Sugar futures slid more than 6 per cent on Friday, to the lowest level in over a month, on heavy profit-taking ahead of a long US holiday weekend after news that India asked mills to double supply.

Coffee and cocoa inched up in thin volume.

ICE Futures US agricultural commodity futures and options markets will be shut on Monday for the US Labor Day holiday and will reopen on Tuesday.

Investors had driven sugar prices to a 28-1/2 year peak on Tuesday because of a shortage of the sweetener in India following weeks of weather reports showing a lack of monsoon rains to nurture India's large crop. But they dumped long positions on Friday after reports that India's government took steps to ensure adequate supplies.

India asked its mills to double the mandatory supply of sugar for subsidized public distribution, and also raised prices the government will pay to sugar producers.

The key ICE October raw sugar contract settled down 1.54 cent or 6.7 per cent to finish at 21.60 cents per pound (lb). It was the biggest one-day percentage loss since March 17, 2008, when it slid 7.7 per cent, according to Reuters data.

Investors "were reluctant to buy on expectations of increasing supply from India that triggered heavy profit taking," said Mike McDougall, senior vice-president of the Brazil desk at Newedge USA.

Trade in the October contract was busy with volume reaching 113,927 lots.

In London, Liffe October white sugar tracked raws lower to end at $537.20 per tonne, down $12.80, well below the record high of $603.60 touched on Tuesday.

Despite Friday's heavy selling, some analysts said sugar was likely to remain supported going forward.

"The market has run out of momentum given that there is no news feeding into higher prices," said Luke Chandler, a commodities analyst with Rabobank.

"Based on the supply deficit predicted for 2009/10, you can see prices at above 20 cents pretty comfortably," he added.

Dealers said sugar still had strong fundamentals, notably expectations of buoyant Indian demand. Top consumer India has swung to a net importer. Its appetite for raw sugar has been a key factor driving a doubling of prices this year.

"There is plenty of physical demand on the dips, and that is not going away right now," one London-based trader said.

Cocoa and coffee futures rose in routine two-day dealings amid slim volumes ahead of the US holiday.

Dealers anticipated improving cocoa grindings on better economic prospects, but remained concerned over the quality of the crop in top grower Ivory Coast.

Benchmark December cocoa on ICE Futures US firmed $13 to settle at $2,936 per tonne. Liffe December cocoa closed up 2 pounds at 1,887 pounds a tonne in modest volume.

Liffe November robusta coffee rose $28 to finish at $1,448 per tonne, supported by a weaker dollar. ICE December arabicas were up 3.30 cents at $1.2410 per lb, a 2.73 per cent gain. – Reuters