By Duane Howell

Heavy spreading has dominated cotton futures trading ahead of first notice day for December deliveries.

December slipped 36 points from its close on Friday, Nov. 8, to finish at 76.52 cents on Thursday, Nov. 14, while March shed 118 points to settle at 77.46 cents. December traded from 75.85-78.50 and March from 79.36-77.37 cents.

Increasing movement of foreign crops and fresh reports that a resumption of sales from ChinaΆs immense reserve stocks to its domestic market could begin any day now weighed on futures sentiment.

Daily volumes averaged a hefty 47,600 lots amid liquidation and index fund rolling of December positions. The turnover hit a huge 64,100 lots on Tuesday prior to conclusion of the big Goldman Sachs roll the next day.

Open interest fell 22,560 lots to 173,448 coming into ThursdayΆs session, with DecemberΆs down 55,982 lots to 30,233 and MarchΆs up 25,621 lots to 106,185. First notice day is Friday, Nov. 22.

With attention focused on the December-March straddle, spreads accounted for up to 81 percent of the daily volumes. December traded out to a 10-point premium on Wednesday before closing the session at a 62-point discount and widening to the 94-point discount on Thursday.

December has traded from a 334-point premium on Aug. 16 to a 239-point discount on Nov. 5. Meantime, March has posted six consecutive lower daily highs and finished at a new seasonal low.

Exercised with the expiration of December options on Nov. 8 were 8,548 calls and 49,042 puts. Though many of the options were believed to have been already offset, the lopsided ratio of puts likely resulted in net buying on Monday and Tuesday as prices firmed and newly established shorts covered or rolled.

Cash grower-to-business sales posted a crop year high of 34,221 bales on The Seam, up from 31,248 bales the prior week. Prices edged up to an average of 76.24 cents from 76.02 cents, reflecting a gain to 22.11 cents from 21.87 cents in premiums over loan repayment rates.

On the crop scene, the U.S. harvest advanced 13 percentage points during the week ended Sunday, Nov. 10, to 56 percent completed, 17 points behind a year ago and 10 points behind the average.

The harvest progressed 11 points to 48 percent done in Texas and 13 points to 47 percent completed in Georgia, behind the averages of 56 percent and 60 percent, respectively. The only states where the harvest was ahead of the averages were California (90 percent), Louisiana (99 percent) and Mississippi (93 percent), though Arkansas (88 percent) was only a point behind.

Condition of the crop remaining on the stalk improved slightly, with good to excellent steady at 43 percent, fair up two points to 36 percent and poor to very poor down two points to 21 percent. The DTN cotton condition index rose to 103 from 98 a week earlier.

Under favorable weather, the harvest on the Texas High Plains could be far along by Thanksgiving, industry sources said, and perhaps near the end of the row shortly thereafter.

Production on the High Plains is estimated at 2.445 million bales, down 55,000 bales from the September projection and 17 percent from last seasonΆs 2.947 million bales.

Yields are projected at an average of 652 pounds per harvested acre, up from 608 pounds last year. Acres for harvest remained at 1.8 million, reflecting abandonment of 52 percent off plantings of 3.76 million acres.

The crop estimate in the adjoining Rolling Plains dropped 20,000 bales from September to 835,000 bales but is up from last yearΆs 531,300 bales. Combined, the High and Rolling Plains output of 3.28 million bales is 80 percent of the projected Texas crop of 4.1 million bales.

U.S. upland growers had contracted by Nov. 1 about 17 percent of their expected acreage, up from 14 percent from a year ago.

Growers have booked 36 percent in the Southeast, up from 17 percent last year; 17 percent in the Mid-South, down from 33 percent; 4 percent in the Southwest, down from 5 percent; and 3 percent in the West, down also from 5 percent.

These USDA estimates donΆt include cotton consigned to marketing organizations but do include cotton contracted with those groups.

Meanwhile, trend-following funds sold 5,068 lots in futures-options combined to reduce their net longs to a mere 128 lots during the week ended Nov. 5, again the smallest since the week ended Nov. 27, 2012, when they were net short.

Index funds sold 5,116 lots to cut their net longs to 61,464 lots, while traders with non-reportable positions sold a net 1,291 lots to boost their net shorts to 5,381 lots.

Commercials bought a net 11,475 lots, covering 13,674 shorts and liquidating 2,199 longs to reduce their net shorts to 56,212 lots. In futures only, non-commercials trimmed their net longs by 1.7 points to 6.5 percent of the open interest.

In its updated supply-demand estimates, USDA raised U.S. production by 211,000 bales from September to 13.11 million, while total market offtake gained 100,000 bales to 14 million. Ending stocks edged up 100,000 bales to 3 million, equivalent to 21 percent of total use.

Domestic mill use rose by 100,000 bales to 3.6 million, based on strong early season activity, and exports were at 10.4 million bales. Analysts had expected a crop of 13.3 million bales, exports of 10.4 million and ending stocks of 3.2 million.

Globally, beginning stocks jumped 2.02 million bales or nearly 16 percent to 88.06 million, production fell 200,000 bales to 117.22 million, consumption gained 100,000 bales to 109.63 million and ending stocks climbed 980,000 bales or about 1 percent to a new record 95.71 million.

Stocks were raised mainly in India where revisions were made to estimates of production and loss from 2006-07 to bring historical stocks to levels which cover reported demand. Aside from those revisions, world estimates werenΆt changed much.