Coffee futures reversed to close higher as the dollar slipped. London cocoa turned positive on support from the weak sterling, helping to lift the U.S. market off its lows, dealers said.

U.S. President Barack Obama's proposals to limit financial risk taking were seen weighing on sentiment for soft commodities earlier in the session.

"It (the Obama proposal) is clearly negative for all markets but I think what we have got to remember is that for it to happen it is going to take years. It doesn't suddenly make March (raws) bearish," said James Kirkup, director and head of sugar brokerage at Fortis Bank Nederland in London.

The proposals, which need congressional approval, would be the most far-reaching overhaul of U.S. banking since the 1930s.

Sugar futures remained underpinned by tight supplies and the prospect of strong demand from a wide range of key importers including Pakistan, Egypt, Mexico and Indonesia, although little business has yet been conducted.

"Sugar is still fundamentally the most tight commodity of them all. It has still got some upside legs," said commodity strategist Kona Haque of Macquarie Bank.

March raws fell 0.48 cent to finish at 28.78 cents a lb.

"It closed poorly (Thursday) and is seeing some more liquidation. I think it is mostly a technical move, but so many people were targeting 30 (cents) that to get close and miss might be taken as a negative sign," said Jack Scoville, analyst for brokers the Price Group.

The contract rose as high as 29.82 cents on Thursday, a 29-year high for the benchmark month but just shy of the 30-cent level which is seen by many as the next upside target for a commodity which more than doubled in value last year.

London (Liffe) March white sugar futures finished $12 lower at $747 per tonne, having touched a record high of $767.00 per tonne on Thursday.

Cocoa futures were mixed with London prices buoyed by the weakness of the pound.

Dealers noted the fourth-quarter 2009 North American cocoa grindings, a measure of demand, dropped 1.54 percent from a year earlier, in line with expectations.

"Both Europe and North America (grinds) are showing signs of bottoming out," Haque of Macquarie said, adding she expected to see positive year-on-year data for the first quarter of 2010.

May cocoa in London closed up 10 pounds at 2,341 pounds a tonne, just shy of a 32-year high for the benchmark contract of 2,356 pounds set Thursday. March cocoa on ICE finished the day down $6 at $3,425 a tonne.

Coffee futures reversed higher as the greenback turned lower.

ICE March arabica futures finished up 0.90 cent at $1.3960 per lb, while Liffe March robustas moved up $33 to close at $1,360 per tonne.

Source: Reuters, flex-news-food.com