NEW YORK (Dow Jones)--ICE Futures U.S. cotton soared to its highest levels in
nearly two years Thursday as speculators bought as world supplies tighten at
the tail end of the season.

Most-active May cotton settled up 201 points, or 2.47%, at 81.17 cents a
pound. The contract touched 81.78, the highest price for cotton on a weekly
chart since the week of March 10, 2008.

Prices at those levels triggered jitters with commercial cotton traders. In
that timeframe, prices held at levels well above fundamental value. Two leading
cotton merchants pointed to losses incurred in that timeframe as they
subsequently ended business operations.

May cotton futures have risen nearly 20% since Feb. 5. The rally took cues
from bullish U.S. Department of Agriculture data anticipating that world cotton
production will fall 12.4% short of demand in the August-July crop year. The
same data added another 9% to outlooks for U.S. cotton exports and cut
estimates for available cotton stocks by 23.25% in the U.S.

The U.S. is the leading world cotton exporter and the No. 3 producer.

Futures bucked a trend of weaker commodities prices Thursday. Though analysts
said cotton was due for a correction lower after the month's sharp rally,
futures climbed traders encountered little selling to block the path higher.

"Once May cleared Tuesday's 80.10 high...the bullish technicals took over,
taking us toward the high end of the trading channel near 82 cents," said Mike
Stevens, an independent cotton analyst located in Mandeville, La.

Adding to those bullish outlooks, data released Thursday by China's National
Bureau of Statistics showed the country's cotton output in 2009 fell 15% to 6.4
million tons. The country's traders imported nearly four times more cotton in
January 2010 than a year earlier, the data show.

China is the world's top cotton producer and importer, as well as the top
destination for U.S. cotton.

Some traders noted, however, the difficulty of obtaining accurate data in
such a large country and the possibility the bureau could make revisions.

The cotton market is likely to enter a volatile stage at these price levels,
said Rogers Varner Jr., president of Varner Brothers, a brokerage in Cleveland.

"[The cotton market stands to see] more entry by specs and hedge funds on the
long side and more anxiety from the mills that their inventories are running
low," Varner said.

He pegged support for May futures at 76 cents and resistance at 84.

ICE daily cotton stocks increased by 12,253 500-pound bales Wednesday to
total 542,702 bales with 51,233 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 2,166 positions Wednesday to total 169,856, according
to the exchange.

Volume was estimated 21,034 lots. In options, approximately 10,170 calls and
3,185 puts traded, according to exchange data.

Close Change Range
Mar 81.38 +201 pts 78.97-81.38
May 81.17 +201 pts 78.47-81.78
Dec 73.97 + 66 pts 73.00-74.14