(Adds arabica, raw sugar closing prices, cocoa open interest data)
* Broker sees risk of further rally in arabicas
* Raw sugar October options expiry holds market at 20-cents
* Speculators reduced robusta long positions
By Marcy Nicholson and David Brough
NEW YORK/LONDON, Sept 17 (Reuters) - ICE arabica coffee futures dropped 3 percent on Monday, turning lower on a wave of profit-taking after failing to hit an eight-week high, while cocoa markets tumbled from their recent consolidation range.
The benchmark sugar contracts edged up, with October options expiry keeping the raws near the key 20-cent strike price.
ICE December arabica coffee futures ICE December arabica coffee futures tumbled 5.45 cents, or 3 percent, to settle at $1.7565 per lb, after hitting a session low at $1.7410.
The benchmark arabica contract hit a session high at $1.8355 per lb, just shy of the previous session's peak of $1.8370, the highest level since July 24.
"It's a loss-of-momentum play, not being able to move higher. Very often when you have a short run-up like this, very often it brings out quick profit taking," said Sterling Smith, futures specialist with Citigroup in Chicago.
Smith noted that it is the Jewish New Year, a holiday that takes many dealers away from their desks and reduces trade volume, allowing for volatile moves like those seen in the softs complex.
"We are at the start of the Jewish holidays and very often markets get a little messy. You get people away from their offices and markets get a little bit thin," Smith said.
Analyst Shawn Hackett said in a commodity report, "My expectation is that one more correction will likely be seen, as overhead resistance in the $1.95 region should halt the current rally."
November robusta coffee futures closed down $19, or 0.9 percent, at $2,064 a tonne.
Speculators reduced net long positions in robusta coffee and white sugar futures and options on NYSE Liffe in the week to Sept. 11, exchange data showed on Monday.
ICE December cocoa sank $58, or 2.2 percent, to settle at $2,584 per tonne, after dropping 3.4 percent to $2,551. The day's sharp move lower pulled the benchmark contract out of the $2,582-$2,679 range that it held for the past week.
Total open interest inched up by 761 lots to 207,128 lots on Sept. 14, a record high that exceeded Liffe cocoa futures open interest which reached 206,163 lots on the same day, exchange data showed.
The contract fell on profit-taking as the market broke out of its recent consolidation, dealers said.
Liffe December cocoa dropped 29 pounds, or 1.7 percent, to close at 1,663 pounds per tonne, after falling 3.1 percent to a session low at 1,640 pounds.
Still, dealers were concerned over sector reform details in top grower Ivory Coast, as well as recent reports of violence in the country, and said cooler temperatures in West Africa, the world's major bean growing area, could hurt crops.
"There is evidence that the market still anticipates a supply deficit in the 2012/13 period, mainly as a result of the unusually dry conditions in West Africa and a possible recovery of demand in the industrialized countries," Commerzbank said in a daily market report.
ICE October raw sugar futures closed up 0.12 cent, or 0.6 percent, at 20.03 cents per lb, an inside session.
Options-related dealings dominated the session, as October options were set to expire at the end of the session with heavy open interest seen at the 20-cent level, keeping the market hovering around this price for most of the session, dealers said.
"We probably have some buy stops around Friday's high of 20.25 cents and sell stops below 19.50 cents," said Thomas Kujawa of broker Sucden Financial.
Brisk harvesting of sugar in Brazil and a reviving monsoon in No. 2 producer India have weighed on prices.
"We have been, and still are, perplexed by the fact that the physical market is not yet reflecting the alleged statistical surplus (i.e. spot physical sugar is not at a massive discount to futures)," brokerage Marex Spectron said in a market report.
A London-based sugar futures broker said he expected sugar prices to consolidate in the near term, but noted an improving production outlook.
"The big problem and possible drawback for the sugar markets is the rapidly improving production in Australia, Brazil, China and possibly India, where the monsoon rains have certainly improved substantially," he said.
December white sugar on Liffe rose $2.10, or 0.4 percent, to close at $575.70 per tonne in thin volume of 1,638 lots. (Editing by James Jukwey, Marguerita Choy and Jim Marshall)