By Duane Howell

An unexpected slash in U.S. new-crop production prospects and an increase in projected old-crop exports as “free” supplies tightened contributed to extending a powerful cotton futures rally last week.

Spot July jumped 685 points or 8.1 percent for the week ended Thursday to close at 91.72 cents, the highest finish since March 15. It settled up 1,236 points or 15.6 percent from its May 31 close.

December advanced 376 points or 4.4 percent to settle at 89.15 cents, just below the seasonal high of 89.20 in mid-March and above the midpoint (88.79) of its lifetime high-low (106.69 and 70.88).

July sprang to a premium to December on Monday in the face of the second day of the big Goldman Sachs index fund roll of longs from the old-crop contract. July, which had closed the previous week at a discount, traded at premiums on Tuesday as wide as 380 points.

The fund roll involved selling July and buying December. Commercials were believed likely on the other side as they rolled or covered shorts and mills fixed on-call prices.

Some speculators also may have covered shorts established in bear spreads when they expected the July discount would widen with the index fund rolling of longs forward. First notice day for July deliveries is June 24. July options expired Friday.

U.S. production prospects for 2013-14 fell 500,000 bales from a month ago to 13.5 million as continued drought in the Southwest raised abandonment, USDA said in its updated supply-demand report. The ending stocks forecast fell 400,000 bales to a tight 2.6 million bales.

Exports for this season rose by 350,000 bales to 13.6 million, topping the crop forecast for 2013-14, while domestic mill use gained 50,000 bales to 3.45 million and ending stocks also fell 400,000 bales to 3.6 million.

The old-crop export increase reflects continued strong sales and shipments and expected higher imports by China, USDA said. Many in the industry had expected an increase, the question having been by how much.

The USDA carried forward the March planting intentions, cut the 2013-14 acres-for-harvest estimate by 300,000 from a month ago to 8.10 million and left the yield projection at 800 pounds, down from 887 pounds in 2012-13 and the five-year average of 817 pounds.

This would be an abandonment of 1.93 million acres or 19.3 percent, with abandonment in the Southwest estimated at 32 percent, up from 25 percent forecast a month ago but down from 41.5 percent in 2012-13.

With the total 2013-14 supply projected down 900,000 bales from last month, exports fell 500,000 bales to 11 million and ending stocks skidded to the equivalent of 18 percent of overall use.

The USDA raised its projection of the marketing-year average price by 5 cents on each end of the range to 73 to 93 cents, with the midpoint of 83 cents up 15 percent from the estimated 72-cent average for 2012-13.

Globally, changes on the month for both 2012-13 and 2013-14 resulted primarily from a sharp increase of 1.75 million bales in ChinaΆs 2012-13 imports to 20 million.

Higher imports by China this season are drawing stocks from exporting countries and constraining the 2013-14 supply available for global consumption and trade outside China, USDA noted.

World 2013-14 production fell a slight 660,000 bales on the month to 117.16 million and consumption eased a fractional 260,000 bales to 110.17 million.

ChinaΆs projected imports for 2013-14 fell a million bales to 11 million, accounting for most of the 1.1-million bale drop to 38.4 million in world trade, while higher imports by China in 2012-13 raised beginning stocks and domestic supplies.

Projected world 2013-14 ending stocks dipped a marginal 250,000 bales on the month to 92.49 million, but a 750,000-bale hike in ChinaΆs carryout left stocks outside China about 3 percent lower at 33.56 million bales.

These projections assume that China continues current policies regulating the national reserve acquisition and release prices, USDA said.

ChinaΆs stocks are estimated at 63.7 percent of the world carryout in 2013-14, up from 58.9 percent in 2012-13. Stocks of this magnitude in China arenΆt sustainable, an industry specialist said, adding that the larger they grow, the more likely Beijing is to act.

Meanwhile, U.S. all-cotton export sales for shipment this season and next slipped to 201,900 running bales during the week ended June 6, still considered good, though down from 323,600 bales the prior week.

Upland net sales for this season of 101,100 bales, down 45 percent from the previous week and 15 percent from the prior four-week average, reflected gross sales of 113,400 bales and cancellations of 12,300 bales. Sales for next season fell to 99,000 bales from 138,400 the week before.

All-cotton shipments slowed to 252,500 running bales from 301,100 bales, with upland exports of 232,300 bales down 16 percent from the previous week and 17 percent from the prior four-week average.

Commitments climbed to 13.293 million bales for 2012-13, up 228,000 from a year ago and nearly 101 percent of the new export estimate, and shipments for the season reached 11.449 million bales, up 1.657 million bales from a year ago and about 87 percent of the forecast. Weekly exports need to average roughly 249,000 bales to make the estimate.

On the U.S. crop scene, conditions are considerably below those of a year ago, according to USDAΆs first weekly ratings of the season.

The data showed good to excellent at 42 percent as of June 9, down nine percentage points from a year ago, and poor to very poor at 21 percent, up eight points.

Planting progressed six points that week to 88 percent complete, seven points behind last year and four points behind average. A week earlier, progress was only a point behind average. Squaring at 6 percent was down from 18 percent a year ago and 11 percent on average.