Cotton for March rose 3.8% to end at 82.65 cents a pound, its highest level since May 15, 2017, the same day a massive short squeeze pushed cotton prices to limit-up levels for the exact same reason.

Approximately 5 million bales of cotton have yet to be fixed against futures in the March contract, a record for this time of year, as mills who were largely bearish waited to fix sales, expecting prices to go lower because of a bearish global picture last summer from USDA.

"The squeeze is already on," said Peter Egli, a risk manager at Plexus Cotton Ltd.

The rapid increase in prices may force some cotton users to cancel sales or pay up for the fiber, he said.

Many cotton buyers entered into contracts last year to purchase U.S. cotton at a price to be determined at a later date, a common practice in the business. Most were bearish on cotton prices and figured they could pay a cheaper price in the future.

Cotton merchants who sold cotton on call to mills have been waiting on the mills to fix those sales to a price in the futures market. There are 5 million bales whose price to complete the sale is yet to be determined for the contract that ends in March. That amount is a record for this time of year, according to figures from the U.S. Commodity Futures Trading Commission.

Cotton prices have jumped 20% since July, and mills are running out of time for them to come back down. Between the March, May and July contracts, 11.6 million bales have yet to be fixed.