NEW YORK, Nov 4 (Reuters) - U.S. cotton futures hit a new
all-time record Thursday for the third day in a row on
speculative fund and trade buying as strong demand from China
and tight supplies conspired to ignite a fresh market rally,
analysts said.

The benchmark December cotton contract set a new
high at $1.402 per lb, up 4.68 cents or 3.5 percent.

Cotton is up over 80 percent this year due to its bullish
fundamentals and is the best performing commodity in the
Reuters Jefferies CRB index. (Graphic on commodities'
performance: http://link.reuters.com/kew48n)
Internal Chinese cotton prices were being quoted at well
over $2 per lb, said Lou Barbera, an analyst for commodities
brokerage VIP Commodities.

'At $1.40, we are still cheap compared to China,' he said.
'Until you see some type of demand rationing, we're going
higher.'

China's benchmark May cotton contract was last done
at 29,855 yuan per tonne, up 190 yuan.

The market is seen getting a further boost over the next
few weeks from a decision by the U.S. Federal Reserve to buy
$600 billion of government bonds to resuscitate the flagging
U.S. economy.

Cotton traders believe the decision by the Fed would
effectively weaken the dollar, which would make commodities
such as cotton attractive for investors.

The Cotlook A index cotton price, the combined average of
the five cheapest cotton prices in the world plus transport,
was quoted at $1.524 on Wednesday, a premium of around 13 cents
over New York cotton futures.

The A Index normally has a premium of 6 to 8 cents over
U.S. cotton prices. It has been running at a premium of 9 to as
much as 15 cents during the rally.

The market got a boost from robust sales as can be seen in
the U.S. Agriculture Department's weekly export sales report.
USDA said total U.S. cotton sales hit 629,100 running bales
(RBs, 500-lbs each), with China again the top buyer of the
fiber.