NEW YORK, Jan 10 (Reuters) - Cotton futures rose on Tuesday, posting their highest close since Nov. 17 for a second day in a row as speculative funds boosted commodity positions in many markets including the fiber.
Some market watchers said investors may be aiming for the $1 a lb level, based on longer-term fundamental issues, like dry weather and competition with other crops, especially food, for acres.
Benchmark March cotton futures finished 0.52 cent stronger at 96.96 cents a lb, the second day in a row that the contract posted its highest settlement since Nov. 17.
March cotton traded in a higher range between 95.70 and 97.08 cents, a level last seen on Nov. 18.
Volume traded in the March contract came to 10,016 lots.
Keith Brown of Keith Brown and Co. in Moultrie, Georgia said, 'I think the market is looking beyond current fundamentals that suggest tedious demand. But, as you look out to the new year you see China loosening credit, lingering drought-like conditions from La Nina, and competition from peanuts and corn that will rob cotton acres.'
While demand may have pushed cotton prices off of their perch, Brown added, stagnant supply is lifting them back up.
'I think that's what we're seeing,' the broker said.
Since bottoming out near 84 cents on Dec. 14, the March contract has climbed about 15 percent.
At some point, the textile mills which have reported a lack of movement of physical cotton, may start buying if prices continue to rise, which would push prices even higher.
Cotton has been supported by Chinese buying as the world's biggest user boosts state reserves and in anticipation of slightly lower U.S. cotton plantings.
Concern that a persistent La Nina phenomenon could keep crop lands dry in top U.S. cotton growing states has also lifted fiber prices.
Market players may remain on hold until Thursday's release of the U.S. Agriculture Department's January supply/demand report, followed by release early next month of the annual potential plantings survey from industry group National Cotton Council.
Total volume traded Monday jumped to 25,253 lots from Friday's tally of 10,839 lots, ICE Futures U.S. data showed.
Open interest, an indicator of investor exposure, slipped to 146,554 lots on Monday from 146,885 lots on Friday, the exchange said.
