NEW YORK, Oct 18: Cotton futures closed sharply higher for the second session running on Friday on investor and merchant buying, with brokers saying the surge should easily spill over into next week.

The benchmark December cotton contract firmed the 3.00-cent limit to finish at 52.57 cents per lb, with the session low at 49.65 cents.

The contract had hit a lifetime low of 45.66 cents on Thursday before uncorking a furious rally.

On Wednesday, the December contract finished at 47.54 cents in the worst close for cotton on the spot daily charts since the middle of May 2007.

March rose 3.00 cents to end at 56.39 cents.

Volume traded in the December contract stood at 10,388 lots at 2:43 p.m. (1843 GMT).I think it will go higher, said Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana.

He said the kind of trade hedging which would serve to cap the market will not likely come out until the December contract approaches 54 cents.

Analysts said supplies are tightening as merchants scramble to cover their obligations by buying futures, with Chinese interest said to be particularly strong when the December contract was below 50 cents.

The level of US certificated cotton stocks has also steadily declined over the past few months because it is the main source of high-grade US cotton for nearby shipment, trade sources said.

ICE Futures US said that as of Aug. 5, certificated cotton stocks deliverable to the market stood at 1.743 million (480-lb) bales. As of Oct. 16, cotton stocks stood at 1.205 million bales, the exchange said.

The market may have also gotten a boost from the weekly export sales report of the US Agriculture Department.

USDA said total US cotton sales hit 408,200 running bales (RBs, 500-lbs each), from 272,700 RBs in last week’s report.

US cotton export shipments was at 237,000 RBs, from 249,000 RBs in last week’s report, the USDA said.—Reuters