Cotton futures on the Intercontinental Exchange (ICE) took a breather Wednesday after rallying for more than two weeks as profit taking pushed prices lower in consolidation. The modest retreat, however, was short-lived as futures prices soared to their highest levels in almost two years on Thursday. The week began with steady buying that pushed ICE cotton futures to 17-month highs on Monday.

The most active May contract settled up 201 points on Thursday at 81.17 cents per pound after touching 81.78 cents earlier in the session. Analysts pointed to news from China as one reason cotton resumed its bullish rally.

On Thursday, China’s National Bureau of Statistics showed the country’s cotton production in 2009 fell almost 15 percent from 2008 to approximately 29.4 million bales. The figure was in line with earlier estimates from the NBS, but it was lower than the agricultural ministry's forecast of almost 30.8 million bales. The most recent estimate from the International Cotton Advisory Committee pegged Chinese production in 2009 at 31 million bales while the China Cotton Association estimation was for 31.2 million, and USDA’s was 32 million bales.

Lower cotton production could force China, the world's largest cotton importer, to purchase more cotton from abroad to meet demand from its domestic textile industry. In fact, the NBS data also showed the country’s traders imported almost four times more cotton in January 2010 compared to the same month last year. The same report also noted transportation problems from China’s largest cottonproducing region are contributing to the tight domestic supply situation. However, China was noticeably absent from the latest weekly export report from USDA.

The department reported net export sales of U.S. cotton in the week ended Feb. 18 totaled a net 113,300 bales, down 69 percent from the previous week and 75 percent from the prior four-week average. Turkey was the featured buyer. Analysts noted most of China was on holiday during that reporting week.

Export shipments for the week totaled 231,000 bales, a marketing year high, up 12 percent from the previous week and 22 percent from the previous four-week average. China, Turkey and Mexico were the primary destinations.

In the spot cotton market, producers in Texas, Oklahoma and Kansas sold 19,243 bales online in the week ended Feb. 25, down significantly from the previous week when 38,473 bales were sold. Prices received by the producers ranged from 62.91 to 73.23 cents per pound versus 62.22 to 70.54 cents per pound the previous week.

With the approach of cotton planting in much of the major cotton producing regions of the United States, some traders were keeping watch on weather conditions. A storm system moved through California’s cotton growing regions during the week, bringing welcome rain to the San Joaquin Valley and snow in the Sierra Nevada mountain range. Some heavy snowfall and blizzard conditions in the mountains added to the winter snow pack there and improved the water outlook for spring and summer.

Snowfall in West Texas this week also added to soil moisture levels in parts of the region and was followed by clear and warmer conditions. Meanwhile, warm and sunny weather was reported in South Texas and along the Gulf Coast.

Scattered rains moved across Alabama and Georgia at midweek, and the precipitation was expected to move into the Carolinas and Virginia by the weekend.

Elsewhere in the Delta, some scattered showers were expected in southern Mississippi and parts of Louisiana.