By Duane Howell

For The Avalanche-Journal

A rally sparked by a friendly shift in monthly world supply-demand estimates after a long string of bearish reports quickly lost momentum as cotton futures posted slight losses on light volume last week.

Benchmark December eased 69 points from the prior calendar week close to settle at 69.93 cents Thursday. It slid back below its nine-day and 40-day moving averages and closed below 70 cents — though barely — for the first time since June 28.

Rallies were capped by deflationary pressures, concerns about slow demand, improved weather in some key areas of the Cotton Belt and still-burdensome stocks, analysts said.

Mills have limited buying mostly to hand-to-mouth. ChinaΆs textile industry, the worldΆs largest, is described as depressed and seeking a new cotton import quota. Running rates have slowed and large volumes of consignment cotton await sales.

Cash grower-to-business sales declined to 4,060 bales from 5,671 bales the previous week on The Seam. Prices slipped 90 points to an average of 61.95 cents and ranged daily from 66.69 to 64.49 cents. Premiums over loan redemption rates fell 200 points to average 9.81 cents.

The market seemed disinterested in USDA data showing net U.S. all-cotton export sales for this season and next rose to a combined 112,500 running bales in the week ended July 5 from 88,800 bales the prior week.

New-crop sales of 97,500 running bales boosted commitments to 2.546 million, about 22 percent of the new USDA 2012-13 export forecast. China has bought 1.238 million bales, about 49 percent of the commitments.

Old-crop sales of 15,000 running bales nudged 2011-12 commitments to 12.592 million, about 12 percent above the USDA estimate.

Shipments of 207,700 running bales brought exports for the season to 10.6 million, about 94 percent of the estimate. Exports need to average the equivalent of roughly 186,300 running bales a week for the three-plus weeks remaining in the crop year to achieve the estimate.

Earlier, slight revisions in supply and offtake cut the projected U.S. 2012-13 carryout by 100,000 bales from a month ago to 4.8 million. Beginning stocks rose by 100,000 bales to 3.3 million, reflecting a decrease to also 3.3 million in domestic mill use in 2011-12.

The crop forecast remained at 17 million bales ahead of USDAΆs first survey-based production projection next month. The estimate incorporated a 4 percent cut in plantings from the June acreage report but abandonment dropped to 17.7 percent from 20.2 percent and yields rose by eight pounds to 785 pounds per acre.

Exports climbed 300,000 bales to 12.1 million and domestic mill use dropped 100,000 bales to 3.4 million. The stocks-to-use ratio dipped to 31 percent from 32 percent foreseen last month but is up from 22.1 percent now estimated for 2011-12.

Globally, 2012-13 ending stocks fell 2.12 million bales to a still record high 72.39 million. Stocks were 66.4 percent of mill use, down from 68.4 percent but also still a record. Output fell 1.48 million bales to 113.81 million and mill use was virtually unchanged at 108.98 million.

For 2011-12, world consumption rose by 470,000 bales to 106.59 million, production fell 380,000 bales to 122.71 million and ending stocks dropped 640,000 bales to 66.68 million.

Global consumption estimates previously had fallen and stocks increased every month since the initial USDA current-crop forecasts in May 2011 except for marginal changes last September.

Foreign mill use of 105.58 million bales in 2012-13 is expected to exceed foreign production by 8.77 million bales, up 1.55 million bales from the crop shortfall foreseen last month. For this season, foreign production is expected to top foreign mill use by 3.85 million bales, down 920,000 bales from the June estimate.

On the crop scene, U.S. upland growers had booked about 10 percent of their expected acreage by July 1, down from 26 percent a year ago, according to informal surveys by USDAΆs Agricultural Marketing Service.

The estimates are based on the June planted acres reported by the National Agricultural Statistics Service. They donΆt include consignments to marketing groups but do include cotton contracted with them.

Producers have contracted 30 percent in the Mid-South, down from 64 percent a year ago; 13 percent in the Southeast, down from 31 percent; 4 percent in the Southwest, against 14 percent; and 4 percent also in the West, compared with 3 percent.

With such a small percentage under contract, producer selling on significant rallies could be expected into and at harvest, analysts say.

U.S. crop ratings deteriorated for the sixth straight week during the week ended July 8, with good to excellent down three percentage points to 44 percent and fair up three points to 38 percent.

Cotton in good to excellent condition fell to seven points below the 10-year average and 10 points below the 20-year average. Beneficial rains in parts of the Southeast, Delta and Texas are expected to bring improved overall ratings in the next weekly report.

Conditions improved — by slight margins — in the latest data only in Texas and Louisiana. Good-excellent cotton in Texas held at 35 percent, while fair rose two points to 41 percent on a decline in poor-very poor crops. In Georgia, good-excellent cotton fell five points to 58 percent.

Cotton setting bolls nationally advanced nine points to 23 percent, up from the five-year average of 19 percent, and squaring cotton jumped 21 points to 70 percent, up from 64 percent on average.

Meanwhile, trend-following funds bought a net 1,910 lots in cotton futures with options during the week ended July 3 to raise their net long position to 7,360 lots.

Index funds sold a net 219 lots to nudge their net longs down to 71,494 lots, while small traders sold a net 392 lots to push their net shorts up to 704 lots.

Commercials sold a net 1,298 lots, liquidating 3,543 longs while covering 2,245 shorts. This boosted their net shorts to 78,149 lots.