By Duane Howell
For A-J Media

Positioning for supply-demand estimates confined cotton futures to a tight closing range of 66 points in holiday-shortened trading last week.

Benchmark December edged up 29 points for the week ended Thursday to settle at 63.05 cents, regaining about half the prior weekΆs loss. It posted five higher lows in a row after hitting a new low for the move the previous week at 62.11 cents.

Technically, DecemberΆs high Thursday of 63.90 cents, above highs of the prior 10 sessions, stalled just shy of a 38.2 percent retracement at 63.98 of the 489-point decline from the Aug. 21 high to the Sept. 2 low. A 50 percent retracement would be 64.56. Chart support points were seen at 62.62, 62.11 and the contract low of 61.20.

Price action appeared inhibited by the approach of an updated U.S. crop estimate and monthly supply-demand forecasts from USDA on Friday. Weekly export sales also were set for release Friday, a day later than usual because of the Labor Day holiday.

Many traders think USDA overestimated global cotton consumption with its forecast last month of 114.65 million bales, up 2.5 percent from 2014-15 and the highest since 2010-11 in the face of a tough macro climate.

The International Cotton Advisory CommitteeΆs September forecast of 114.96 million bales and the USDA estimate were above Cotton OutlookΆs late August projection of 109.94 million bales. Consumption peaked at 123.97 million bales in 2006-07, according to USDA figures.

The ICAC said high domestic cotton prices and low polyester prices in China, the worldΆs largest cotton consumer, have made its cotton spinning sector less competitive. Low crude oil prices have supported the use of polyester fiber in yarn production and restricted growth in cotton use.

The Cotlook A Index and the price of polyester in China were essentially equal during most of the 2000s, with cotton sometimes the cheaper. The prices diverged in 2009-10 and cotton prices have remained substantially above those of polyester since then.

During the buildup of government-held reserves, domestic cotton prices, as measured by the China Cotton Index, were around 144 cents a pound, but quickly fell when Beijing announced it would no longer buy cotton for its stockpile.

Domestic prices continued to fall last month, averaging 95 cents and narrowing the gap with international cotton prices. However, polyester prices also have fallen, maintaining the spread with cotton.

A U.S. agricultural attaché report from Beijing added to the mix, nudging the postΆs forecast of ChinaΆs consumption up slightly to 34.5 million bales from USDAΆs August forecast of 34 million, which was even with last seasonΆs estimate. The report estimated ChinaΆs crop at 25.26 million bales, down from USDAΆs 26 million and last yearΆs 30 million.

The ICAC estimated world production at 108.85 million bales, compared with USDAΆs 108.99 million bales, down 10 million bales from 2014-15, and 107.25 million bales by Cotton Outlook.

U.S. crop estimates spanned a wide range of nearly 2 million bales, from 13 million to 14.99 million, and averaged 13.78 million, up from USDAΆs August forecast of 13.083 million, according to a survey of cotton analysts by The Wall Street Journal.

Some say the Texas High Plains crop, barring catastrophic weather before harvest, could approach 4 million bales, Mary Jane Buerkle, communications director of the Lubbock-based Plains Cotton Growers, Inc., reported in a weekly PCG newsletter.

That would be up from 3.67 million bales estimated by USDA last month and 3.261 million bales harvested in the two High Plains crop reporting districts last year.

The crop generally has continued to benefit from warm, open weather in recent weeks, but lack of rain had begun to take a toll in many fields, particularly on dryland acreage, Buerkle said.

Informa Economics, Memphis-based analytical firm, estimated U.S. production at 13.209 million bales, sources said. Plantings were estimated at 8.558 million acres, down from USDAΆs 8.898 million, with yields pegged at 834 pounds off acres for harvest, against USDAΆs 795 pounds, last yearΆs 838 pounds and the five-year average of 829 pounds.

On the current U.S. crop scene, cotton conditions again slipped slightly during the week ended Sept. 6, with good to excellent down a percentage point to 53 percent and poor to very poor up a point to 12 percent, according to data reported by USDA.

The ratings were up from year-ago readings of 49 percent good to excellent and 17 percent poor to very poor. The DTN cotton condition index dropped two points to 136, up from 121 a year ago. This marked the fourth straight weekly decline and was a new low of the season.

Forty-four percent of the Texas crop rated good to excellent, down a point from a week earlier, and poor to very poor rose a point to 16 percent. A year ago, Texas cotton was 35 percent good-excellent and 25 percent poor-very poor.

Growers had harvested 6 percent of the Texas crop, six points behind last year and four points behind the five-year average. Ninety-two percent of the Texas crop was setting bolls, five points behind average, and open bolls at 21 percent lagged the average by 11 points.

Boll opening beltwide advanced nine points to 31 percent, seven points behind a year ago and the average, while boll setting edged up a point to 95 percent, behind by four points and five points, respectively.

Meanwhile, trend-following funds reduced their net longs by 12,197 lots, or 27.5 percent, to 32,184 in cotton futures-options combined during the week ended Sept. 1, according to supplemental traders-commitments data reported by the Commodity Futures Trading Commission.

They liquidated 9,762 longs and added 2,435 shorts. Index funds raised their net longs by 740 lots to 68,177, while traders with nonreportable positions cut theirs by 1,540 lots to 1,340.

Commercials reduced their net shorts by 12,999 lots to 101,702, covering 9,828 shorts and adding 3,171 longs.