NEW YORK: Cotton futures extended gains to a more than two-month high on Thursday on trade short-covering and continued investor buying following US government reports indicating continued strong demand and tightening US supplies, dealers said.
The most-active December cotton contract on ICE Futures US closed up 1.08 cents, or 1.2 percent, at 89.15 cents a lb, after reaching 89.28 cents, the highest level since early April.
Short-covering helped drive gains ahead of the spot contract's expiration on July 9, dealers said.
"There's a lot of get-me-out short-covering," said Ron Lawson, a partner at commodity investment firm LOGIC Advisors.
The front-month July contract on ICE finished up 1.66 cents, or 1.8 percent, at 91.72 cents per lb, its highest close since March.
Trading volumes were heavy at about 55,000 contracts and more than double the 30-day average of about 24,000 contracts, preliminary Thomson Reuters data showed.
A sense that US supplies are tightening was driving the short-covering, compounded by talk of large purchases of US cotton, dealers said.
US government weekly data was seen as strong for so late in the crop year that ends July 31, underpinning prices and adding to a sense of tightening supplies outside of China.
Cotton surged during the previous session on renewed buying after a US Department of Agriculture report forecast a drop in US stocks and output in the 2013/14 crop year, dealers said.
Open interest reached 190,205 lots on Wednesday, up 3,330 lots from the day before, ICE data showed.
Despite the sense of tightening supplies, certified stocks climbed to more than 536,000 bales on Wednesday, ICE data showed, the most since June 2010.
The world is expected to hold a record inventory of 92.49 million bales by the end of July 2014.
More than 60 percent is expected to become part of China's reserves, the result of a government stockpiling program launched in 2011.
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