ICE cotton set a three-week high on Tuesday as a storm blew into US key growing regions, but a notice that much-anticipated reserve sales will begin this week in top consumer China pared gains. The most-active March cotton contract on ICE Futures US climbed to 79.65 cents a lb before settling up 0.68 cent, or 0.9 percent, at 79.14 cents per lb.
Trading volumes were lighter than average ahead of the US Thanksgiving holiday on Thursday this week. Trading of cotton futures on ICE will be closed on Thursday, and resume with a delayed opening on Friday at 8 am (1300 GMT) and an early close at 1 pm.
Snow and rain threatened harvesting along the east coast of the United States, the world's top exporter. The US crop, which is late because of delays earlier this season, is expected to be the smallest in four years.
"This is one of the coldest and biggest storms in a November, and there's more out there in the field than normal," said Ron Lawson, a partner at commodity investment firm LOGIC Advisors.
A weekly US crop progress report released after Monday's close showed 12 percent of the US crop remained to be harvested, less than in previous years.
Even so, cotton pulled back from the day's steepest gains as China is expected to begin cotton reserve auctions this week, according to a government-funded website.
The reserve sales and potential changes to quota allocations stoked global traders' concerns over reduced import demand, as Chinese textile mills have voraciously sought lower-priced foreign cotton due to a government stockpiling program launched in 2011.
China's stocks represent about half of estimated global inventories, and the auctions and policy changes could flood the market with supplies and crimp import demand.
Cotton prices have tumbled 16 percent from an August peak near 94 cents as speculation has mounted that China would soon begin the sales.
Speculators have fled their bullish bet in fibre and switched to a small net short position, and total open interest has languished near the lowest levels since January 2012.
The spot contract closed up 0.89 cent, or 1.2 percent, at 77.85 cents a lb.
Some 200,000 bales have so far been tendered against the December ICE contract, which is due to expire on December 6.