Cotton futures rebounded from a new eight-month low to finish ahead in mostly light, technically oriented dealings last week.

Benchmark December gained 394 points for the week ended Thursday to close at 102.57 cents, settling in the upper quarter of its 1,124-point range from 93.20 to 104.44 cents. March rose 411 points to 100.75 cents.

December plunged on Tuesday to its lowest print since Dec. 23, rebounded to finish above its nine-day moving average for the first time since June 6, and extended the rally on Wednesday to close all but two points of a 101-point gap left between the low of 144.46 on July 14 and the high of 103.45 on July 15.

Uncertainty on the outcome of debt ceiling negotiations in Washington and profit-taking as the end of the month approached produced a setback on Thursday. Traders kept an eye on Tropical Storm Don, which threatened to interrupt the harvest in South Texas and offered a chance for showers in parts of the Texas High Plains this weekend.

A corrective upside target around 109 would be a 38.2 percent retracement of the decline from 134.96 to the 93.20 low, an analyst said.

Cash trading featured 5,013 bales on The SeamΆs business-to-business exchange, up from 265 bales the prior week. Prices averaged 100.09 cents, reflecting premiums of 47.45 cents over loan redemption rates.

Net U.S. export sales for this season and next came in about as expected at 40,700 running bales for the week ended July 21, with old-crop cancellations of 64,000 bales and new-crop sales of 104,700 bales.

Shipments of 137,300 running bales boosted the total for the season to 13.672 million and left roughly 392,700 running bales to be shipped in the remaining 10 days of the marketing year to reach the USDA estimate.

Separately, U.S. mills consumed cotton at a seasonally adjusted annual rate of 3.539 million bales in June, according to Commerce Department data.

This compares with a slight upward revision to 3.533 million bales in May and is up 1.9 percent from 3.474 million bales in June 2010. However, it is below USDAΆs 2010-11 estimate of 3.8 million bales.

Annualized rates have been below the USDA estimate five straight months and have averaged 3.662 million bales through 11 months of the marketing year.

The monthly consumption report is scheduled to be discontinued for budgetary reasons. The final release is set for Aug. 25.

Looking ahead, demand and exports from India will be key factors in how cotton prices behave in the 2011-12 marketing year, Joe Nicosia, president and chief executive of Allenberg Cotton Co., said on the Ag Market NetworkΆs monthly conference call.

Mill demand plummeted after spot futures surged to an all-time high of 219.70 cents on March 7 and synthetic values via options reached as high as 227 cents.

Nicosia told the conference call that how much demand has been deferred and how much has been lost will determine pricing in the new marketing year beginning Aug. 1.

Panelists said U.S. production could range from 15.4 million to 15.7 million bales, down from USDAΆs July forecast of 16 million bales and from 18.4 million bales harvested last year.

India, the worldΆs second-largest cotton exporter behind the United States, is projected by USDA to maintain its exports at 5 million bales in 2011-12, unchanged from the prior year.

A sprinkling of mill demand emerged in the low-to-mid-90-cent area, basis December, sources said. The undertone was described as remaining cautious as mill buyers attempted to assess finished product demand for the fourth quarter of 2011 and to balance yarn inventories.

The market seemed comfortable at the moment with prospects for record world production despite the U.S. crop loss. But prices in the second half of the crop year will need to assure spring plantings in the Northern Hemisphere and could determine whether Southern Hemisphere plantings next fall will support current output projections, an analyst observed.

Brazilian and Australian production jumped to 13.5 million bales in 2010-11 from 7.23 million in 2009-10 and is forecast to expand further to 13.8 million in 2011-12.

Meanwhile, U.S. cotton at or beyond squaring advanced eight percentage points to 79 percent during the week ended July 24, 13 points behind a year ago and eight points behind average. Boll setting expanded 15 points to 46 percent, behind by 10 points and three points, respectively.

Harvesting was in full swing in areas of the Texas Coastal Bend and Lower Rio Grande Valley.

National crop ratings put good to excellent up a point to 29 percent, fair down two points to 30 percent and poor to very poor up a point to 41 percent. The good to excellent rating remained below the prior record low of 35 percent in 1998. A year ago, ratings were 68 percent good to excellent, 24 percent fair and 8 percent poor to very poor.

Conditions declined in Texas, with poor to very poor up two points to 59 percent, fair down three points to 28 percent and good up a point to 13 percent. Ratings improved in Alabama, Arizona, Arkansas, Georgia and Louisiana; deteriorated in California, Kansas, Mississippi, the Carolinas, Oklahoma and Virginia; and held steady in Missouri and Tennessee.

Conditions were above normal in Arizona, California, Mississippi, Tennessee and Virginia.

On the international scene, India increased its 2010-11 crop estimate by 4.2 percent to 32.5 million bales (170 kilos or 375 pounds). The government-run Cotton Advisory Board raised the estimate from an earlier forecast of 31.2 million bales.

Elsewhere, crop conditions in China are improved from a year ago, according to a survey by the Cotton Research Institute of the China Academy of Agricultural Sciences. The China Cotton Growth Index of 109 — a value of 100 would be unchanged from last year — compared with an eight-year average of 97.