COMMODITIES-Up broadly as markets await QE3 word; coffee jumps

* Market trade positive but light ahead of Fed
* Oil extends Friday gains in choppy trade
* Copper hits four-month highs
* Arabica coffee biggest one-day gain since January 2009
* Grains sell off ahead of USDA report

By Barani Krishnan
NEW YORK, Sept 10 (Reuters) - Oil and copper prices rose on
Monday, extending their gains from Friday on growing optimism
there will be new economic stimulus soon in the United States,
while coffee had its biggest jump in 3-1/2 years in a flurry of
short-covering.
But grain markets fell, with corn prices sinking to a
six-week low as traders moved out of bullish bets ahead of a
U.S. government report that will update the effect of crop
damage from the worst U.S. drought in half a century.
The 19-commodity Thomson Reuters-Jefferies CRB index
stayed in positive territory, rising half a percent, as 10 of
its 19 components showed gains.
Commodity prices have swelled over the past few weeks, with
gold touching a six-month peak, copper nearing four-month highs
and oil steadying from demand uncertainties in the second
quarter.
Last week, the net long bullish money in commodities held by
hedge funds and other big speculators hit a one-year high, data
from the Commodity Futures Trading Commission showed.

The rally heated up when investors bet the Federal Reserve
will launch a third round of quantitative easing or bond buying
by this week to spur on the U.S. economic recovery.
Monthly jobs data from the Labor Department last week showed
U.S. nonfarm payrolls increased only by 96,000 in August,
against market expectations for a 125,000 rise. The Fed is
holding a two-day policy meeting that will end Thursday and
speculation is rife it could approve a QE3.
"I think they're going to announce some sort of new program,
whether it's another round of QE or whether it's another Twist,"
said Zachary Oxman, managing director with TrendMax in
Encinitas, California.
The Fed's "Operation Twist" was a policy last year that
involved selling short-term Treasuries and buying longer-term
bonds.
"The Fed certainly does not back out or lighten up here,"
said Oxman. "If anything, they step on the accelerator. We are
in an election year and have a current president who, for all
intents and purposes, really needs to get this economy moving.
There's more QE coming."
Oil prices settled higher, although in choppy trading.
Crude oil's benchmark Brent grade in London rose 56
cents, or 0.49 percent, to finish at $114.81 a barrel. U.S.
crude rose 12 cents, or 0.12 percent, to close at $96.54.
China, one of the world's largest commodity buyers, saw its
imports for crude oil fall 12.5 percent in August from a year
earlier to the lowest daily rate since October 2010. Its implied
oil demand fell to 8.92 million barrels per day (bpd),
underlining sputtering domestic demand as the global economic
outlook darkens.
Data last week showed that China's industrial output growth
slowed to 8.9 percent year-on-year in August, the weakest since
May 2009, while total imports were down 2.6 percent, against
expectations for a 3.5 percent rise.
Ahead of the Fed's QE3 move, China last week gave green
light for a $150 billion stimulus covering 60 infrastructure
projects.
In copper, London Metal Exchange three-month copper
broke above the psychological $8,000-per-tonne level for the
first time since May 14, ending at $8,068 a tonne, up $78.
The most active U.S. copper futures contract, December
, rose 4.35 cents, or more than 1 percent, to settle at
$3.6885 per lb after touching a four-month high at $3.70.

Arabica coffee in New York rallied nearly 7 percent as
players bought heavily into a market cheapened by six weeks of
selling.
"I think the long-term macro guys were short and it's prudent
to take money off the table with a record short," said Nick
Gentile, chief trader at Atlantic Capital Advisors in New
Jersey.
Arabica's December contract in New York rallied as
much as 6.9 percent before settling up 6.5 percent at $1.7365
per lb. It pierced a 100-day moving average at $1.71, posting
its biggest one-day gain since January 2009.
December corn futures in Chicago fell 2 percent,
settling down 16-1/4 cents at $7.83-1/4 a bushel as players
awaited the U.S. Department of Agriculture's monthly
supply-demand and crop production reports on Wednesday for an
insight
into whether this summer's rally in grains could run longer.

Prices at 3:49 p.m. EDT (1949 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US crude 96.27 -0.15 -0.2% -2.6%
Brent crude 114.66 0.41 0.4% 6.8%
Natural gas 2.812 0.130 4.8% -5.9%

US gold 1731.80 -8.70 -0.5% 10.5%
Gold 1725.92 -9.97 -0.6% 10.4%
US Copper 370.00 4.40 1.2% 7.7%

Dollar 80.420 0.168 0.2% 0.3%
CRB 313.240 1.570 0.5% 2.6%

US corn 787.25 -15.25 -1.9% 21.8%
US soybeans 1718.25 -17.50 -1.0% 43.4%
US wheat 901.50 -14.00 -1.5% 38.1%

US Coffee 173.65 10.60 6.5% -23.9%
US Cocoa 2653.00 -23.00 -0.9% 25.8%
US Sugar 19.43 0.05 0.3% -16.4%

US silver 33.574 -0.059 -0.2% 20.3%
US platinum 1602.80 7.50 0.5% 14.1%
US palladium 672.25 18.25 2.8% 2.5%