SOFTS-Arabica coffee falls 3% to three-week low; raw sugar also down

NEW YORK/LONDON, Jan 4 (Reuters) - Arabica coffee futures on ICE fell 3% to hit a three-week low on Wednesday, pressured partly by favourable weather for crop development in top producer Brazil, while raw sugar also closed down.

COFFEE

* March arabica coffee settled down 5 cents, or 3%, at $1.613 per lb after dipping to a three-week low of $1.5925.

* Dealers said rains in Brazil coffee areas and forecasts for more showers over the next few days should aid crop development.

* The market was also keeping a close watch on economic turmoil in Brazil, with the country's currency falling to its weakest since July 2021 this week before regaining some ground on Wednesday.

* However, the market could gain some support in the next few days from index fund buying.

* The weak performance of coffee in 2022 means it has become underweight in some indexes, so there will be some buying to restore the previous balance along with selling of stronger-performing commodities.

* Costa Rican coffee growers exported 11.7% fewer beans in December than in the same month of 2021, the country's ICAFE coffee institute said on Tuesday.

* March robusta coffee rose $21, or 1.1%, at $1,873 a tonne.

SUGAR

* March raw sugar fell 0.4% to 19.63 cents per lb, having hit a three-week low of 19.51 cents earlier.

* Dealers said changes to Brazilian fuel policy under the country's new president Luiz Inacio Lula da Silva were likely to favour the use of cane to make sugar rather than ethanol.

* "Well, for all those mills or mill groups that had been making plans to boost ethanol production, those plans are now looking questionable," said a U.S. sugar broker.

* Traders also said that increased output of sugar in India was helping to keep the market on the defensive.

* March white sugar fell $4.40, or 0.8%, at $543.10 a tonne.

COCOA

* March New York cocoa rose $31, or 1.2%, to $2,603 a tonne, boosted partly by a weak dollar.

* March London cocoa was little changed at 2,046 pounds per tonne. (Reporting by Marcelo Teixeira and Nigel Hunt; Editing by Alison Williams, David Goodman and Shailesh Kuber)