* Dry conditions in key U.S. growing state prompt buying – dealers
* Friday’s USDA monthly crop report eyed
* Open interest climbs for 5th straight session – ICE data
NEW YORK, May 6 (Reuters) – ICE cotton gained for a third straight session on Monday as unfavorable growing weather in the United States sparked concern over upcoming supplies from the world’s top exporter and prompted buying, dealers said.
The most-active July contract on ICE Futures U.S. gained 0.96 cent, or 1.1 percent, to settle at 87.39 cents per lb.
Planting delays amid heavy rains across the Midwest and into the southeastern United States pushed crops like corn and cotton to gains last week.
For grains, the concerns eased on Monday on expectations that plantings would speed up, but cotton traders turned to eye drought conditions in Texas, the country’s top growing region.
“Within the next five weeks, we need to get rain in Texas. It’s a roll of the dice, (as) we plant so much of the U.S. crop in a drought-stricken area,” said Ron Lawson, a partner at commodity investment firm LOGIC Advisors.
The dry weather has caused growers in some parts of the state to hold off planting until later in the season, and has created a weather-related risk premium, dealers said.
The delays will affect the upcoming 2013/14 crop, but also could strain the current year’s supplies if they are needed to extend far past the crop year-end in July, traders said.
Dealers said they were eyeing the U.S. Department of Agriculture’s (USDA) monthly crop report on Friday for any changes in the supply and demand forecasts.
“Demand in light of continued strong export data should be boosted again, the only question being by how much,” said Sharon Johnson, cotton specialist for Knight Futures, projecting that U.S. exports will be 13.3 million bales in 2012/13, compared with the USDA’s April outlook of 13 million 480-lb bales.
Last week, U.S. government data showed total export sales at the highest since mid-January and export sales to China at the highest since September.
China, the world’s largest textile market, began building its strategic reserves in 2011, paying above global prices to support domestic farmers. The stockpiling program is expected to continue this year.
The country is expected to hold more than half of the projected record global inventory by the end of the crop year, though those stocks are considered unavailable to the global marketplace.
Open interest totaled 168,057 contracts on Friday, according to ICE data, climbing for a fifth straight session after falling to the lowest level since December.
Speculators drove a first-quarter rally of 18 percent as they boosted their bullish bets in cotton futures and options to a five-year high in March.
As they have cut back that net long position, prices have slumped. Spot prices are down more than 9 percent from a one-year high of 93.93 cents a lb touched in mid-March.
Certified stocks totaled 494,884 bales on Friday, ICE data showed. (Reporting by Chris Prentice; editing by Jim Marshall)