NEW YORK, March 18 (Reuters) - U.S. cotton rose the 7-cent
limit on Friday for the second day in a row on protective short
covering amid worries about the situation in Libya and the
potential for further mishap in Japan this weekend, brokers
said.

With a 3.6 percent gain, the active May cotton contract on ICE
Futures closed at $1.9912 per lb, extending the
gain from Wednesday, when the market settled at a three-week
low of $1.8512.

Still, for the week, the market is down 2.84 percent.

Open interest, an indicator of investment exposure in
cotton, stood at 172,925 lots as of March 17, a level that is
still near the lowest since late July 2010, data from ICE
Futures U.S. showed.

Volume traded was estimated at 17,000 lots, the lowest
level since Feb. 28 and almost 50 percent below the 30-day
norm, Thomson Reuters preliminary data showed.

'It's a helter-skelter thing, with everything going on
around the world,' said Mike Stevens, an independent analyst in
Louisiana.

He said the market got a boost from firmer Chinese cotton
prices, with the September cotton contract on the
Zhengzhou Commodity Exchange last done at 30,540 yuan per
tonne, up 1,125 yuan on the day.

Strong stock markets and grains futures encouraged
investors to pile into cotton, mitigating somewhat concerns
about how much the disasters in Japan will impact cotton
demand.

On a technical level, the May contract finished above the
20-day moving average at $1.9815 and this could mean a push to
clear strong resistance over $2 going next week, analysts
said.

The next bit of information which will provide direction
for cotton futures would be the potential plantings report by
the U.S. Agriculture Department due out on March 31.

That is the first government survey of likely plantings for
major row crops like cotton, corn, soybeans and wheat in 2011.

Despite the rally, cotton has to compete for acreage against
similarly high-priced grains this year.

Analytical firm Informa Economics projected on Friday U.S.
farmers will plant 13.13 million acres to cotton ,
a level that would be the highest in 5 years.