CORRECTED - NY cotton ends at new top, Fed ease to boost mkt

(Corrects cotton hitting record high to second day in a row, instead of third day)
 * Tight supply, fund inflows propel cotton futures
 * USDA seen lowering China crop estimates next week
 * Fed's quanitative easing to spur further cotton surge
 (Recasts, updates prices, market activity to U.S. close)  By Rene Pastor
 NEW YORK, Nov 3 (Reuters) - U.S. cotton futures rose in heavy trading on Wednesday, finishing at a record top for the second straight day as speculative fund buying boosted prices along with strong Chinese cotton prices and tight supplies, analysts said.

 Bullish fundamentals lured speculative funds into cotton, up more than 75 percent this year. That is the strongest gain so far in 2010 on the Reuters-Jefferies commodity index, far ahead of the record-setting gold market and wheat futures.

 The market is seen getting a further boost over the next few weeks from a decision by the U.S. Federal Reserve to buy  $600 billion of government bonds to resuscitate the flagging U.S. economy.

[ID:nN03287174] Also see [MKTS/GLOB] and [FRX/]  The ICE Futures U.S. cotton market kept pace with a rally in cotton futures on China's Zhengzhou Commodity Exchange, but eased back from session peaks on mild profit-taking.
 "Prices shot to new record highs on the heels of overnight.
 "Prices shot to new record highs on the heels of overnight
prices in China and new record highs for the (Cotlook) A Index," said Mike Stevens, an independent cotton analyst in Louisiana.
 The benchmark December cotton contract CTZ0 rose 1.26 cents to end at $1.3552 per lb, having hit a new record high for the second straight session at $1.392 per lb. The session low was $1.3321. Under exchange rules, the daily limit will revert back to 5 cents from 6 cents on Wednesday.

 Business was heavy. Volume traded reached 65,781 lots, more than 150 percent above the 30-day average at 25,663 lots, Thomson Reuters preliminary data showed. The volume on Wednesday was just below the year high of 67,885 lots set on June 10.

 China's benchmark May cotton contract CCFc4 jumped to 29,980 yuan a tonne, setting a record for a third straight day. The contract last traded at 29,715 yuan, up 1.075 yuan.  The Cotlook A index cotton price, the combined average of  the five cheapest cotton prices in the world plus transport, was quoted at $1.524 on Wednesday, a hefty premium of around 13 cents over New York cotton futures. The A Index normally has a premium of 6 to 8 cents over U.S. cotton prices. It has been running at a premium of 9 to as much as 15 cents during the rally.

 Sterling Smith, an analyst for brokerage Country Hedging Inc. in Minnesota, said the decision by the Federal Reserve on quantitative easing would likely keep the greenback under pressure and boost commodities like cotton among others. "All in all, it means more dollars," he said. "The debt's going to expand. It should lead to a weaker dollar."
"In general ... any commodity that has a good fundamental story is going to have legs on this."
 "It will be bullish for commodities in general --particularly those that are sensitive like sugar, coffee and
cotton that have supply issues boosting their markets."

Cotton rose more than 20 percent in October and has gained over 90 percent since the rally kicked off in July.  "There is a big supply gap at home and abroad," said Yang Guoqi, an analyst with Jinshi Futures in China's largest cotton producing region of Xinjiang.

The market gained more momentum from reports of late rains hitting crop quality in India, the world's No. 2 exporter of the fiber, and expectations the U.S. Agriculture Department may lower China's cotton crop forecast in its monthly supply/demand report due out on Tuesday. "The talk of continuing physical demand, late season rain in Indian cotton fields and speculative exuberance propelled the market higher again," Commonwealth Bank of Australia said in a daily note.

  In technical terms, Thomson Reuters analyst Wang Tao said U.S. cotton prices, basis the second-position March contract, could rise to $1.4116 per lb over the next four weeks as part
of a wave pattern. [TECH/C] 

The March cotton contract CTH1 increased 2.21 cents to finish at $1.3166 per lb, having hit a lifetime peak of $1.3495.

PRICES AT 3:10 P.M. EDT (1910 GMT)
    SETTLE     NET    PCT     LOW    HIGH  CURRENT
              CHNG   CHNG                      VOL
CTZ0   135.52    1.26   0.9%  132.31  139.20   27,582
CTH1   131.66    2.21   1.7%  126.45  134.95   25,101
TOTAL MARKET            VOLUME           OPEN  INTEREST
          CURRENT    30D AVG     Nov 02  NET CHNG
ICE Cotton    65,781    25,663     243,838    -3,250

 (Reporting by Rene Pastorin New York, Naveen Thukral in
Singapore and Niu Shuping in Beijing; Editing by David
Gregorio)

Source: http://www.reuters.com/article/idUSSGE6A205F20101104