Cotton prices rose, capping the biggest three-day rally in eight months, on signs that global demand may outpace supplies.

Cotton exports from the U.S., the world's largest shipper, will be 9.1 percent higher than forecast last month, the Department of Agriculture said yesterday. Inventories will be
3.3 million bales, 23 percent lower than a January estimate and down 48 percent from a year earlier, the agency said. A bale weighs 480 pounds, or 218 kilograms.

"The bullish fundamental case has been built by yesterday's crop report," said Mike Stevens, an independent trader in Mandeville, Louisiana. Lower stockpiles were "a rude wake-up call to mills around the world," he said.

Cotton futures for March delivery rose 0.66 cent, or 0.9 percent, to 72.82 cents a pound on ICE Futures U.S. in New York. In three days, the fiber gained 9.3 percent, the most since June. Earlier, the price reached 73.91 cents, the highest level for a most-active contract since Jan. 13.

Yesterday, cotton jumped 3 cents, the most allowed by ICE. The price has dropped 3.7 percent this year, partly because the dollar's rally eroded the investment appeal of raw materials.

World consumption of the fiber will climb 4.9 percent to 115.5 million bales, the USDA said yesterday. China, the leading buyer, and India will use more as demand recovers more than forecast.

Last year, futures jumped 54 percent as adverse weather hampered the U.S. harvest and damaged crop quality.

Eoin Treacy's view When one looks at a long-term chart of cotton, a broad ranging pattern is evident, more recently between 40¢ and 80¢. If one goes back to the 1970s from 40¢ to 100¢. This pattern suggests cyclicality to supply and demand also seen in some other agriculture related markets.

Cotton found support near 40¢ from November 2008, broke upwards from the five-month base in April 2009 and remains in a relatively consistent uptrend. It rallied with alacrity this week from near 66¢, which coincides with the 200-day moving average and a sustained move below that level would now be required to question scope for further higher to lateral ranging.