* Europe cocoa grind scheduled for April 10 release

* Arabica ends week up 5.5 percent following prior week's tumble

* Raw sugar climbs to 2-week high

(New throughout, updates closing prices; adds trade comment, second byline, NEW YORK dateline)

By Marcy Nicholson and Nigel Hunt

NEW YORK/LONDON, March 28 (Reuters) - Cocoa futures closed firm on volatile chart-based dealings on Friday, as the market formed a potentially bullish indicator, while ICE arabica rose with any crop relief from rain in top grower Brazil's coffee belt seen as limited.

Raw sugar on ICE Futures U.S. climbed for the fifth straight day to a two-week high, on the heels of the firm Thomson Reuters/CoreCommodity CRB Index .TRJCRB .

Cocoa futures were higher with ICE May CCc1 closing up $28, or 0.9 percent, at $2,983 a tonne, trading in a wide $88 range as the market approached a 2-1/2 year high of $3,039 a tonne set earlier this month.

July cocoa on Liffe LCCc2 rose 13 pounds, or 0.7 percent, to finish at 1,883 pounds a tonne, in a wide 44-pound range. Both contracts marked outside reversals higher, falling below the previous session's low and closing above its high, which can sometimes be interpreted as a bullish technical indicator.

Both the New York and London markets were initially lower, but a lack of follow-through selling forced investors to cover their short positions, pushing the market higher. Even more buying came into the market after rising above the prior session's high, dealers said.

"A lot of guys were looking for this to get pounded, then when the selling dried up, you just had too many guys running to cover (their short positions) at the same time," one U.S. dealer said.

Dealers said fundamentals remained supportive with demand outstripping supplies, leading to a drawdown in stocks.

"For this season, our new deficit has been reduced to a more manageable 56,000 tonnes, but next year's is expected to still remain tight at over 100,000 (tonne deficit)," Macquarie analyst Kona Haque said.

Europe's first quarter grind data was due to be released on April 10. North American data will be released April 17.

COFFEE MOVES HIGHER

May arabica coffee on ICE KCc1 settled up 4.25 cents, or 2.4 percent, at $1.8060 per lb, rising 5.5 percent for the week after tumbling 13.5 percent the previous week.

"We are getting bits of rain but not enough to offset the damage that has been done," Haque said.

The spot contract surged to a two-year high of $2.0755 per lb earlier this month in an astonishing 80 percent rally in just seven weeks as the severe drought in Brazil's main arabica growing regions raised production concerns. Prices fell back as rain finally reached Brazil, though precipitation has been below average.

"Farmers are well financed and do not need to buy any agricultural inputs until the rains come and are happy to sit on the coffee," Volcafe, the Swiss-based coffee division of commodities house EDF Man, said in a note.

May robusta coffee on Liffe LRCc2 rose $13, or 0.6 percent, to end at $2,096 a tonne.

Dealers said the setback in prices has slowed sales by farmers in top robusta producer Vietnam.

Raw sugar futures on ICE rose to the highest level in more than two weeks in choppy conditions.

Dry weather in Brazil's main center-south sugar cane growing region has cut 2014/15 production prospects by 35 million tonnes, taking the forecast crop to 586 million tonnes, trade house Sucre et Denrees (Sucden) said on Friday. ID:nL5N0MP2ZI

The dry weather could also delay the start of this year's cane crush in Brazil's key center-south region, though sugar and ethanol group Grupo Virgolino de Oliveira said it started harvesting cane early this season on concerns that El Nino rains may slow fieldwork later in the year. ID:nE5N0J6002

May raw sugar futures on ICE SBc1 ended up 0.11 cent, or 0.6 percent, at 17.98 cents a lb after earlier peaking at 18.10 cents, its highest level since March 11. It closed the week up 6.8 percent.

Liffe May white sugar LSUc1 futures closed up $0.30, or 0.06 percent, at $478.00 per tonne.

(Additional reporting by Sarah McFarlane, editing by William Hardy, Elaine Hardcastle and Tom Brown)

((Marcy.Nicholson@thomsonreuters.com, +1 646 223 6043)(Reuters Messaging Marcy.Nicholson.ThomsonReuters.com@reuters.net))

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