KANSAS CITY (Dow Jones)--Cotton futures climbed to new two-year highs
Thursday on continued speculative fund buying, extending the rally that began
in July.

Cotton for December delivery rose 2.08 cents, or 2.4%, to 89.49 cents a pound
Thursday on ICE Futures U.S. in New York. The session peak of 89.91 cents is
the strongest price for the contract since Sept. 3, 2008, when it hit 90.17
cents.

Cotton's bullish fundamentals remain intact and supportive for futures
prices, though traders cited no fresh news for Thursday's gains. Global and
U.S. stocks remain tight and consumption continues to grow, fueling the overall
climb. Even a weaker-than-expected report on U.S. export sales wasn't enough to
prevent traders from buying.

The recent leg up in futures is attributed purely to buying from speculative
fund traders, who predominately use chart points to make sales or purchases.

"They're buying strictly off the charts; I don't even know if they know how
to spell cotton, let alone know what the fundamentals are," said Sharon
Johnson, chief cotton analyst at First Capitol Group in Atlanta.

"It's not just that we're up, but we're getting very expensive, and we're
getting closer and closer to harvest," she said, adding that there are no major
U.S. crop issues.

Futures prices often decline with the approaching harvest as traders sell on
the influx of new supplies that will hit the market.

While the U.S. crop rated in good-to-excellent condition edged down to 60% in
the week through Sunday from 62% the previous week due to excessive heat, the
crop remains in overall good shape. Texas, the largest cotton-producing state,
saw its good-to-excellent rating decline to 64%, from 67%, U.S. Agriculture
Department data show. Texas output is still expected to reach a record high 8.8
million bales this year.

Current 2010-11 U.S. cotton production, estimated by the USDA at 18.5 million
bales, represents a 52% increase over last year, owing to mostly favorable
weather and increased planted area due to high prices. The USDA will issue
updated crop projections on September 10.

Though the U.S. is expected to ship more cotton from the significantly larger
crop, recent data show the rally is beginning to affect exports.

Export sales for week through August 26 totaled 252,200 bales, down about 48%
from last week, the USDA said Thursday.

Global crop concerns have been bullish for cotton as stockpiles tighten and
mills scramble for available cotton. Pakistan, the world's fourth-largest
cotton grower, has likely seen 16% of its cotton wiped out from recent floods
that devastated the country.

"The tightening of stocks available for mill use has pushed cotton prices
higher," the International Cotton Advisory Committee said Wednesday.

China and India are expected to account for most of the increase in world
mill use in 2010-11, the ICAC said.

While rising cotton production in the U.S. and India will help to replenish
world supplies, stockpiles will remain low as consumption grows.

The USDA pegs global ending stocks at a 14-year low of 45.61 million bales.

Traders are watching Hurricane Earl's progress as it nears the East Coast.
About half of the North Carolina cotton crop has begun its boll-opening stage
of development, making it vulnerable to heavy rain that could affect the
quality of the fiber.

"If it just brushes the coast, there would be very little impact on the crop.
It would be affected by the rain more than anything else," said Billy Carter,
executive vice president and chief executive of the North Carolina Cotton
Producers Association Inc., based in Nashville, N.C.

Earl was packing winds of 125 miles per hour, though the strongest winds are
expected to remain in the Atlantic and away from cotton-production areas. The
eye of the hurricane is expected to pass near North Carolina's Outer Banks
Thursday night.