Cotton futures closed higher Tuesday as buying from Chinese mills under an
import quota continued, enabling the commodity to shake off late-day moves in
equities and the dollar that otherwise were bearish.

One analyst said cotton remains generally underpinned by low U.S.
inventories.

Cotton for July delivery rose a penny, or 1.2%, to 82.20 cents per pound on
ICE Futures U.S.

Like many other commodities, cotton rose early in the day when no further
negative news about Europe's debt issues emerged. The dollar softened and
equities rose, with investors willing to look toward riskier assets on some
easing of fears that sovereign debt problems would hurt the economy.

"As a result, most commodities, including crude oil, were up on the day,"
said Sharon Johnson, senior cotton analyst with First Capitol Group in Atlanta.
Cotton also rose.

By early afternoon, however, stocks turned lower on reports that Germany will
issue new restrictions on bearish stock bets, and the euro tumbled on reports
that Germany would support a tax on the financial-market sector. But while some
commodities such as crude oil fell, cotton retained its gains.

"Part of that is the ongoing buying we continue to see coming out of China as
the mills over there are completing their purchases relating to the import
quota," Johnson said.

China normally bars cotton imports, but periodically establishes import
quotas. Last week, the country announced an additional 2010 import quota of
800,000 metric tons to meet strong domestic demand.

Cotton also appears to be drawing ongoing support from tight inventories,
said Keith Brown, principal with Keith Brown & Co. in Moultrie, Ga. In
particular, he cited data on ending stocks from last week's U.S. Department of
Agriculture report. The USDA estimated that U.S. stocks at the end of the
2010-11 marketing year will be 3 million bales, which would be the lowest since
1995-96 and down from 3.10 million estimated for the current year.

"In 1995, we went to $1 a pound," Brown said. "That doesn't mean we're going
to $1 a pound here. There are obviously other influences."

In particular, markets generally have been affected in recent weeks by
euro-zone debt issues. This has generated worries about the economy and also
boosted the dollar, both of which normally hurt commodities.

Still, "we are staying strong in the face of a falling stock market and a
rising U.S. dollar," Brown said.

Weaker equities tend to hurt confidence in the economy and thus cotton
demand, while a muscular dollar makes commodities generally more expensive in
other currencies.

Cotton tends to have some seasonal strength in May while the U.S. crop is
planted, Brown said. This is due to the potential for adverse weather to hamper
planting efforts.

"But as you get into June, you start to weaken as the crop is into the
ground," Brown said.

So far, planting appears to be occurring at a normal pace. The crop was 47%
planted as of Sunday, compared to 39% at this time a year ago and a historical
average of 46%, the U.S. Department of Agriculture said late Monday in its
weekly crop-progress report.

ICE cotton open interest--the number of active positions left at the end of
the session--increased by 2,262 positions Monday to total 181,049, according to
exchange data.

Electronic volume as of 2:30 p.m. EDT (1830 GMT) Tuesday was estimated at
14,832 lots. In floor options trading, there were approximately 235 calls and
109 puts, according to exchange data.

Close Change Range
July 82.20c up 1.00c 81.35c-82.44c
December 77.91c up 0.49c 77.40c-77.95c