Futures prices for cotton from the next harvest hit a 10-month high, even as those for fibre from the last harvest struggled, amid ideas that China's imports could be in for a sharp decline.
Cotton for May delivery closed 0.2% lower at 86.72 cents in New York.
It lost nearly all its premium over the December lot - the first contract for the US 2013 crop - which added 0.3% to 86.39 cents a pound, its best finish in 10 months.
The dynamics came despite a US Department of Agriculture cut on Friday of 300,000 tonnes to 4.2m tonnes in its estimate for stocks as of the end of 2012-13, a revision which at one point sent the May contract to its own 10-month high of 88.78 cents a pound on the day.
Already factored in?
The USDA downgrade, in its monthly Wasde report, was the latest in a series, prompted largely by unexpectedly fast US cotton exports, largely to China.
"In August last year, the USDA projected the US 2012-13 cotton carryout at 5.5m bales, 30% higher than its current projection," Luke Mathews at Commonwealth Bank of Australia said.
However, the revision had already been discounted by investors – explaining the loss in the May contract of most of its intraday gains by the close on Friday, analysts said.
"The Wasde report was supportive for cotton prices, though the market had arguably already factored in the bullish news into existing prices," Mr Mathews said.
Chinese imports to slow?
And analysis of the USDA figures suggests a sharp slowdown in Chinese imports in the second half of 2012-13 – with the forecast that the country will buy-in 15.0m tonnes over the whole season implying a relatively modest 5.2m tonnes in the second half.
The estimates suggest "that the USDA assume a slowdown in exports within the final six months of the season to average 871,000 bales per month, down from 1.6m bales in the first six months", Rabobank said.
"Old crop values have passed fair value, and reduced Chinese imports in the second half of 2013 will result in a correction lower for old crop prices."
Old vs new
However, Goldman Sachs led pressure for a more generous assessment of prices for the US 2013-14 harvest, given the temptation for farmers to sow other crops offering better returns.
"The rally in cotton prices has been driven in large part by near-dated prices, with net speculative length increasing sharply for old-crop positions," the bank said.
Regulatory data late on Friday showed speculators increasing their net long position in New York cotton futures and options by nearly 8,000 contracts to 60,482 lots, the second-highest figure since October 2010.
"We believe instead that the tightening in fundamentals will occur in the new-crop with December 2013 cotton prices offering a sharply lower producer margin than competing crops like corn and soybeans," Goldman said.
"As a result, our three-month price forecast remains below the forward curve and we see more upside risk to cotton prices for deferred contracts."
