NEW YORK, Nov 10 (Reuters) - U.S. cotton futures charged to
a new record top but closed sharply lower on Wednesday, the
first time it has fallen in 9 sessions, as heavy investor
selling and profit-taking finally deflated the market's record
run, analysts said.

A spike in cotton margins to its highest level since 1996
prompted investors who have seen the market
rise nearly 32 cents the last 9 days to cash in their gains.

The U.S. cotton market on ICE Futures U.S. rates the top
performing commodity on the Reuters Jefferies Commodity Index
this year, having risen more than 95 percent in value
during Wednesday's session. At the end of the day, it was up
over 85 percent.

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

The benchmark December cotton contract on ICE
Futures U.S. rose the 6-cent daily limit to trade at a new
record of $1.5723 per lb in Asian trade. It then fell the limit
to a low of $1.4523 during the U.S. trading session.

The December contract ended 5.58 cents lower, down 3.69
percent on the day, at $1.4565 per lb.

The current most-active March cotton contract
finished the 6.00 cent limit down at $1.4111.

Despite the sell-off, the market is still overbought.

(Graphic: http://graphics.thomsonreuters.com/gfx1/AB_20101011144108.jpg)

Analysts said the debate will now focus on whether the
sizzling rally in fiber contracts is done or whether this is
only a brief pause for cotton.

'It's a top,' Mike Stevens, an independent cotton analyst
in Louisiana, said while declining to say if the market high is
in place. 'It's time for a rest. People locked (their gains)
in.'

Jobe Moss, an analyst for brokers and merchants MCM Inc. in
Lubbock, Texas, said investors who have fattened up on their
long positions felt it was time 'to ring the register.'

Trading volume on ICE Futures U.S. hit an all-time record.

Total volume stood at 89,294 lots, according to preliminary
Thomson Reuters data. This eclipsed the all-time mark of 85,945
lots set on Feb. 15, 2008.

Analysts said that despite another move to record prices in
China, cotton futures on the Zhengzhou Commodity Exchange ended
up lower on Wednesday.

Zhengzhou's May cotton contract hit a new lifetime
top at 33,720 yuan per tonne, but last traded 500 yuan lower at
32,350 yuan.

Stevens said the increase in margins likely encouraged some
investors to bail. Moss added a position suddenly became much
more expensive to cover after ICE raised those costs for
investors.

Market bulls believe the outlook remained bullish though,
given strong demand from mills in China, the world's No. 1
consumer of cotton.

The bulls point to news that the U.S. Agriculture
Department's monthly supply/demand report cut China's cotton
production by an additional 1.5 million (480-lb) bales and
raised its imports in 2010/11 by 2 million bales.

U.S.-based traders said the profit-taking and the rolling
by index funds of positions out of the spot December contract
should finally cap the market.

They added a rally may have to wait for the December
contract to get off the board and then the focus will turn to
the March cotton contract during the northern hemisphere winter
and the spring.