NEW YORK (Dow Jones)--ICE July cotton futures closed 4% higher as bullish
fundamental and macroeconomic news from China sparked a broad-based rush of
buying in the U.S.

Nearby cotton for July delivery ended up three cents, the daily limit allowed
for the market on ICE Futures U.S. Cotton hit that level midsession and held
fast as bullish macroeconomic cues knocked the dollar back and sent stocks and
many commodities prices higher. Though equities later retreated, they were
stronger for much of cotton's session.

Cotton prices climbed amid a maelstrom of news from China. Rallying fiber
prices there and talk of poor weather conditions in key cotton growing regions
met reports from Reuters that the country's May exports increased by 50% from
last year. That news sparked buying on ideas that economic growth remains
strong despite current worries. China is the world's leading cotton producer,
importer, and textile manufacturer. The U.S is the world's top cotton exporter
and No. 3 producer. Analysts said cotton traders bought previously sold short
positions to exit bearish exposure in the futures market.

"Today is a perfect storm--everything lined up at the same time," said Mike
Stevens, an independent cotton broker and analyst based in Mandeville, La.

The rally came with a bullish backdrop as world cotton supplies are expected
to fall 13% short of demand in the current season. Price increases on those
fundamentals have encouraged more planting of the crop and expectations for
higher production. Nonetheless, rebounding world textile demand is expected to
eat up much of the new supplies--the bulk of which won't be available until the
fall. Cotton prices were also set up for the bounce that kicked in this week
after dropping 6% during the two weeks before.

The significant year-on-year increase in exports is particularly bullish for
the cotton market as those shipments include textiles, said John Flanagan,
president of Flanagan Trading Corp. in Fuquay-Varina, N.C.

Periodic heavy rains continue to hit cotton areas of the Yangtze river valley
in eastern China, according to Meteorlogix, a private forecaster. This may mean
continued delays to spring planting and possible damage to newly emerged cotton
in the area, Meteorlogix said.

In the background, available supplies of cotton fiber are disappearing as
merchants and mills stock up. Fresh cotton supplies from the Northern
Hemisphere won't be available until the fall.

"We are now scraping the bottom of the barrel for cotton to be delivered
prior to July 31st," Stevens said.

ICE cotton stocks decreased by 57,683 500-pound bales Tuesday, with 57,434
bales decertified by their owners, presumably for cash sales overseas, analysts
noted. ICE cotton stocks now stand at 934,026 bales after several days of
withdrawals, ICE data show.

The daily value for world cash cotton measured by the Cotlook Cotton Index
rose 1.70 cent Wednesday to 91.40 cents a pound, Cotlook data show.

Traders are looking ahead to more supply-and-demand cues scheduled for
release at 8:30 a.m. EDT Thursday. Analysts expect the U.S. Department of
Agriculture's monthly crop production and supply/demand report will peg project
the 2010-11 U.S. cotton crop higher following bullish planting conditions.
Analysts also anticipate strong weekly U.S. cotton export sales data at the
same time.

The daily trading limit for ICE cotton futures expands to 4 cents for
Thursday's session per exchange rule.

ICE cotton open interest--the number of active positions left at the end of
the session--decreased by 263 positions Tuesday to total 176,221, according to
the exchange.

Volume was estimated 39,289 lots. In options, approximately 7,553 calls and
3,655 puts traded, according to exchange data.

Close Change Range
Jly 81.32 +3.00 78.42-81.32
Oct 77.26 +1.45 76.00-78.00
Dec 77.63 +1.22 76.41-77.83