NEW YORK, Sept 15: US cotton futures ended the week with strong gains, adding 3 cents by Friday’s close, as speculators and funds continued to feed their seemingly insatiable appetite for cotton, based on long-term fundamentals that argue for fewer cotton acres, analysts said.

You have a weak market that’s at a price today that will preclude planting of cotton next spring. If you can lock in 8 times your return on equity versus lock in a loss, what are you going to grow? said Ron Lawson director at logicadvisors.com, referring to the huge differential between cotton and wheat.

ICE Futures open-outcry December cotton contract increased 0.76 cent to close at 63.61 cents per lb. It reached a peak dating back to Aug. 8 at 63.75 cents.

The range remained narrow, but started with a gap higher at the open and extended its advance up to a fresh 5-week high.

March cotton added 0.79 cent to settle at 66.64 cents. The rest of the board finished up 0.67 to 0.85 cent.

On the ICE Futures electronic cotton market December cotton was 0.55 cent higher at 63.40 cents by 2:47 p.m. EDT (1846 GMT). Its range ran from 62.81 to 63.92.

Despite the appearance of slowing down and maybe running out of volume yesterday, almost non-existent export business, a net bearish crop report, and absolutely awesome cotton growing weather in West Texas, the cotton bulls are putting

on a real show in a rare fifth

day up, said Mike Stevens, of Swiss Financial Services in Louisiana.

He added that trade sellers pressured prices on gains, but a second wave of bulls pulled prices back towards the highs.

Despite bearish supply fundamentals in this week’s weak export sales report and increased crop estimates by the USDA, some traders said funds have been taking their cue from bullish technical readings.

The market is telling me that it wants to rally. It is bullish on the daily, weekly, and monthly charts. The crop report, which I though was bearish, has been brushed off.

Funds are long the market, and they certainly don’t

want cotton to put in a poor or bearish technical performance. Cotton is very undervalued versus where farmers can plant wheat and soybeans,” said

Alan Feild trader at Iamhedged.com.

With wheat prices trading around record highs and

questions surrounding the health of the current crop, cotton players are betting many cotton acres will be turned over for wheat and other more expensive grains, Lawson

explained.

After the cotton harvest this fall, everyone’s going to plant wheat as a cover crop to avoid winter erosion, he said.

Though the crop changeover would not happen until

next year, Lawson said, speculators are required to get

into the market through the

contract with the highest open interest.

So, he said, speculators buy the current, or December 2007, contract with the intention of rolling it over at expiration, thus driving near-term prices up on long-term fundamentals.

Total cotton volume on Thursday came to 12,536 lots, with electronic trade making up 8,801 lots of that business. Open interest rose by 978 lots to 210,848 as of Sept 13.

Broker Flanagan Trading Corp said it saw resistance in open-outcry December cotton at 64.05 and 64.85 cents, with support at 63.25 and 62.50 cents.

---Reuters