NEW YORK, Feb 10, 2010 (Dow Jones Commodities News via Comtex) -- Speculator and fund buying lifted ICE Futures U.S. cotton prices to four-week highs Wednesday on lingering bullish sentiment from Tuesday's government supply and demand report.

March cotton settled up 66 points, or 0.9%, at 72.82 cents a pound, off of the 73.91 high.

Cotton is "powering higher based on the USDA report that came out Tuesday," said Spencer Patton, chief investment officer at Steel Vine Investments in Chicago.

The cotton market took a bullish turn Tuesday as the U.S. Department of Agriculture raised its outlook for 2009-10 U.S. cotton exports to 12 million bales from 11 million bales last month. The bullish adjustment drove March futures up the 300-point limit as speculators bought back previously sold positions that acted as bets the market would move lower. That buying continued Wednesday, but eased as the session progressed, leaving futures off of highs.

Analysts said speculative interest in ICE cotton will grow amid bullish outlooks.

March cotton has support at 72 cents and resistance near 74, said Sterling Smith, market analyst at Country Hedging in St. Paul, Minn.

However, the recent spike in prices is likely to keep commercial traders out of the market, an analyst said.

Mills are not buying at high levels, and participants in China will be on holiday beginning Feb. 14 for Lunar New Year, said Sharon Johnson, senior cotton analyst at First Capitol Group in Atlanta. China is the leading importer of U.S. cotton.

"We may see some merchants buying in anticipation of higher prices, but producer selling will gain ground above 74 cents basis May," Johnson said.

Traders continue to roll out of the March contract into May futures.

ICE daily cotton stocks increased by 578 500-pound bales Tuesday to total 527,956 bales with 25,263 bales awaiting review, according to exchange data.

ICE cotton open interest – the number of active positions left at the end of the session - increased by 1,953 positions Tuesday to total 164,093, according to the exchange.

Volume was estimated 64,677 lots. In options, approximately 11,719 calls and 3,923 puts traded, according to exchange data.

Close Change Range
Mar 72.82 +66 pts 71.54-73.91
May 73.63 +65 pts 72.35-74.16
Dec 72.51 +25 pts 71.35-72.62