March arabica futures on ICE <KCH9 stood 3.60 cents or 3.25 percent lower at $1.0730 per lb at 1557 GMT.

Brazilian coffee exports in December rose to 2.728 million 60-kg bags, up from 2.004 million in the same month a year earlier, government data showed on Friday.

Analyst F.O. Licht said on Monday that rising production in 2008/09 should allow importers to rebuild stocks, but warned supplies could tighten in 2009/10 and beyond.

"Current prices simply do not offer sufficient incentive for producers to increase output, which would be necessary to continue matching demand," the analyst said, issuing its first estimate of the 2008/09 world coffee balance.

Robusta coffee futures in London were also lower with March off $25 or 1.6 percent at $1,565 a tonne.

Dealers said there remained concern about nearby supply tightness although the large premium for the January contract was attracting tenderable coffee. January was off $16 at $1,821 but its premium to March remained more than $200.

"There is a lot of coffee being graded at the moment and a lot is on the way. As more coffee gets to the board I think it (January) will come under pressure," one coffee dealer said.

A strong dollar also weighed on sugar prices with March raws on ICE off 0.10 cent at 11.75 cents a lb.

Dealers noted no immediate indications of fund re-allocations in soft commodities, but said they expected investment funds to sell off some sugar positions after the sweetener's resilient performance in 2008.

"Index fund rebalancing may weigh on raws at some point this week," brokers Sucden said in a market report on Monday.

March whites in London fell $2.50 to $326.70 per tonne.

China confirmed on Monday it would buy 800,000 tonnes of sugar from domestic refiners to shore up prices and protect Chinese mills and farmers from a surplus after an expected record production season.

Cocoa prices were slightly higher with the market looking to consolidate after rising to a 23-year high in London late last month.

May cocoa in London rose five pounds to 1,784 pounds a tonne. The contract peaked at 1,820 pounds on Dec 23, a 23-year peak for the second month.

The market has been boosted by tight supplies with port arrivals in top producer Ivory Coast running well below year earlier levels.

Cocoa arrivals at ports in Ivory Coast were 491,000 tonnes from Oct. 1 to Jan. 4, compared with 803,902 tonnes received in the same period during the 2007/08 season, exporters estimated on Monday.

"There is still the problem of arrivals in Ivory Coast and that is why we have good support on cocoa," Diapason fund manager Lathiere said.

ICE March cocoa was up $10 at $2,550 per tonne.