Unable to overcome overhead resistance, cotton futures have retreated to a three-week low finish ahead of updated USDA supply-demand estimates.

Benchmark March lost 123 points for the week ended Thursday, Jan. 9, to close at 82.81 cents, its lowest settlement since Dec. 23. May fell 121 points and finished even with March at 82.81 cents, July dropped 131 points to 82.67 cents and December shed 148 points to 77.46 cents.

Negative implications linked to the fifth failure on probes above 85 cents in March weighed on sentiment. However, March at its low of 82.66 cents held above retracement support at 82.38, analysts said.

Traders adjusted positions ahead of USDAΆs updated supply-demand estimates, scheduled for release on Friday, Jan. 10. A couple of big index funds began an annual five-day rebalancing exercise.

Cash grower-to-business sales slowed to 50,890 bales from 57,841 bales the prior week on The Seam. Prices fell to an average of 76.37 cents from 77.15 cents, reflecting a dip to 24.03 cents from 24.14 cents in premiums over loan repayment rates. Daily price averages ranged 75.22 and 77.33 cents.

Traders digested reports showing weak U.S. export sales, forecasts for a sharp reduction in imports and lower plantings in China, a smaller global cotton area and a continued buildup in fund-spec longs.

U.S. upland export sales slumped to 68,100 running bales during the week ended Jan. 2, down 21 percent from the previous week and 62 percent below the prior four-week average. These were the lowest since the week ended Oct. 3.

Upland shipments quickened to 211,300 bales, up 48 percent from the previous week and 37 percent from the prior four-week average. These were the largest weekly exports since Aug. 15.

On the international scene, China is likely to stop buying cotton for its reserves by August, said Jarral Neeper, president of the California-based marketing cooperative Calcot, as quoted by Dow Jones Newswires.

Neeper projected at the Beltwide Cotton Conference in New Orleans that ChinaΆs imports could drop 45 percent to 6 million bales during the 2014-15 marketing year that begins Aug. 1.

China has confirmed that it plans to end its stockpiling policy and replace it with direct subsidies but details have remained lacking.

On the home scene, U.S. apparel retailers have been selling less cotton in their imported products since the recession, according to data reported by Cotton Inc. at the beltwide conference.

From 2007 through 2013, imported womenΆs and girlΆs bottoms, such as jeans and khakis, are up 10 percent at about 1.4 billion units, but the overall cotton content of those products is down 7 percent. The average weight of the bottoms also is down 9 percent to 0.63 pound.

Jon Devine, senior economist at Cotton Inc., estimated that cottonΆs overall market share has fallen 8 percent to 9 percent since 2007.

Globally, cotton area is expected to decline in 2014-15, mostly on a projected drop in China, says the International Cotton Advisory Committee.

The secretariat forecast ChinaΆs cotton area at 3.9 million hectares, or 9.64 million acres, down about 15 percent from 2013-14. Plantings this season were down 8 percent from 2012-13, ICAC estimated.

A separate Beijing Cotton Outlook survey showed as much as a 9 reduction to 4.209 million hectares or 10.401 million acres.

And the China Cotton Association subsequently pegged planting intentions at 4.248 million hectares, or 10.497 million acres, down 8.9 percent from its estimate for 2013-14.

Then Neeper, the Calcot executive who recently returned from China, estimated that ChinaΆs cotton plantings could fall as much as 20 percent.

Assuming average yields, the BCO survey suggested production would be reduced 7 percent to 11 percent to 6 million to 6.31 million metric tons, or 27.56 million to 28.98 million 480-pound net weight bales.

The prospective area may change, ICAC pointed out, noting that planting doesnΆt begin until March. Much may depend upon such factors as the farmer support level in the new program.

Global cotton mill use is expected to continue growing in 2014-15 on the basis of continued recovery in world economic growth. However, ICAC said a small gain in cotton prices could constrain the increase in cotton demand, particularly if the price of polyester remains low.

Converted from metric tons to statistical bales, the ICAC forecasts put world production at 114.09 million and consumption at 112.71 million, down 3.5 percent and up 3.3 percent, respectively, from this season.

“While the divergence between cotton production and consumption is expected to narrow, there is still a significant supply of cotton and stocks are growing,” ICAC said.

World stocks at the end of this season are estimated at 90.85 million bales, down from 93.33 million foreseen a month ago, with 56 percent slated for China. As of Dec. 27, ChinaΆs reserve held 54.2 million bales.

The global carryout in 2014-15 is projected at 92.18 million bales, 81.7 percent of consumption. World trade is expected to drop 9 percent to 35.55 million bales, largely owing to an ongoing fall in ChinaΆs imports.

Although ChinaΆs crop is expected to be lower, its consumption also is declining and the government holds enough cotton stocks for a year and a half of mill use without any further imports or production, ICAC said.

For the first time this season, ICAC raised its estimate of the marketing year average world price, hiking it by three cents to 91 cents as measured by the Cotlook A Index. The 2012-13 average was 88 cents.

Meanwhile, trend-following funds bought 4,977 lots in futures-options combined during the week ended Dec. 31 to boost their net long position to 33,251 lots. Index funds sold 347 lots to trim their net longs to 66,719 lots, while small traders bought 3,097 lots to reverse to net long 2,743 lots from net short 354 lots.

Commercials sold 7,727 lots, adding 6,243 shorts and liquidating 1,484 longs to boost their net shorts to 102,714 lots.

DUANE HOWELL is retired farm editor of the Avalanche-Journal. He can be reached at duane.howell@sbcglobal.net