Slowly rising prices in some large producing countries amid ongoing Chinese buying, expectations for smaller 2012 plantings and improved technical factors have helped to strengthen cotton futures.

The market posted four new eight-week highs in a row before giving back much of the advance after USDA reported increases in its projections of U.S. and world ending stocks.

Spot March gained 95 points for the week ended Thursday to close at 95.69 cents, while new-crop December advanced 109 points to 92.07 cents. March traded within a 428-point range from 93.22 to 97.50 cents, highest print since Nov. 18 and up nearly 16 percent from the Dec. 14 low — now seen as likely a major bottom — at 84.35 cents.

Heavy losses in grains after USDA estimated supplies well above trade expectations also weighed on cotton at the end of the period. March cotton neared a 50 percent retracement (97.80) of the 2,690-point decline from the Sept. 15 high at 115.25 to the December low.

Cash grower-to-business sales reached a new marketing year high of 75,696 bales on The Seam, up from 44,027 bales the previous week. Prices fell 284 points to an average of 85.15 cents, within daily ranges from 77.99 to 87.53 cents. Premiums over loan repayment rates slipped 143 points to average 31.58 cents.

The basis on the base inch-and-sixteenth quality widened 195 points in the seven U.S. markets to an average of 663 points off March, according to USDAΆs spot quotations, and ranged from 425 points off March in the Southeast to 1,069 points off in the most active West Texas region.

The U.S. production estimate dropped a slight 153,000 bales from a month ago to 15.674 million, USDA said. Export prospects fell 300,000 bales to 11 million, domestic use remained at 3.6 million and ending stocks rose by 200,000 bales to a projected 3.7 million.

Upland output in Texas fell 200,000 bales to 3.5 million, 55 percent less than in 2010, with the crop down 50,000 bales to 1.88 million in the High Plains, only 35 percent of the 5.331 million bales produced in 2010, and fell 135,000 bales to a mere 195,000 in the adjoining Rolling Plains, which harvested 1.023 million bales last season.

Globally, production dipped 580,000 bales to 122.84 million, mill use fell 1.35 million bales to 109.99 million and the carryout rose by 680,000 bales to 58.35 million, up about 29 percent from beginning stocks. The projected stocks-to-use ratio of 53 percent is above both the five-year and 10-year averages.

However, the world carryout minus ChinaΆs estimated stocks actually declined, falling to 41.3 million bales from 42.1 million foreseen a month ago. China has been buying aggressively for its national reserves, and this cotton will be isolated from the market until it is deemed needed.

The monthly supply-demand report overshadowed supportive weekly data showing net U.S. upland export sales at a seven-week high data of 92,800 running bales, with 69,500 bales bought by China.

Shipments remained slow at 158,500 bales, up 6 percent from the previous week but down 10 percent from the prior four-week average.

Concerns that a persistent La Nina phenomenon again could mean dryness in much of the Cotton Belt, especially in top-producing Texas, contributed to the futures gains.

Record water usage and severe drought in 2011 could mean water shortages in 2012 for farmers in and near TexasΆ Lower Rio Grande Valley, the first area in the nation to plant cotton.

Rationing is likely, says Juan Enciso, research water engineer with the Texas AgriLife Research and Extension Center in Weslaco.

Agriculture in South Texas used just over 1 million acre feet of water in 2011, against only 519,000 in 2010, he said in report. Total water use was 1.4 million acre feet, compared with 731,000 in 2010.

If growers are allocated only a few irrigations or about 6 to 8 inches of water, itΆs important to start making planting decisions on cropping and acreages, Enciso said. Corn, for example, requires four to five irrigations, sugarcane seven to 10, grain sorghum only one or two and cotton three, he said.

Municipal water is secure and will always be a priority of over water for agricultural uses, the engineer said.

Irrigation also will be closely monitored on the Texas High Plains, where the driest year on record and extreme heat prompted an all-time high abandonment of planted cotton acres.

New rules went into effect Jan. 1 in Lubbock and surrounding counties requiring registration with the High Plains Underground Water Conservation District of wells capable of producing 171/2 or more gallons per minute.

Drought readings have eased slightly in the High and Rolling Plains, but substantial rainfall still will be needed before planting time. Short to very short soil moisture prevailed in 87 percent and 74 percent of the northern and southern High Plains, respectively, as of Jan. 8.

In California, the Department of Water Resources said the water content of the Sierra Nevada Mountains stood at only 19 percent of average for the first week of January. This was one of the driest measurements in history for this time of year.

The DWR estimated that 60 percent of requested amounts will be allocated for 2012, pointing to abundant winter snowfall and rains the previous year. State water reservoirs have remained above average.

Meanwhile, trend-following funds bought a net 12,084 lots in futures-options combined during the week ended Jan. 3 to boost their net long position to 14,113 lots. This was the largest buying by those funds since the week ended Aug. 10, 2010.

Index funds sold a net 2,889 lots to reduce their net longs to 48,837 lots, and traders with non-reportable holdings bought a net 4,776 lots to reverse their position to net long 966 lots from net short 3,810 lots.

Commercials sold a net 13,971 lots, adding 7,650 shorts and liquidating 6,321 longs.