Cotton futures swung from gains of nearly 2% to tumbling the daily maximum allowed in New York as the market's gyrations, prompted by quality fears, took on a particularly volatile guise.

New York's benchmark December cotton contract initially rose to 79.19 cents a pound, its highest in five months, after rains overnight in US growing areas exacerbated quality fears which have driven the fibre up some 12% in a week.

Keith Brown, at Georgia-based brokerage Keith Brown & Co, said: "We had rains in Mississippi. That cotton may be turn out to be of poor quality," at a time when fears over the coarseness of fibres in the US crop is already causing concerns.

Less than half the US crop is making the grade sufficient to meet criteria for delivery against New York contracts a factor which, with a slower-than-usual harvest too, has cut certified inventories to their lowest since the mid-1990s.

Strong export data

Strength in crop futures in Chicago, where corn and soybeans gained some 2%, also fuelled the initial enthusiasm for cotton, traders said.

Furthermore, strong export sales data, showing the US selling nearly 220,000 running bales of cotton in the latest week, also boosted sentiment.

However, December cotton nonetheless then tumbled to set an intraday low of 74.86 cents a pound - down the maximum 3.0 cents allowed in New York - enough to wipe out the last session's gains.

'Psychological support'

The drop was blamed on profit-taking, encouraged by concerns over the longevity of the current rally.

With world cotton inventories forecast at record high levels this year, "we don't believe these gains in the Ice futures market to endure past December", Luke Mathews at Commonwealth Bank of Australia said.

Keith Brown forecast pressure from better crop results, with quality in the northern hemisphere harvest "set to improve" as harvest proceeds.

However, on Thursday, the path of cotton futures took a further twist, as they recovered almost all their intraday losses to end down just 0.2% at 77.72 cents a pound.

Mr Brown flagged the "psychological support" to prices in the next session which will be gained from a strong late rally.