ICE cotton jumps to a 1-month high as rains stoke supply worry


* Fiber posts biggest weekly gain in 6 weeks

* Heavy rains in India could hamper harvest in no 2 producer -dealers

* December cotton closes above 50-, 100-day MA

NEW YORK, Sept 27 (Reuters) – ICE cotton rallied to a one-month high on Friday and posted its biggest weekly gain in six weeks on bullish chart signals and rains in India which fueled worry over delayed or damaged supplies in the world’s No. 2 producer.

The most-active December cotton contract on ICE Futures U.S. gained 1.16 cents, or 1.4 percent, to settle at 86.63 cents a lb after climbing to 86.98 cents, its highest level since late August.

Second-month prices settled the week up 2.5 percent in the their biggest weekly gain since mid-August as follow-through buying lifted the December contract past its 50- and 100-day moving averages on Friday and drove further gains.

The market rallied this week as concerns built over the impact of unfavorable weather on supplies in the world’s key producers, even with global inventories forecast to hit a record by the end of the 2013/14 crop year on July 31.

No. 2 producer India has seen excessive rains in recent days which could hamper harvesting of a bumper crop, dealers said.

India’s climbing output has widely been expected to make up for lower production this year in the United States and China because of unfavorable weather and less acreage.

Rains have delayed crop progress and hurt yields in key growing regions of the United States, the world’s top exporter, and bad weather prompted the Agriculture Ministry in China, the world’s top grower, to lower its output forecast this week.

“You’ve got these concerns about how much China’s crop is going to be down, and we had another big rainfall in India,” said Sharon Johnson, a cotton specialist with KCG Futures in Atlanta.

Expectations of more wet weather in areas of the United States helped fuel the worry, dealers said.

While record world inventories are expected by the end of July, the bulk of the supply is expected to become part of China’s stocks and unavailable to the world market.

A government stockpiling program has increased the country’s share of global supplies and driven voracious demand for foreign cotton.

On Friday, China said it will issue low-tariff import quotas in 2014 for cotton and key grains at the same level allocated this year.

Beijing began the third year of its controversial government stockpiling program this month.

The country has yet to decide when the next round of sales from the reserve will take place. At what price the government decides to sell its inventories could dampen import demand.

Second month cotton prices are on track to end the quarter little changed after posting a loss last quarter.

Speculators added to their bullish stance in cotton for a second straight week, U.S. Commodity Futures Trading Commission data showed on Friday.

Noncommercial dealers had reduced it to the lowest level since January and took the wind out of a rally that lifted cotton to nearly 94 cents a lb last month.

With Friday’s rally, the December contract broke out of the narrow trading range it had been locked in since the end of August.

The close above the 50- and 100-day moving averages has brightened fiber’s technical outlook, dealers said. (Reporting by Chris Prentice; editing by Jim Marshall)