NEW YORK, Feb 8 (Reuters) - U.S. cotton futures closed
higher Tuesday on investment fund buying as tight stocks and
brisk mill demand trumped an initial selling spree triggered by
a rate increase in China, analysts said.

Cotton futures stumbled earlier in the session after China
increased interest rates for the second time in over a month to
cool off its surging economy.

But analysts said China will not turn off the spigot in
powering economic growth so the potential threat to cotton
consumption from an economic slowdown may not materialize at
all, they said.

'The increase just shows how strong the Chinese economy
is,' said Keith Brown, president of commodity firm Keith Brown
and Co in Moultrie, Georgia.

He said that after every rate rise by Beijing, the market
would initially sell off knee-jerk style and then come roaring
back because Chinese cotton demand would remain strong.

The key March cotton contract on ICE Futures U.S.
increased 0.78 cent to conclude at $1.7529 per lb, dealing from
$1.7294 to $1.7816.

Total volume hit some 45,500 lots, more than double the
30-day norm, Thomson Reuters preliminary data showed.

Cotton is the best performing commodity so far in 2011 in
the Reuters-Jefferies commodity index. In 2010, cotton was also
the star performer, rising about 90 percent.

(Graph: http://link.reuters.com/kew48n)

Analysts said the market's attention will now turn to the
fresh numbers from the U.S. Agriculture Department's monthly
supply report due out Wednesday at 8:30 a.m. EST (1330 GMT).

Most in the trade do not believe a major change is possible
in world cotton demand at this time although high prices could
eventually reduce world cotton consumption.

Once the report is done, the market will be looking toward
next month's USDA potential plantings report on March 31 to see
if high cotton prices spurred more cotton sowings in 2011.

Industry group the National Cotton Council of America said
U.S. 2011 cotton plantings will likely reach 12.5 million
acres. Most analysts think the number will be much higher
because the NCC survey was conducted before the current rally
in the cotton market.

A Reuters survey at the Beltwide Cotton conference this
month forecast U.S. 2011 cotton plantings from 12.48 million to
12.53 million acres, a five-year high and an increase of around
15 percent from last year's cotton sowings of 11.04 million
acres.