LONDON, July 3 (Reuters) - Arabica coffee futures on ICE rose on Wednesday, heading back towards this week’s seven-month highs as a weaker dollar and continued worries over frost risk in top producer Brazil again prompted funds to cover their shorts.
* September arabica coffee rose 1.4 cents, or 1.2%, to $1.1105 per lb at 1132 GMT, after touching $1.1410 on Monday, its highest since Nov. 29.
* South and central Brazil are expected to be hit by the coldest temperatures of the year in coming days, and frost will likely form in some coffee areas, but it is unlikely to be widespread and will not be very intense, forecasts indicate.
* “Industry are not panicking at all about this frost but overall prices are still pretty cheap so the market needed some kind of (rebalancing). We’re probably back to where we should be if we look at fundamentals,” said a dealer.
* In industry news, companies like Nestle are willing to pay a premium for Zimbabwe’s coffee beans, leading small-scale farmers to return to a sector that was all-but destroyed under former President Robert Mugabe.
* In the wider markets, the dollar edged lower, undermined by the steady fall in U.S. Treasury bond yields, fading optimism over the Sino-U.S. trade deal and the possibility of fresh tariff hostilities with Europe.
* A weaker dollar and stronger real tends to discourage selling by Brazilian producers.
* September robusta coffee rose $14, or 0.9%, to $1,457 per tonne, after touching a more than three-week peak of $1,489 on Monday.
* October raw sugar edged up 0.01 cents, or 0.1%, to 12.36 cents per lb, having hit its lowest since end-May on Tuesday.
* “Following yesterday’s rather unexpected drop the likelihood of any significant rally seems limited. On the other hand, there would seem little reason for prices to drop further,” said a dealer.
* There are continued concerns that a weaker-than-normal monsoon in India, a top sugar producer, could curtail sugar production there just as Brazil, another top producer, reduces its output in favour of ethanol.
* August white sugar rose $0.40, or 0.1%, to $320.10 per tonne.
* September New York cocoa rose $3, or 0.1%, to $2,475 per tonne.
* September London cocoa rose 3 pounds, or 0.2%, to 1,832 pounds per tonne.
* U.S. food maker Mars Inc. supports a decision by Ivory Coast and Ghana to set a floor price for their cocoa exports, becoming one of the first major chocolate companies to back the initiative. (Reporting by Maytaal Angel, Editing by Ken Ferris)