* Mills given new sliding-scale import quotas - reports
* Prices gain after 6-percent decline from 1-year high
* Technical support seen at 85.59 cents a lb
NEW YORK, March 26 (Reuters) - Cotton futures rose on Tuesday, stemming a four-day slide as reports of new import quotas in China supported prices in the United States, the world’s top exporter, and as technical support buoyed the market.
The most-active May cotton contract on ICE Futures U.S. gained 1.45 cent, or 1.7 percent, to settle at 88.04 cents per pound.
It was fiber’s largest one-day rally since climbing to a 1-year high of 93.93 cents a lb on March 15.
Buying was prompted by reports that China has allowed new import quotas to spinning mills from research firm Cotlook and CNCotton, a publication of Beijing-based China National Cotton Information Center. The move allows the mills to import one bale for every three purchased from state reserves.
The news from world’s largest consumer allayed concern that demand for foreign cotton had dwindled amid recent high prices and on sales of government reserves reported last week. Cotton found further support amid a market correction and technical support after having posted its longest string of daily losses since late September.
Prices had fallen about 6 percent from the one-year high, on concern that the speculator-induced rally had run out of steam and that plans from China and India, the world’s largest producer, to sell from government stocks could flood the global market and deflate demand for foreign cotton.
“China is issuing additional import quotas. The momentum has been up (higher), though it had fallen back,” said Jobe Moss, a broker at MCM Inc in Lubbock, Texas, noting that cotton was approaching technical support at 85.59 cents a lb and that had prompted buying.
Open interest totaled 208,023 contracts on Monday, after falling each session following the climb to a one-year high. The combination of the falling open interest and prices was seen as evidence that speculators had begun dialing back their bullish bets.
Prices are up about 18 percent since the start of the year, driven as noncommercial dealers boosted their bullish bets in cotton futures and options to the highest since 2008.
The rally has come despite forecasts of a record global surplus by the end of crop year through July, because more than half of those are expected to become part of China’s stockpiles and are considered unavailable to the global marketplace.
Beijing began building its reserves in 2011, paying above global prices to support farmers.
The May/July contract spread on ICE increased for a fifth straight session on Tuesday, leaving July at a premium of 1.29 cents a lb, the highest the second-month has held to spot contract since early March.
The July contract closed up 1.51 cents, or 1.7 percent, at 89.33 cents a lb.
The spread is expected to widen further as the index roll will soon begin and open interest grows in the July contract ahead of the spot contract’s expiration on May 8. (Reporting by Chris Prentice; Editing by Marguerita Choy)