NEW YORK, Oct 11: NY cotton finished on Friday at a five-year high on robust trade and options-related buying as the market dismissed a bearish USDA monthly supply/demand report, analysts said.

December cotton soared 1.74 cents to conclude at 71.54 cents a lb, trading from 67.90 to a new contract high of 71.70 cents. On the weekly charts, it was the best close for cotton since trading near 72 cents in October 1998.

March vaulted up 1.80 cents to end at 73.86 cents, climbing for the fourth day running to hit a contract high of 74 cents. The rest surged 0.90-1.80 cents.

We’re going a lot higher, said Alan Feild, an analyst for brokers iamhedged.com in Memphis, Tennessee.

Massive options-related and trade buying reversed an early downturn in cotton caused in part by a bearish USDA supply/demand report.

The USDA raised its estimate of the U.S. 2003/04 cotton crop to 17.56 million (480-lb) bales and kept its estimate of China’s cotton harvest unchanged at 25.5 million bales.

Jobe Moss, an analyst for brokers and merchants MCM Inc. in Lubbock, Texas, said the market’s reaction showed that it doesn’t believe the USDA’s crop report.

Market players contacted by Reuters said they believe the Chinese cotton crop will fall to around 24 million bales and that eventually the USDA will have to come down to that figure after poor weather ravaged the Asian giant’s cotton crop.

There was big time options buying, said Moss, adding most of it appeared to come from several merchant houses based in the center of the cotton trade in Memphis.

Analysts said expectations of massive Chinese cotton imports in 2003/04 powered futures higher since many players believe prices are not yet high enough to ration demand.

Feild said it would not be surprising if the December cotton contract eventually rockets up to a region over 80 cents, a level it last reached in mid-1998.

Cotton rallied despite the funds’ being overly long and record open interest in the market. Open interest shot up 3,287 to a new record of 103,853 lots as of Oct. 9, surpassing the previous mark of 100,781 lots set last Oct. 2.

Technicians said resistance in December cotton would be at 72, then 73 cents. Support was pegged at 70.25 and 69.80 cents.

Floor dealers said final estimated volume stood at a robust 24,000 lots, against the prior count of 18,858 lots.

Options volume was at a heavy 22,000 lots, nearly 13,000 of them in calls and some 9,000 lots in puts. —Reuters