* Open interest falls for first time in almost two weeks
* Prices settle close to intraday high
* Chinese imports seen halving in 2012/13 - ICAC
NEW YORK, Oct 2 (Reuters) - Cotton prices rose for a second
day on Tuesday as the market consolidated within recent ranges
and on a flurry of short-covering after selling pressure in the
run-up to the quarter's end last week.
After hitting its high for the day at 71.92 cents, New York
cotton for December delivery settled up 0.91 percent at
71.85 cents per lb on ICE Futures U.S.
March's premium to the nearby price has increased in recent
weeks due to pressure on the benchmark contract. It was as high
as 1 cent on Monday, its loftiest in almost two months, before
narrowing slightly to 0.84 cent on Tuesday.
Open interest dropped by 904 lots on Monday, its first fall
in almost two weeks, reflecting a brief spell of short covering.
That took the total to 189,650 lots.
The weaker dollar also buoyed prices, although gains were
minimal and volumes low. Just under 12,000 December lots changed
hands on Tuesday, well below recent trading sessions, with
investors hoping for direction from China, the world's largest
textile market, after the country's week-long holiday.
Beijing's strategic reserve is expected to replenish its
stockpile after the break after offloading some fibers last
month, analysts said.
That may not be enough to offset the otherwise bleak outlook
heading into the northern hemisphere harvest, though.
Compounding that outlook was a report by the International
Cotton Advisory Committee (ICAC), an association of governments
of cotton producing, consuming and trading countries, which
forecast that Chinese imports would halve in the current season
to end-July 2013, slowing the voracious buying seen last year.
That in part reflects a slower pace of purchasing for the
strategic reserve as well as slack demand from the textile
industry, which has been hurt by high domestic fiber prices.
The ICAC said local prices in China will continue to be
elevated compared with the rest of the world due to the
government's minimum support price policy, under which the
strategic reserve is expected to make daily purchases of new
crop between September and March next year aimed at helping
farmers.
Those prices, which have forced some textile mills to switch
to lower-priced manmade fibers, contrast starkly with the
futures prices, which the ICAC said it expects to remain under
pressure.
"In the rest of the world, the pressure of accumulating
stocks, combined with weak demand, could drive cotton prices
down," it said in a statement.
The downbeat assessment of the market echoed forecasts by
the U.S. Department of Agriculture of record stocks due to lower
demand and higher output.
Even so, fibers bucked the downward trend in the broader
financial markets. Grains extended recent losses and equities
eased amid expectations that debt-laden Spain is getting close
to requesting a financial bailout from the euro zone.
The Thomson Reuters-Jefferies CRB index, a global
benchmark for commodities, eked out a gain of 0.07 percent.