U.S. cotton futures sunk to the lowest settlement in nearly 11 months on Monday amid speculative spillover selling that knocked the market under its recent trading range.

However, the market rallied as short covering took place at the end of the week when traders built in bullish expectations for the Aug. 12 release of USDA's supply/demand report. The end of the marketing year export sales report also captured market attention.

Many traders said this week's export sales report was no way to kick off the new marketing year. In the week ended July 31, USDA reported a total of only 10,900 bales were sold to all destinations combined. Sales to Turkey, Vietnam, and Bangladesh were partially offset by cancellations from China, Japan, and South Korea.

Export shipments of 353,200 bales were up 39 percent from the previous week and 34 percent more than the four-week average. Primary destinations were China, Turkey, Mexico, and Indonesia.

The final 2007-08 export total came in at 12.3 million bales, up three percent from the previous marketing year. This past season's export shipments should provide an adequate target for next year's anticipated 14.5 million-bale export effort, market observers noted.

Meanwhile, spot cotton sales were slower in the week ended August 7 as online trading by producers in Texas, Oklahoma, and Kansas totaled 1,194 bales compared to 3,105 bales the previous week.

Light to moderate rains fell in parts of Texas this week as Tropical Storm Eduoard made landfall and tracked inland. Heaviest amounts of precipitation were recorded in the Upper Coastal Bend, but the storm's winds were not strong enough to damage cotton, and most of the cotton crop was not far enough along to be susceptible to stringing out from heavy rain. Edouard brought beneficial rain to some areas in the northern Coastal Bend and the southernmost areas of the Blacklands that missed out on rain from Hurricane Dolly.

Scattered thunderstorms helped ease dry soil on areas of the Texas High and Rolling Plains. Growers there continue to irrigate where possible, but many plants still are wilting during the heat of the day.

The stressful growing conditions have pushed most of the dryland crop to early maturation and many stands are reaching the 'cut out' stage.