* Closes modestly lower after running limit down
* Profit-taking likely but upside pressure remains -dealers
By Barani Krishnan
NEW YORK, Oct 18 (Reuters) - U.S. cotton futures closed
modestly lower on Thursday, retreating from five-month highs, as
investors took some profit on a price surge caused by worries
that the market may face a near-term squeeze in supply of good
quality fiber.
Prices eased for the first time in five sessions, after
running up on concerns that cotton from the early harvest of
fields in the southeastern United States had high levels of
"micronaire." Such a condition could result in coarse fibers
that could break during the spinning process at textile mills.
The most-actively traded cotton contract on ICE Futures
U.S., December, closed down 0.14 cent, or 0.2 percent, at
77.72 cents a lb. The contract fell the daily limit of 3 cents a
pound before recovering most of it.
"The way this market has rallied has caught too many people
short," said Jobe Moss of cotton traders MCM Inc in Lubbock,
Texas. "It's only right that some profit-taking comes in, but
there's still a lot of upside pressure that's keeping things
up."
December cotton settled at a five-month high of 77.86 cents
on Wednesday, after rallying nearly 8 percent from Monday's
close.
Traders said the contract has potential to move up to May's
highs of above 80 cents a pound, but also caution that such high
prices could scare away millers.
Trading volumes in U.S. cotton have been extraordinary since
the rally began. On Thursday, Thomson Reuters data showed
volumes in ICE cotton at above 64,800 lots, or nearly 260
percent higher than the 30-day average.
Just a week ago, cotton prices appeared doomed after the
U.S. Department of Agriculture (USDA) issued one of its bleakest
reports on the crop in decades.
That report marked the third month in a row that the USDA
had increased its estimates for worldwide stocks of cotton since
the new marketing season started on Aug. 1. The latest revision
put ending stocks 14 percent higher than 2011/12's 69.56 million
bales.
