Stunning U.S. export sales, [filtered word]d global supplies, a falling dollar and quantitative easing by the Federal Reserve have exploded cotton futures to new all-time highs.

Spot December soared 18.77 cents for the week ended Thursday to close at 140.45 cents, just off its daily limit-up high at 140.52. March surged 17.76 cents to close up the limit to 136.66 cents, while December 2011 jumped 6.85 cents to a new contract high finish at 96.97 cents.

World values as measured by the Cotlook A Index hit an all-time high Thursday morning at 155 cents. Chinese prices also scored record highs.

Cash grower sales climbed to 36,990 bales on The Seam from 25,426 the previous week. Daily average prices ranged from 125.49 to 138.02 cents, reflecting premiums of 71.25 to 83.17 cents over loan redemption rates.

The Fed's decision to buy $600 billion of government bonds in an effort to stimulate the struggling economy slammed the dollar and lifted commodities, particularly those with already bullish fundamentals.

The Reuters-Jefferies CRB index, a global commodities benchmark, rose to its highest since October 2008. A falling dollar cheapens dollar-denominated commodities overseas and can promote use of commodities as a hedge against inflation, which a weakening greenback can stoke.

U.S. export sales for delivery this season and next leaped far beyond expectations to 629,100 running bales during the week ended Oct. 29, more than double the prior week��s 300,800 bales. Closing prices for spot futures that week averaged 123.86 cents.

Upland sales for this season were 560,800 running bales, up from 264,200 bales the previous week and up 20 percent from the previous four-week average. China bought 329,400 bales or 20 percent.

Shipments remained puny at 94,100 running bales, bringing exports for the season to 1.998 million. This is 11.8 percent behind exports a year ago and 18 percent of the record 2010-11 sales of 11.395 million bales.

Ongoing reports of problems with yields and quality in China's crop fueled talk that USDA may cut its estimate of the country��s output and raise its forecast of imports in its supply-demand report on Tuesday.

China's cotton output is expected to fall 5 percent this year owing to lower plantings and bad weather, Reuters quoted a National Development and Reform Commission official at a conference in Beijing. The official did not specify the size of the harvest, Reuters said.

But a 5 percent fall would imply 6.08 million metric tons (27.925 million bales) to 6.37 million (29.257 million bales) based on figures attributed to the National Bureau of Statistics and the Ministry of Agriculture, respectively. The China Cotton Association has forecast 6.64 million tons (30.497 million bales). These compare with USDA��s 31.5 million bales, down from 32 million last season.

On the U.S. crop scene, harvesting advanced eight percentage points to 61 percent done during the week ended Oct. 31, up from 27 percent a year ago and 22 percent on average.

The Texas harvest expanded eight points to 45 percent, 15 points ahead of the average. Texas crop ratings improved on cotton left on the stalk, with good to excellent up a point to 58 percent, fair also up a point to 32 percent and poor to very poor down two points to 10 percent.

With crop ratings declining in importance as the harvest advances, USDA ceased issuing national condition figures.

On the Washington scene, U.S. industry representatives met with Obama administration officials to voice concerns regarding India's ongoing restrictions on cotton exports.

Attending were officials of the National Cotton Council, National Council of Textile Organizations, American Cotton Shippers Association and Amcot, the trade association of four major cotton marketing cooperatives.

An NCC report said India, the world's second-largest producer and processor of raw fiber, is a wildcard in the current market. Increased production over the past decade has allowed India to emerge as the second-largest exporter behind the United States.

But since April, India's restrictions on cotton exports have added to the volatility and uncertainty in the world cotton market, NCC said. After India announced on April 19 a further ban on export registrations, the difference between the world cotton price and India's internal price grew to 13 cents from the previous average of 5 cents, NCC said.

By introducing an artificial gap between world and internal prices, India's export restrictions convey benefits to their textile industry at the expense of textile industries in other countries,NCC said.

And by disrupting marketing channels and distorting relative prices, U.S. industry spokesmen said, India's export restrictions also could prove detrimental to longer-term cotton demand.

India is expected to review its export policy in December. Indian traders who sold cotton to Pakistan are unlikely to honor most of the deals for nearly a million bales after they failed to get registered with export authorities, Reuters reported, quoting Pakistani industry sources.

Separately, India's textiles minister said the country does not have adequate cotton supplies for fresh exports and the government will assure supplies for domestic mills before allowing additional shipments.

Meanwhile, record high volatility has accompanied the surge to record high world prices, says the International Cotton Advisory Committee.

The Cotlook A Index averaged 127 cents last month, 89 percent higher than in October 2009, ICAC said. Volatility averaged 57 percent from August through October, up from 11 percent over the comparable period last season, ICAC said.

This volatility -estimated by calculating the spread between the minimum and maximum values reached over a given period and dividing it by the average - is the highest for any corresponding three-month period since the index was first published in the 1960s, ICAC said.

The steep rise and high volatility reflect primarily a combination of low global stocks and continued demand by spinning mills, ICAC said, but also have been affected by panic induced by fear of defaults on contracts.

source:CTEI