By Rene Pastor

NEW YORK, Oct 29 (Reuters) - The U.S. cotton market ended
the wildest month in its history, with prices soaring to its
highest level since the American Civil War in the 19th century
due to a perfect confluence of strong demand, tight stocks and
almost insatiable investment fund buying, analysts said.

Prices of cotton in the ICE Futures U.S. stormed to an
all-time high of $1.305 per lb on Oct. 26, climaxing a
three-month long rally that saw values climb nearly 80 percent
since July.

'Cotton ended its wildest month in history,' Mike Stevens,
a veteran, independent cotton analyst in Louisiana said.
'There's nothing (in cotton trading history) that compares to
this (month).'

The benchmark December cotton contract gained 3.58
cents to close on Friday at $1.2526 per lb. For the month of
October, the key cotton contract had risen 23 percent. It was
the largest monthly gain since November 2001, according to
Thomson Reuters data.

The volume traded on Friday reached over 34,000 lots, about
30 percent higher than the 30-day average at 25,000 lots, the
preliminary data from Thomson Reuters showed.

The latest CFTC data showed that noncommercial and managed
money funds increased their net long position in the U.S.
cotton market to their highest level in nearly a month.

The Mississippi Historical Society's Eugene Dattel, an
economic history, said cotton prices were trading near $1.89 a
lb at the height of the 1861-65 U.S. Civil War.

With October in the books and the year almost done, cotton
is the biggest gainer in the Reuters Jefferies CRB commodity
index by posting an increase of nearly 60 percent -- better
than the star commodities of gold and silver in precious metals
and the grain market's heavily traded corn and wheat futures.

(Graph of CRB index: http://link.reuters.com/kew48n)

The cotton market jumped on Friday after news that India
may possibly default on sales of 1.0 million bales to Pakistan,
whose own cotton crop has been decimated by floods.

The 'fear of default' drove cotton up, said Stevens.
Sharon Johnson, cotton expert at First Capitol Group in
Atlanta, said that after U.S. GDP figures went out and the
dollar weakened, '(cotton futures) started ticking up.'

A supportive factor for U.S. cotton prices is the steady
close of China's cotton market and the strong prices seen in
the Cotlook A index, which is made up of the five cheapest
prices in the world market, and is still running at a premium
to the ICE Futures U.S. cotton market.

In China, the Zhengzhou Commodity Exchange's May cotton
contract was last traded on Friday at 27,245 yuan per
tonne. The Cotlook A index was being quoted at $1.415 on
Friday.

Analysts said the signposts for next week in the cotton
market would be the impact of any decision by the U.S. Federal
Reserve to shore up the fragile U.S. economy and its impact on
the dollar.

A weaker dollar normally gives most commodities that are
denominated in the greenback a boost.