* Ouattara forces advance toward major Ivorian cocoa port
* Arabica coffee futures begin rebound after long slide (Updates prices, rewrites, adds NEW YORK to dateline, byline)
By Rene Pastor and Nigel Hunt
NEW YORK/LONDON, March 30 (Reuters) - U.S. cocoa futures dropped to a 2-1/2 month low Wednesday as investors eyed increased prospects for a resolution to the power struggle in Ivory Coast, which could free up exports from the world's top cocoa grower.
Volume in U.S. cocoa futures was double the 30-day norm, Thomson Reuters preliminary data showed, as investors sold long positions now that Alassane Ouattara seems to be gaining the upperhand over incumbent Laurent Gbagbo.
New York's May cocoa futures slid $70 to close at $2,987 per tonne. In the last two sessions, the contract has lost 8.0 percent in value and settled at its lowest level since Jan. 13.
The July cocoa contract on London's Liffe market fell 46 pounds or by 2.3 percent to end at 1,948 pounds a tonne.
Ivorian forces loyal to Ouattara are now in control of the town of Soubre, the last main town on the road to the cocoa port of San Pedro, residents said.
If Ouattara's forces take control of the San Pedro port, it could allow cocoa to once again flow out of the country after an export ban stalled supplies.
"There's definitely some pricing in of a quicker resolution. If a quick resolution does occur, these sort of prices would draw cocoa out (of Ivory Coast) quite quickly," Keith Flury, a senior analyst at Rabobank said.
"The political situation appears close to reaching a change in Ivory Coast," added Sterling Smith, senior analyst with brokerage Country Hedging Inc in St. Paul, Minnesota.
The trade is now mulling whether Ivorian supplies will be shipped out or whether there will be any further logistical or quality problems that may crop up, he said.
Ouattara's export ban, EU sanctions and the collapse of the local banking system have meant over 450,000 tonnes of stocks are languishing in storage, and concerns about a deterioration in quality are growing by the day.
"The sell off is speculator based. They were the ones that ran the prices up," Flury said.
The market's technical outlook had remained shaky after May fell below the 100-day moving average at $3,150 and the 200-day MA at $3,042 on Tuesday.
COFFEE, SUGAR REBOUND
Arabica coffee futures on ICE were higher with the market finally beginning to rebound following a prolonged slide driven mainly by bearish technical indicators.
Fundamentally, the market is seen as bullish given the tight supplies of high-quality washed arabica beans.
"We have a bullish outlook looking to the next season with a deficit expected. Prices should stay supported from here on out," Flury said.
New York's May arabica coffee futures rose 4 cents to $2.6545 per lb. London's May robusta coffee contract rose $14 to end at $2,524 a tonne.
Sugar futures were mixed as the market looked toward the full-bore harvesting of the cane crop in Brazil's premier center-south region.
"With the looming Brazilian crop on the horizon, it seems safer to sell a rally than buy a dip intraday," Sucden Financial said in a market report on Wednesday.
The May raw sugar futures rose 0.31 cent to 27.33 cents per lb. London's May white sugar contract increased $5.30 to finish at $707.80 per tonne.
Smith said that technically, a fall in the May raw sugar contract below the 200-day MA at 25.90 cents would bring the area of 24.50 cents into play, the 50 percent retracement of the move from the May 7, 2010 low of 13 cents to the 36.08 cents top on Feb. 2, 2011. * Prices as of 1650 GMT Product Last Change Pct Move End 2009 Ytd Pct ICE sugar 27.27 0.25 +0.93 26.95 1.19 ICE coffee 267.85 3.80 +1.44 137.60 94.66 ICE cocoa 2989.00 -73.00 -2.38 3310.00 -9.70 Liffe sugar 707.80 5.30 +0.75 710.20 -0.34 Liffe coffee 2521.00 11.00 +0.44 1332.00 89.26 Liffe cocoa 1948.00 -46.00 -2.31 2271.00 -14.22 CRB index 354.52 0.51 +0.14 283.38 25.10 Crude oil 104.78 -0.01 -0.01 79.36 32.03 Euro/dlr 1.41 0.00 +0.15 1.43 -1.30 * ICE sugar and ICE coffee in cents per lb, ICE cocoa, Liffe sugar and Liffe coffee in dollars per tonne. Liffe cocoa in pounds per tonne
(Editing by Lisa Shumaker)