Profit-taking amid overbought technical readings, rising stocks in deliverable position and talk of slowed export demand have contributed to trimming a cotton futures surge to a five-month high.

Still, spot March advanced 114 points for the week ended Thursday, Jan. 23, to close at 87.33 cents. March hit a high of 88.43 cents on Tuesday, Jan. 21, its highest intraday price since Aug. 20 and a gain of 15.4 percent from its November low of 76.65 cents.

The May contract gained 121 points to 87.61 cents and July added 167 points to 87.54 cents, while December eased 36 points to 79.31 cents after encountering formidable resistance at 80 cents.

Bullish chart signals, worries about tightening U.S. supplies even as world stocks have soared and a large unpriced on-call mill position helped to underpin the market and shove it into buy stops on the way up.

An increase in certificated stocks to 69,178 bales from 34,087 bales on Jan. 2 attracted attention as the March discount to May widened to a settlement difference of 28 points. March had inverted last month and traded at premiums as wide as 60 points.

In cash trading, grower-to-business sales fell to 53,312 bales on The Seam from a crop year high of 120,701 bales the previous week. Prices edged up 57 points to an average of 77.78 cents, reflecting a 160-point gain to 25.99 cents in premiums over loan repayment rates. Daily price averages ranged from 77.18 to 79.14 cents.

World values as measured by the Cotlook A Index advanced 380 points from a week earlier to 94.25 cents Thursday morning.

The market digested new reports that China will implement a trial target price subsidy program next season in its key Xinjiang cotton area as it transitions from its stockpiling policy.

Key specific details — such as the level of the target price — still havenΆt been announced, however. The transition has been widely expected and is not considered to have been a market factor.

Government spokesmen have been quoted as saying the new policy will involve market factors, including domestic and international prices, to a greater extent than the previous program.

Their comments, however, also have been interpreted as indicating that the use of reserves and import quotas will continue to play a role in efforts to maintain market stability.

The new policy, which will compensate farmers with subsidies when prices are below the target, also will be adopted for soybeans in certain provinces. How the huge cotton stocks will be managed still isnΆt known.

On the crop scene, ChinaΆs cotton production in 2013-14 declined 7.7 percent from the previous year to 6.31 million metric tons (28.98 million 480-pound bales), the National Bureau of Statistics said.

The USDA earlier this month surprisingly raised its estimate of ChinaΆs crop by a million bales from its December forecast to 33 million, against its estimate of 35 million bales in 2012-13.

Government classing data indicated that Xinjiang production, which typically accounts for about 60 percent of the total, may exceed the 2012-13 output, USDA said.

On the demand front, big unpriced on-call mill holdings offered support on market pullbacks. Unfixed call positions based in March fell 238 lots to 21,397 on the mill side and 315 lots to 6,318 on the producer side during the week ended Jan. 10, according to Commodity Futures Trading Commission data.

The net call difference widened 77 lots (7,700 bales) to 15,079 lots (1.508 million bales), which was 13.8 percent of the open interest. The ratio of unfixed mill positions to that of producers stood at 3:39:1. First notice day for March deliveries is Feb. 24.

For all the 2013-14 marketing year deliveries combined, the mills priced 1,508 lots and producers fixed 346 lots. The unpriced positions were 50,845 lots for mills and 9,401 lots for producers.

Separately, commercials were the largest buyers in futures-options combined in the week ended Jan. 14, likely mainly on price weakness during the reporting period when prices slid as low as 82.39 cents, basis March.

Commercials bought 8,025 lots, adding 6,717 longs and covering 1,308 shorts to cut their net shorts to 94,824 lots. Subsequent growth in open interest as prices surged likely reflected mainly spec-mill buying, though some merchant-mill participation may have been involved, analysts said.

Trend-following funds sold a light net 538 lots to shave their net longs to 32,660 lots, according to CFTC supplemental traders-commitments data. Index funds sold a net 6,506 lots to reduce their net longs to 60,298, while traders with non-reportable positions sold a net 986 lots to cut theirs to 1,866 lots.

Earlier, confirmation that ChinaΆs cotton imports rose 14.4 percent in December from a year ago to 609,000 metric tons (nearly 2.8 million bales) may have contributed to the bullish environment. Imports were up from 173,122 tons (795,100 bales) in November.

Heavy imports typically are seen in December to meet quota deadlines, analysts said. Imports for the first five months of the marketing year totaled about 1.4 million tons (6.43 million bales) and for calendar 2013 fell 19.2 percent to 4.15 million tons (19.06 million bales).

The marketing year imports leave about 4.57 million bales required to meet the USDA forecast of 11 million bales, which is down 46 percent from 2012-13. Cotton Outlook has estimated ChinaΆs imports for 2013-14 at 2.5 million tons or 11.483 million bales.

A preliminary survey showing ChinaΆs massive manufacturing sector contracted in January for the first time in six months may have weighed on cotton market sentiment. The early version of HSBCΆs purchasing managersΆ index fell to 49.6 this month from 50.5 in December. A reading below 50 indicates contraction.

The report was seen as adding to recent signs the worldΆs second largest economy is decelerating. Weakness in ChinaΆs manufacturing sector could affect industrial commodities such as cotton.