* Biggest monthly price rise since Feb 2011
* Market has ignored bearish news - analyst
* Funds most bullish since January - CFTC
* Weather watch will continue next week

NEW YORK, Aug 31 (Reuters) - Cotton prices rose on Friday to
post an 8 percent jump in August, notching their biggest monthly
gain in a year and a half, as speculative investors bet that
torrid weather conditions would hamper global output and help to
eat into record stockpiles.
The benchmark December cotton contract rose for a
third straight day on Friday, settling 0.32 cent, or 0.42
percent, higher at 77.26 cents per lb.
That was just 0.03 cent shy of its intraday high and just
off Thursday's 3-1/2 month high. The U.S. market will be shut on
Monday for the U.S. Labor Day holiday.
The rally, the biggest one-month gain since February last
year, was driven by a renewed appetite among speculators for
fibers despite a multitude of bearish signs.
"The market has ignored bearish news, but held together even
in the face of limited bullish news so at the very least, it
will be interesting to see how it behaves into September," said
Knight Futures cotton analyst Sharon Johnson.
It even outperformed the broader commodities market. The
19-commodity Thomson Reuters-Jefferies CRB index rose
slightly more than 3 percent.
Non-commercial dealers are ending the northern hemisphere
summer their most bullish since January, according to Friday's
U.S. Commodities Futures Trade Commission (CFTC). They added
just over 3,000 lots to take their net long to 15,405 lots in
the week to Aug. 28.
An absence of producer hedging exacerbated the gains.
Growers hope for a return to first-quarter levels around $1 per
lb, Johnson said.

WEATHER BETS
The bulls expect that a potentially devastating drought in
India will hurt crops and force the world's No. 2 producer to
restrict exports. Traders are also watching for damage from
Hurricane Isaac which drenched crops in Mississippi and
Louisiana, key U.S. cotton belt states.
So far, reports have indicated the damage has been
minimal.
In the longer term, record inventories will be depleted as
farmers switch out of fibers and grow more soybeans to take
advantage of the soaring grains markets.
But before that happens, traders will need to confront the
more alarming possibility that China plans to sell some of its
strategic stockpile, potentially derailing the recent rally.

WEATHER WATCH
Weather watch will continue next week, with attention
turning to west Texas, the United States' biggest cotton-growing
region, where recent rainfall has been meager.
Elsewhere in the broader market, cotton garnered some
support from a weaker dollar which hit an eight-week low against
the euro after Federal Reserve Chairman Ben Bernanke reinforced
expectations for further monetary easing to revive the world's
largest economy.
Bernanke, speaking at the Kansas City Fed's annual symposium
in Jackson Hole, Wyoming, said the U.S. economy faced "daunting"
challenges and that the Fed would act as needed to strengthen
the recovery. But he did not explicitly signal an imminent move.
Demand has been hit by weak retail sales due to a slack
global economy as well as a switch by mills to using
less-volatile synthetic fibers.