* Cotton prices fall after rally
* Higher dollar weighs on commodities prices
* CFTC graphics r.reuters.com/buv87r
By Chris Prentice
NEW YORK, Feb 4 (Reuters) - Cotton prices pulled back from recent highs on Monday as the U.S. dollar gained, certified stocks rose and speculative buying that has driven fiber's longest bull run in two years waned.
The most-active March contract on ICE Futures U.S. fell 1.24 cents, or 1.5 percent, to settle at 81.74 cents per lb. The drop, only the third in the past fourteen sessions, pushed the front month through its 9-day moving average.
"We've had a nice run in the market, we're due for a little bit of a pullback," said Ron Lawson, a partner at commodity investment firm LOGIC Advisors.
Lawson said the stronger U.S. dollar, a deterrent to exports of products like cotton, helped spur the pricing correction. Cotton underperformed the entire Thomson Reuters Jefferies CRB Index, which declined in Monday's trading.
A recent uptick in supply onto the exchange also weighed on cotton prices, with over 51,000 480-lb bales awaiting approval from the U.S. Department of Agriculture, according to ICE data. That compares to about 5,000 bales at the start of the year.
It is also in addition to the 144,271 bales already registered with the exchange, up from the approximately 8,000 bales in October following a seasonal draw-down on stocks following the previous growing season.
Total trading volume was more than 39,000 contracts, according to preliminary Thomson Reuters data. That was more than double the 250-day average, although activity in the spot contract has fallen and business further along the curve has picked up as funds roll their positions into May and July.
Overall open interest has jumped by almost a third over 210,000 lots, its highest in two years, while outstanding contracts in the spot contract, which expires on March 6, have fallen for seven straight sessions, down 12 percent to just over 116,000 lots.
Even after Monday's decline, speculative buying has pushed cotton prices up 9.4 percent year to date. Fiber was the best performing commodity in the Thomson Reuters-Jefferies CRB Index last month, rising a whopping 10.5 percent in January and registering its largest monthly gain since early 2011.
Following their buying spree, hedge funds and other speculative investors are holding their largest net long position in more than two years.
But the recent price spike has already dissuaded some end users from buying fiber, said Jobe Moss of MCM Inc. in Lubbock, Texas.
"When you take the prices up like that, business slows down," Moss said.
Last week, U.S. government sales data indicated a decrease in export sales from the prior week, as well as the first time Chinese buyers had canceled bales since mid-July.
Looking ahead, the USDA is set to report on the country's cotton supply and demand on Friday. Last month, cotton prices rose after the government cut its outlook for U.S. cotton production even though it raised its global surplus estimate. (Reporting By Chris Prentice; editing by Andrew Hay)