* Sugar up 3 percent as commodity markets rebound
* Funds have scaled back huge net longs in cocoa futures (Rewrites throughout, updates prices; adds comment, second byline, NEW YORK dateline)
By Marcy Nicholson and Nigel Hunt
NEW YORK/LONDON, Jan 13 (Reuters) - Sugar futures on ICE surged 3 percent on Wednesday, on a bullish combination of chart-based buying, continued Asian demand and as some farmers in India began to switch to crops that require less water due to a drought.
Cocoa futures also rose, after falling to multi-month lows on Tuesday, while coffee nudged higher.
The soft commodities recovered some ground and followed larger markets higher as recent declines linked to concerns about an economic slowdown in China eased after data showed the country’s exports fell less than expected.
The 19-market Thomson Reuters CoreCommodity Index, bounced up from the prior session’s 13-1/2-year low.
March raw sugar futures settled up 0.42 cent, or 3 percent, at 14.47 cents per lb, the spot contract’s biggest rally in five weeks, in heavy volume.
“Yesterday’s hold of 13.93 (cents) was key and we were very close to penetrating the 100-day moving average at 13.89 and the 200-day moving average at 13.75,” one U.S. trader said, referring to the double bottom with a two-month low.
“I think the Indian story is validating the inverses in the futures curve out in 2017.”
Indian farmers in the country’s top sugar growing state of Maharashtra are being forced to replace cane with less water-intensive crops, as a scorching drought drives authorities to hold back water from dams.
March white sugar settled up $10.50, or 2.6 percent, at $423 per tonne.
March New York cocoa settled up $32, or 1.1 percent, at $2,892 per tonne, after a steep decline to an 8-1/2-month low on Tuesday.
“The market has started to find an area of consolidation and support ... The first few days of the year have been among the most brutal I can remember,” one cocoa trader said, referring to the heavy volume of sales in the last few days.
Dealers said commitment of traders data, to be issued on Friday and Monday, should show substantial reductions in speculative net long positions in New York and London cocoa.
Dealers said another key focus would be fourth-quarter European grind data, to be issued on Friday, which was expected to show a year-on-year rise of about 2 to 5 percent.
March London cocoa settled up 10 pounds, or 0.5 percent, at 2,073 pounds per tonne.
Arabica coffee futures also strengthened, with March ending up 0.45 cent, or 0.4 percent, at $1.148 per lb. March robusta coffee settled up $9, or 0.6 percent, at $1,457 per tonne. (Editing by William Hardy and Meredith Mazzilli)