* July, Dec cotton post biggest ever one-day percent gains
* Weekly U.S. export sales robust
* Chinese interest rate cut triggers short-covering

June 7 (Reuters) - U.S. cotton futures soared on Thursday
and closed at their highs for a second day, with both July and
December contracts logging their largest ever one-day percentage
gains, as buyers raced to cover short positions taken out during
May's 20 percent price decline.
While a Chinese interest rate cut set Thursday's advance in
motion, speculative buyers in the United States rushed to cover
short positions when it looked as if cotton's day-earlier rally
marked a trend turnaround.
On Monday, December futures tumbled to a contract low at
64.61 cents a lb and July set a contract low at 66.10. On
Tuesday, December futures finished at their lowest close for a
third position cotton contract since early October 2009.
All that changed on Wednesday when prices across the
commodity spectrum rallied, including cotton.
"I think this could be a short-term bottom, maybe even
medium-term if we're going out a few weeks," said Sharon
Johnson, senior cotton analyst at Penson Futures in Atlanta.

Benchmark December cotton on ICE Futures U.S. surged
3.92 cents, or 5.73 percent, to finish at the 72.28 cents per lb
high, a level last seen on May 29.
December's contract volume was a whopping 35,296 lots.
Brokers said rollovers into December futures from July by funds
were at least partly behind the hefty tally, along with short
covering and pent up buying by commercial interests.
Spot July cotton ended at the 73.89 cents a lb high,
which dates back to May 29, up the 4.00-cent limit, or 5.72
percent. Volume was healthy at 19,590 lots.
"Open interest is at a 17-month high. I think its because of
short positions. You have to go back to early February of 2011
to find a higher level," Johnson said, noting that index funds
had been reducing commodity positions across the board.
"So, the increase came from trend following types, and
speculative funds because they've been putting on a lot of
shorts. And not just in cotton," she said.
A build-up in open interest came from speculators who had
been net short for four consecutive weeks and by commercial
buyers, according to the CFTC's weekly spec/hedgers report.
The U.S. Department of Agriculture reported cotton export
sales of 205,800 running bales in the latest week when combining
old crop and the crop for the coming year, more than needed for
the USDA to meet its annual export projections. [ID: nIGB072878]
In other news, the USDA is likely move the release of its
agricultural reports until later in the day following a move by
leading exchanges to extend their trading days, USDA chief
economist Joseph Glauber said in an interview.
While some traders would prefer USDA to release major
reports while markets are closed, others want to capture the
instantaneous surges in trading that would accompany a "live"
release of significant information.
In India, a large cotton producer, monsoon rainfall was 36
percent below average in the week to June 6.

Open interest, an indicator of investor interest, rose by
1,590 lots to 203,234 on June 6. Friday was the highest reading
since Feb. 10, 2011 when open interest was at 220,096 lots, ICE
data showed.
Thursday's traded volume was 64,040 lots, about 163 percent
greater than the 30-day average, according to Thomson Reuters
data.