Speculative long liquidation after a big, quick buildup and re-establishment of some shorts pounded cotton futures last week.

Spot May lost 498 points to close the holiday-shortened trading week at 88.54 cents, July fell 553 points to 88.39 cents and December shed 346 points to 87.54 cents. May had clawed above its 60-day moving average but closed below it three straight days and in the red six sessions in a row.

Cash trading on The SeamΆs grower-to-business exchange turned inactive the last two days of the trading week and slumped to 2,230 bales for the period from 47,554 bales the previous week. Prices fell to an average of 79.06 cents from 85.02 cents, reflecting a drop to 29.19 cents from 29.76 cents in premiums over loan redemption rates.

Texas cotton moved into the No. 5 slot among the five cheapest world growths reported by the Cotlook A Index. It was quoted at 101.25 cents, only 3.25 cents below the cheapest. Cottons from Benin and Mali, part of the African Franc Zone, were the cheapest, followed by Brazilian and now nominally quoted Greek.

Macro developments spurred strength in the dollar index and contributed to the cotton futures losses along with an unexpected batch of U.S. export sales cancellations. This followed completion at the end of March of ChinaΆs purchasing program for its national reserves.

Traders also braced for updated USDA supply-demand estimates Tuesday. The report generally is expected to feature friendly U.S. figures and unfriendly foreign numbers.

The May contract inverted in volatile spread trading to a 15-point premium to July from a 15-point discount at the end of the previous calendar week. This was seen as evidence of tightening supplies for nearby shipment, even in face of the export sales cancellations.

Net all-cotton weekly export sales cancellations of 138,900 running bales for delivery this season cut 2011-12 commitments to 11.522 million running bales, still 8 percent above the USDA estimate.

The report prompted concerns about additional cancellations if prices were to take off to the upside. But talk also circulated of new business — not concentrated in China — having been done as prices weakened.

All-cotton shipments at a marketing year high of 422,600 bales lifted exports for the season to 6.981 million running bales. Fast-paced shipments reached 65 percent of the USDA estimate and reduced the average needed to achieve the forecast to roughly 217,000 running bales a week.

New-crop sales jumped to 96,600 bales and brought commitments for 2012-13 to 916,400 running bales. Combined commitments for this season and next dipped 42,300 running bales to 12.438 million.

In its first weekly crop progress report of the season, USDA said U.S. growers had planted 7 percent of their intended cotton acreage as of April 1, up from 5 percent a year ago and 4 percent for the five-year average. An increased pace had been expected.

Planting was most advanced in Arizona at 20 percent done and Texas at 12 percent, up from averages of 16 percent and 7 percent, respectively.

U.S. prospective plantings came in at 13.155 million acres, down 10.7 percent from last year and the high end of trade estimates which had centered on 12.75 million acres.

With corn and soybean futures having advanced strongly since the survey ended in mid-March, fewer cotton acres appear likely.

Producers in high-risk Texas reported intentions to seed 6.8 million acres of upland, down 9.9 percent from last year and 51.7 percent of the U.S. all-cotton area.

On the world scene, cotton trade and prices have been affected to a large extent by government policies in China and to a lesser extent in India, says the International Cotton Advisory Committee.

ChinaΆs huge buying of domestic and foreign cotton for its national reserve boosted its imports to what ICAC now forecasts at 4.2 million metric tons (19.29 million 480-pound bales), up 61 percent from 2010-11.

While the purchases supported both domestic and international prices, sales from the reserve could reduce Chinese imports and depress world cotton prices in the future, ICAC said.

On the other hand, India suddenly imposed a ban on new exports on March 5. This, on balance, had limited lasting effect on world prices. But the longer the ban remains in place, the greater its upward impact on world prices could be, ICAC said.

With production expected to exceed consumption the ICAC sees global stocks rebounding 41 percent to 13.128 million tons (60.3 million bales).

However, two-thirds of world stocks buildup is taking place in China as a result of its stockpiling. Subtracting the estimated amount in the Chinese reserve from global stocks, the remaining “free” stocks may rise by only 5 percent to 9.4 million tons (43.17 million bales), ICAC said.

The size of the Chinese reserve creates significant uncertainty for the global market for months and maybe years to come, ICAC said.

In other news, India announced plans to create a strategic cotton reserve of 2.5 million bales (of 170 kilos or 375 pounds) to ensure sufficient supplies for its textile mills.

The state-run Cotton Corp. of India will oversee the new reserve. The CCI is likely to purchase 2 million bales in the next two months at prevailing market prices, the government statement said.

The move was viewed as indicating a lifting of the ban on new exports would seem unlikely anytime soon.

Meanwhile, speculators boosted their net long futures-only position by a whopping 5.1 percentage points to 10.2 percent of the open interest during the week ended March 30, the exchangeΆs spec-hedge data showed.

This was their largest net long position since Jan. 27 when it was 10.5 percent. The buildup greased the skids in an overbought market for the ensuing slide. The specs added 2,488 longs and covered 7,321 shorts, raising their net longs by 9,809 lots to 19,515. Commercials added 8,596 short hedges and lifted 1,213 long hedges.