Speculative selling on the Intercontinental Exchange (ICE) knocked cotton futures prices to six-week lows on Thursday as outside weakness pushed prices through key levels on the technical charts.

Cotton traded higher most of the week as equities rose Monday due to news of an unexpected rise in pending U.S. home sales during March. On the same note, crude-oil price gains led other commodities following strongerthan-expected U.S. jobs data released last week. The bullish news for the U.S. economy sent investors out of the dollar and into riskier bets.

“The weak dollar made prices of commodities contracts relatively less expensive in other currencies causing metals and most agricultural commodities prices to rise Monday,” an analyst explained.

Traders also spent the week looking ahead to the Friday release of USDA's supply/ demand report. Analysts surveyed early in the week expected the department to trim its outlook for 200910 U.S. cotton production and raise its outlook for U.S. exports.

“This bullish fundamental outlook has supported prices for more than a year as world supply/demand data have the same characteristics of tight supply and strong demand,” a market observer said. "I believe the overall bullishness in the market will continue despite the fact that USDA left U.S. exports unchanged in its April figures.”

This month's U.S. cotton forecasts for 2009-10 show lower production and ending stocks. USDA's production estimate was reduced 251,000 bales from last month based on the department’s final Cotton Ginnings report released March 25, 2010. With domestic mill use and exports unchanged, the lower production was reflected in ending stocks of 3.0 million bales, 200,000 below lastmonth. The stocksto use ratio of 19.4 percent would be the smallest since 2003-04.

The department’s world cotton forecasts for 2009-10 included small revisions that resulted in slightly lower ending stocks compared with last month. Beginning stocks were raised marginally, due mainly to prior year adjustments for India and Pakistan. World production was reduced approximately 500,000 bales based on reductions for the United States and Australia. World consumption was raised, reflecting increases for Brazil, India, Turkey, and Uzbekistan, partially offset by a reduction for Pakistan. Forecast ending stocks of 50.9 million bales were 44 percent of world consumption which is the smallest world stocks-to-use since 1994-95.

In other news, USDA reported net sales of U.S. cotton for delivery in 2009-10 totaled 187,600 bales in the week ended April 1. The figure was 10 percent lower than the previous week but nine percent more than the four-week average. Turkey, Mexico, and China were the week’s top buyers. Net sales of 47,600 bales for delivery in 2010-11 were for Mexico, South Korea, and Thailand.

Exports of 309,700 bales were up seven percent from the previous week and four percent from the four-week average. Primary destinations were China, Turkey, Mexico, and Thailand.

Sales in the spot cotton market were higher as growers in Texas, Oklahoma, and Kansas sold 1,991 bales online in the week ended April 8 compared to the previous week when 703 bales were traded. Prices received by producers ranged from 65.91 to 75.20 cents per pound versus 64.92 to 66.75 cents per pound one week earlier.

Meanwhile, analysts said cotton traders paid little attention to news this week that Brazil has agreed to delay trade retaliation against the U.S. for its cotton subsidies. The U.S. has set up a fund to pay Brazil $147 million annually to compensate for damages U.S. subsidies caused Brazilian cotton producers. The action is in response to a dispute the World Trade Organization (WTO) first ruled on in 2005.

“Our path forward respects our farm bill process and the role of Congress in shaping our commodity programs,” said U.S. Secretary of Agriculture Tom Vilsack. “I look forward to working with Congress and Brazil to craft a long-term, mutually agreeable solution to this dispute that meets the needs of American farmers, workers, and consumers,” he concluded.