A combination of factors powered cotton futures to two-month highs last week ahead of USDAΆs monthly supply-demand forecasts.

Crop worries, demand creeping up under the market, improved technical factors, speculative buying and implementation of ChinaΆs procurement of domestic cotton for its state reserves all played a role in driving the market higher, analysts said.

Benchmark December advanced 785 points to finish at 113.63 cents, its highest close since July 8, in the holiday-abbreviated trading week ended Thursday. It closed in the upper portion of its 1,161-point range from 103.86 to 115.47 cents, having finished with a loss just one time — by three points — in nine sessions.

December triggered technical buying after rallying from a test of the prior weekΆs low and closing Tuesday above its 50-day moving average and then above the 60-day average Wednesday. A 50 percent retracement of the move from 140.90 on June 3 to 93.20 on July 26 would be 117.05 cents.

Large December unfixed mill on-call sales provided underlying support. Rolling of December short hedges to March was reflected in open interest decreases in December and increases in March eight straight sessions until interest increased in both contracts Wednesday when prices surged to limit gains.

The rolling was attributed to efforts to avoid a possible December squeeze in view of the low level of deliverable stocks. Overall, open interest going into ThursdayΆs session had increased 2,893 lots from a week earlier to 151,107, largest since June 14.

In cash trading, grower-to-business sales totaled 1,809 bales on The Seam, compared with 1,865 bales the previous week. Prices gained 496 points to average 102.70 cents, reflecting a 399-point hike to 49.13 cents in premiums over loan redemption rates.

Business-to-business sales jumped to 8,368 bales from 461 bales on prices averaging 104.36 cents, down slightly from 104.90 cents, and premiums of 51.80 cents, up from 49.80 cents.

Reports of crop damage in Pakistan, the worldΆs fourth-largest cotton producer, and deterioration in the U.S. crop contributed to the rally.

PakistanΆs Business Recorder reported initial estimates indicated torrential rains have damaged at least 40 percent of the cotton in the Sindh province. The report, citing estimates by the cotton development commissioner, said flash floods damaged approximately 1 million to 1.5 million bales (of 170 kilos or 375 pounds).

The USDA last month projected PakistanΆs crop at 10.3 million 480-pound bales, up 17 percent from the previous year when devastating floods — still fresh in the memories of traders — cut production to 8.8 million bales from 9.6 million in 2009-10.

Concerns have persisted about the size and quality of the U.S. crop ahead of USDAΆs updated supply-demand report on Monday.

U.S. cotton rated good to excellent fell two percentage points to 28 percent during the week ended Sept. 4, a record low for this time of year, and poor to very poor rose by three points to 44 percent.

Conditions were rated the worst since July 10, and the good to excellent cotton compared with 30 percent as of Aug. 7 when poor to very poor totaled 41 percent just ahead of USDAΆs August crop estimate. A year ago, good-excellent was 60 percent and poor-very poor was 12 percent.

Ratings declined in Alabama, Mississippi, Tennessee, North Carolina, Oklahoma, Texas and Virginia, improved in Arizona, Arkansas, California and Kansas and held steady in Georgia, Louisiana, Missouri and South Carolina. Conditions were reported above average in Arizona, Arkansas and California and still slightly above in Mississippi and Tennessee.

Boll opening advanced 15 points to 42 percent, up two points from a year ago and a bulging 10 points above average. Harvest progress at 7 percent was up slightly from 6 percent a year ago and the average.

A substantial increase in preliminary certified planted acreage reported by U.S. producers to the Farm Service Agency has added to much uncertainty regarding USDAΆs looming crop estimates.

The FAS figures are incomplete but USDAΆs National Agricultural Statistics Service is expected to incorporate the administrative data into its September crop forecasts and adjust the planted area upward from the previously estimated 13.725 million acres.

A decrease is expected in the projected yield, however, and acreage abandonment may be revised upward. This still is widely expected to result in a significant reduction in the production forecast.

However, Informa Economics, Memphis-based research and consulting firm, reviewed the FSA acreage data and projected an output of 17.467 million bales, up from USDAΆs August estimate of 16.554 million. Informa projected the per-acre yield at 817 pounds, down from USDAΆs 822 pounds.

This is the first year the FSA has made the certified acreage data publicly available on its website. The data will be updated monthly and released by mid-month through the end of the year.

In other developments, China intended to buy an initial 24,300 metric tons (111,600 bales) for its reserves. The program is to end March 31.

Meanwhile, world cotton production prospects have increased a million bales from a month ago, the mill use outlook has declined a million bales and prospective ending stocks have risen by 2 million bales, according to estimates by the International Cotton Advisory Committee secretariat.

The ICACΆs September estimates put global production at 124 million bales, consumption at 114 million bales, exports unchanged on the month at 37 million bales and ending stocks up 2 million bales to 52 million.

After a 4 percent drop in 2010-11, cotton mill use is projected to resume slow growth in 2011-12, rising 1.5 percent, while production is expected to rise by 8 percent to the largest output since 2004-05.

With production outstripping consumption, ending stocks could rebound by 24 percent. The ICAC carryout forecast is up from its estimates of 42 million bales last season and 40 million bales in 2009-10.