Jersey City, New Jersey.

"There's a lot of physical roaster buying that has to get done. They have to replace inventory and the only place they can replace the coffee is out of Brazil, and that will keep the market steady."

December arabica coffee on ICE climbed 1.55 cents, or 0.5 per cent, to end at $2.8825 per lb, the strongest close since May 10.

November robusta coffee on Liffe fell $19 to settle at $2,333 per tonne.

Volume in the softs complex was light ahead of the US Labor Day holiday on Monday.

"The markets are looking at fundamental questions that have yet to be clarified," said Mike McDougall, vice-president of brokerage Newedge USA.

"There's macro confusion as well. Are we on the verge of a double-dip recession or more quantitative easing? Or will the billions sitting in money markets come back in? It's got the markets on a standby mode."

He said raw sugar futures, which ended the month down 0.4 per cent, retained support from questions over how much sugar will top producer Brazil harvest and nervousness about whether India would scale back sugar exports if food inflation becomes an issue in the country, as it did last year.

There are also questions about China's sugar import plans and suspicion in the trade those purchases would top Beijing's 1.9 million tonne sugar import quota.

Other producing nations are expected to see bumper crops, however.

October raw sugar on ICE closed up 0.06 cent at 29.68 cents per lb, well below the session high at 30.22. October white sugar on Liffe dropped $3.20 to settle at $770.80 per tonne.

Sugar supplies to swell

"In Europe, the harvests will start in September and in Russia and Ukraine, the harvests has started already and these countries are all projecting record sugar yields and really massive crops," Uhlenbrock said.

Cocoa futures were higher but rangebound, with ample supplies still capping gains following a bumper 2010/11 West African crop.

December cocoa on ICE settled up $11 at $3,113 per tonne while December cocoa on Liffe rose 8 pounds to finish at 1,957 pounds a tonne. – Reuters