NEW YORK, Dec 31 (Reuters) - U.S. cotton futures settled an
historic year 91.50 percent higher, with Friday's 1.38 percent
rise contributing to their overall advance, as strong demand
from top consumer China and investment funds nearly doubled
prices.

The key March cotton contract on ICE Futures U.S.
added 1.97 cents to close at $1.4481 per lb, and set a higher
range that ran from $1.4353 to $1.4684 a lb.

Volume, however, was exceptionally light at 5,421 lots.
The cotton market came in as the second best performing
commodity in the Reuters-Jefferies commodity index, up over 80
percent in 2010 and just a shade behind silver.

While cotton was off its peak of close to $1.60 a lb set on
Dec. 21, the outlook for 2011 remained bullish. Inventories
were tight, China's consumption remains hot, and investment
buyers viewed the fiber futures as undervalued.

Historians said the $1.60 high set last seen at the height
of the U.S. Civil War in the 1860s, when the Confederacy hoped
to use its monopoly on cotton to win recognition from European
powers.

(Graphic: http://link.reuters.com/syx34r )

'We started seeing mill fixations below $1.40. That gave
cotton a base. Then, in the news, Australia reported that 1 pct
of their acres got flooded. And the ministry of agriculture in
China came out with crop estimates of 28.5 million bales with
USDA showing it at 30 million bales,' said Mike Stevens, an
independent cotton analyst in Mandeville, Louisiana.

'Those were not big market movers, but they reinforced the
positive tone on an extremely light trading day,' he added.
Despite cotton's lofty levels, analysts said underlying
fundamental support from strong demand coupled with specific
supply issues is likely to continue boosting prices in 2011.