NEW YORK, Jan 4 (Reuters) - U.S. cotton futures settled
with healthy gains on Tuesday, reversing small losses in the
last minutes of trade, as investors saw an opportunity to buy
in a tight market when prices fell briefly before the close.

Concerns about global cotton supplies kept prices propped
up for most of the session, as some investors focused on
flooded cotton crops in Australia and dry conditions in Texas
growing regions, among other concerns, brokers said.

Benchmark March cotton contracts on ICE Futures U.S.
finished with 1.11 percent gains at $1.4378 per lb, up 1.58
cents. The contract advanced to a high at $1.45 shortly before
the close, up from the day's low at $1.3980, last seen Dec.
30.

Volume firmed to 8,818 for the March contract, greater than
the 6,823 contracts traded on Monday. Monday's total tally came
to 11,541 lots, according to ICE data.

May cotton also rallied to close 1.59 cents, or 1.17
percent, higher at $1.3789 per lb.

Cotton stood its ground for most of the day, unlike other
commodities prices, which fell sharply as sellers felt the thin
pre-holiday trade had taken the complex up too far, too fast.

But, late in the day, cotton prices, too, succumbed to the
downdraft among most other commodities, as investors sorted out
the impact of a rebalancing of major commodity market indexes
with the start of a new trading year.

Once cotton prices slipped, however, some speculators swept
in and snapped up March and May contracts, sending them to new
session highs shortly before the close.

Cotton brokers were somewhat perplexed at who the actual
late-session buyers were, but said the last stretch to the
day's highs were won when stop-loss buy orders were triggered.

Bill Raffety, senior analyst for futures brokerage Penson
GHCO in New York, pointed out that U.S. cotton supplies for
March delivery have been tight for some time and that an
International Cotton Advisory Committee report emphasized tight
conditions in several top growing nations.

'It is estimated that only about 10 percent of projected
world trade of 8.3 million tons is still available for purchase
at this relatively early stage of the season. The scarce
uncommitted supply may provide strong pressure on prices and
cause increased volatility through the rest of the season,'
said an ICAC in a statement late Monday.

In addition, Raffety said, Australian floods and a
government cap on exports out of India have been exacerbating
worries about supply shortfalls.

Listed Australian agricultural firm PrimeAg Australia Ltd said
on Tuesday that 13 percent of its cotton cropping
land in the flood-hit state of Queensland was under water, but
some recovery was possible if rains ease.

Elsewhere, cotton plantings in the U.S. are expected to
jump to a five-year high if American farmers plant over 11.04
million acres (4.5 million hectares) to cotton, according to
data from the U.S. Agriculture Department.

Cotton growers are holding their annual Beltwide Conference
in Atlanta, Georgia from Jan. 4 through Jan. 7.

Among the topics they will be discussing are cotton futures
record high hit last month at $1.5912 per lb, a level unseen
since the U.S. Civil War in the mid-19th century. Factors
behind the 2010 rally include world consumption outpacing
supply, the lag between the time it takes for increased
production to meet higher demand, and increased investor
demand.