Chart-driven action contributed to pressure on cotton futures last week, but consolidative-type trading developed in back-to-back inside-range sessions ahead of the long Memorial Day weekend.

The market came into the week having just completed a bearish weekly outside-range reversal to the downside following reversal-type price action on the heels of what most analysts had interpreted as supportive supply-demand estimates from USDA.

Spot July promptly fell to a low for the month of 55.52 cents - now a support point - on Monday, 615 points below the prior week's rally high, en route to finishing with a loss of 228 points to 56.78 cents for the week ended Thursday. December lost 103 points to 60.04 cents.

A 50 percent retracement of the July contract's 1,945-point surge from the March low to the May high would be 51.95, while a similar retracement of the break from this month's high to the low would be 58.60.

July closed below its nine-day and 18-day moving averages. The popular July-December straddle, which had traded the prior week as tight as 165 points, weakened sharply, finishing at a 125-point widened settlement difference of 326 points.

A weaker dollar, which enhances the competitive price position of U.S. crops overseas, fell to its lowest level this year, offering support for cotton even as an announced plan for China to sell 55 percent of its stockpiled cotton dampened prospects for near-term import demand.

China will sell 1.5 million metric tons (6.890 million bales) of 2.72 million tons (12.493 million bales) purchased for state reserves through April, Bloomberg News reported, quoting Cottonchina.org.

Sales are expected to begin soon. Old-crop cotton is expected to comprise roughly a third. Prices for the 2008 crop will be higher, reports indicated. Chinese mills are said to have urged that the minimum prices be lowered.

A China analyst says 800,000 tons (3.674 million bales) could be released rather quickly, with the results possibly then affecting how the balance would be offered. He says an absence of high grades may not be completely solved by the release, though inclusion of 2008-crop supplies would be expected to help.

The stockpiling program bolstered internal prices and resulted in tight available supplies. Raw cotton inventories at more than 80 percent of China's textile mills have fallen to record lows, one report said.

China's imports are estimated by USDA at 6.5 million bales this season, down 500,000 bales from the April forecast and down from last season's 11.53 million. The 2009-10 projection is 9 million bales.

A factor contributing to keeping cotton futures on the defensive may have been forecasts for beneficial rain on the Texas High Plains over the Memorial Day weekend, some analysts said. This area last year accounted for 35 percent of the U.S. all-cotton planted area.

Only a small percentage of the region's dryland cotton acreage has sufficient moisture to produce and maintain stands, sources said.

"We just got enough moisture (last weekend) to ruin the seed of what we'd dry-planted," a Lynn County producer south of Lubbock commented early in the week. "We'll have to replant that."

A few dryland producers, such as in parts of Dawson County, have had good rains, but sources indicated as much as 80 percent or more of the High Plains' non-irrigated cotton acres lacked adequate surface moisture.

Subsoil moisture is good to excellent throughout the area, and soaking rain "could really change things overnight." Producers appeared likely to complete planting irrigated acreage by this weekend.

Growers on the High Plains planted cotton on 3,264,099 acres last year, including 1,812,700 acres or 55.5 percent seeded under dryland conditions. As recently as 2005, irrigated acreage comprised 52.7 percent of the planted area of 3.703 million acres.

Producers then shifted some of their irrigated acres to other crops, but some growers this year are expected to return a portion to cotton from such crops as corn in the north and peanuts in the south.

Some forward contracting of 2009-crop cotton equities was reported earlier this month, and local marketing pools were described as active.

On the national scene, the cotton planting lag grew to 11 percentage points behind average at 42 percent completed during the week ended last Sunday, behind last year's 46 percent done. Planting advanced 10 points for the week but was behind the average pace in every cotton state.

Producers in Texas had planted 37 percent, behind the average of 39 percent, and growers in Georgia had seeded 40 percent, against 49 percent for the five-year average.

Improved planting weather subsequently speeded operations in the wet-delayed Delta, and most of the irrigated crop in the High Plains appeared likely to be in the ground by this weekend. It's amazing to see so little cotton planted in Mississippi, a Delta source said, adding that soybeans are now being planted on top irrigated ground.

On the mill front, U.S. textile manufacturers have received $49.024 million on 2,492,092 bales during the first seven months of the Upland Cotton Economic Adjustment Program, according to USDA's Farm Service Agency. Payments were made on 1,236,199,613 pounds of cotton.

Under the cotton program developed as part of the 2008 farm act, U.S. textile mills are eligible for payments of four cents per pound for eligible cotton from last Aug. 1 through July 31, 2012.

The payments must be used for costs incurred in the purchase of land or the acquisition, construction, installation, modernization, development, conversion or expansion of depreciable fixed assets.

Meanwhile, trend-following funds built their net long position in cotton futures with options by a slowed 4,709 lots to 27,150 during the week ended May 12, while index funds continued to reduce their net longs by a stepped up 2,080 lots to 59,650. Net longs held by trend-following funds remained the largest since July 1.