Cotton futures bucked the downward trend in grains, hitting a two-month high, after the US reined in expectations for the increase in this year's domestic harvest, citing "variable" weather.
Cotton futures for October touched 71.15 cents a pound, the best for a spot contract in two months, while the better-traded December lot rose back above 68 cents a pound, also for the first time since July.
The increases followed a downgrade by the US Department of Agriculture, in its benchmark monthly Wasde crop report, of 960,000 bales to 16.54m bales in its forecast for the domestic cotton harvest this year.
The reduction took all by a fraction of an upgrade the UDSA introduced in last month's Wasde, and was far bigger than the 50,000-bale cut that investors had expected, according to a Bloomberg survey.
"The USDA projected new crop US production well below all published analysts' estimates," cotton analyst Louis Rose, said.
While the forecast for US cotton exports was also cut too far more than the market had expected, by 700,000 bales to 10.0m bales, the inventory estimate was reduced by 400,000 bales to 5.2m bales, tighter than analysts had pencilled in.
'Drought conditions'
The USDA cited for its harvest downgrade a field survey which "shows reductions mainly for Texas, Georgia and Arkansas".
"Weather was variable in August with some states reporting drought conditions, resulting in broad scale irrigation, while other states received significant rainfall," the department added.
In fact, separate data on Thursday showed dryness retreating in Texas, the top cotton producing state, of which 57.7% was rated as in drought, down 3.8 points week on week.
Nonetheless, moisture deficits are more widespread than at the start of the year, when 43.8% of Texas was see as in drought.
India takes lead
The tighter view of US inventories contrasted with an increase to the forecast for world stocks, upgraded by 1.21m bales to 106.29m bales.
The revision reflected largely an improved forecast for the Indian harvest, revised upwards by 1.0m bales to 30.0m bales - overtaking China to become the world's top cotton grower for the first time in more than half a century.
