U.S. cotton futures prices on the Intercontinental Exchange (ICE) charged to a 16-month high Monday as strong fundamentals sent funds in to buy the soft commodity. Although the market started the new calendar year on a strong note, it proved to be nothing more than a flash in the pan as futures ground to seven-week lows Thursday.

A shift in China's economic policy sparked pressure that tripped bearish technical chart points, a trader explained. Cotton and other commodities were pressured by talk that China planned to tighten its monetary policy. As the leading importer of U.S. cotton, tighter credit would make it more difficult for Chinese mills to purchase cotton to spin into textiles.

"Tightening of credit policies in China worried people and rippled into commodities in general," an observer said. "However, some say the move in commodities was psychological, and a policy shift would not actually affect demand."

USDA's export sales report showed a continued interest in U.S. cotton as net upland sales of 197,000 bales were made in the week ended Dec.31. The figure was down 44 percent from the previous week and 25 percent lower than the four-week average. China again was the week's major buyer with Turkey and South Korea rounding out the top three. Net sales of 3,700 bales for delivery in 2010-11 were for South Korea.

Shipments continue to lag as 100,200 bales were exported, down 20 percent from the previous week and 12 percent from the four-week average. Primary destinations were Turkey, China, Mexico, and Taiwan.

The recent spike in export sales activity has some now wondering if USDA will upwardly revise its U.S. export estimate in next week's supply and demand figures. As it stands today, the U.S. needs to average weekly sales of 188,411 bales, allowing for an average five-year carryover, to reach the current department estimate of 11 million bales.

Shipments, on the other hand, need to ramp up to 236,076 bales per week to do the same. Analysts say the recent lull in shipments is likely to change soon if conversations with shippers that shipments are about to pick up prove accurate.

Knowing that mills around the globe continue to be short-covered and that Chinese mills now are armed with import quotas of 8.7 million bales, some believe U.S. supplies will continue to dwindle rather quickly over the coming months.

"We have long held that demand leads with high grade cotton and trickles down from above," said an analyst. "Of note, is that there is a very high probability that all U.S. Pima cotton will be completely committed by the end of January. Attention will quickly turn exclusively to Upland cotton," he explained.

In other news, many commercial buyers were attending the Beltwide Cotton Conference in New Orleans, La., this week leaving support in cotton relatively thin. The absence of buyers was felt in the spot cotton market as sales were lower the first trading week of 2010. Growers in Texas, Oklahoma, and Kansas sold 29,379 bales online in the week ended Jan. 7 compared to the previous week when 36,916 bales were traded. Prices received by producers ranged from 60.63 to 67.19 cents per pound versus 65.04 to 66.35 cents per pound one week before.

Meanwhile, from West Texas across the Plains and into the eastern part of the U.S. Cotton Belt, unseasonably cold conditions were experienced across much of the country. Scattered snow showers and colder weather were in place throughout West Texas where overnight temperatures dropped well below freezing. Some single digit temperatures there halted all outside field work. The cold front stretched across the state and even southern regions in the Rio Grande Valley experienced it.