Government policy is distorting cotton production, consumption and trade, ICAC says at the conclusion of its 72nd plenary meeting. World cotton use forecast below production for the fourth straight season.

Cotton futures slipped in the late going Friday and settled with a slight loss for the day but ahead for the fourth week in a row.

Benchmark December closed off 26 points to 87.18 cents, a bit below the midpoint of its 86-point range from up 24 points at 87.68 to down 62 points at 86.82 cents. March closed off 24 points to 87.13 cents.

For the week, December gained 55 points and March rose 79 points as December maintained a fractional carry.

Volume slowed to an estimated 13,000 lots from 17,872 lots the previous session when spreads totaled 7,872 lots or 44% and EFP 11 lots. Options volume totaled 2,944 calls and 5,893 puts.

Government policy is distorting cotton production, consumption and trade, the International Cotton Advisory Committee said Friday at the conclusion of its 72nd plenary meeting in Cartagena, Colombia.

World cotton consumption in 2013-14 is projected below production for the fourth consecutive season, the secretariat said in a statement, noting that stocks are expected to reach a record high.

Cotton prices are above their long-term average, supported by the procurement policy of the government of the largest cotton producing and consuming country in the world, the secretariat added, referring to China.

“This policy maintains domestic cotton prices at approximately 50% above current international prices,” the statement observed, while stocks in the national reserve account for around half the world total.

By artificially supporting prices, the controversial policy is undermining the long-term competitiveness of the cotton industry and creating much uncertainty.

“When and how these stocks are liquidated is the key unknown factor that will define the fundamentals of the world cotton market over the next several years,” ICAC said.

China has indicated this will be the last season of its stockpiling program, after which it generally is expected to shift to some form of direct grower subsidy for 2014-15.

With relatively high world cotton prices encouraging production but discouraging consumption at the same time, global cotton stocks have risen dramatically over the past several seasons.

But the near-term availability of old-crop supplies outside China is perceived as comparatively tight, especially for the most desirable qualities.

Futures open interest continued to grow Thursday, rising 3,814 lots to 209,565, with DecemberΆs up 2,344 lots to 132,886 and MarchΆs up 840 lots to 59,781. This is the largest since Aug. 20 — the second session after December peaked at 93.72 — when the open interest was 209,987 lots.

Certificated stocks remained at 11,909 bales, while cotton awaiting review climbed to 11,793 bales at Memphis.

World values as measured by the Cotlook A Index gained 50 points Friday morning to 93.15 cents. The premium to ThursdayΆs December futures settlement narrowed seven points to 5.71 cents. For the week, the index rose 170 points.