DJ MARKET TALK: Cotton Sets New Marks As Merchants Cover Hedges

Cotton futures continued their precipitous rise Tuesday, as merchants abandoned their hedge positions and mill demand showed nosigns of slowing. After prices hit their daily limit the previous twoconsecutive sessions and restricted trading activity, participants jumped backinto the market Tuesday, with both the December and March contracts recordingheavy volume. Total volume ended at 52,707 contracts, compared with a normalpace between 21,000 and 24,000 contracts. Analysts attributed the rise acrossboth contracts to merchants buying back their hedge positions and exiting themarket before banks demand more margin, or money held as collateral against afutures position. An increase in margin calls has driven merchants to file forbankruptcy in the past. ICE December futures settled 4.88 cents, or 3.9%,higher at $1.2959 a pound, while March cotton hit its daily limit, up 6 cents,or 5%, to $1.2531.