Oct 4 (Reuters) -Cotton futures inched lower for the second consecutive session on Wednesday on demand concerns, while traders eyed a weekly federal export sales report.

* Cotton contract for December CTZ3 fell 0.33 cent, or 0.4%, to 87.1 cents per lb by 12:26 p.m. EDT (1626 GMT).

* "We are trapped in the same (price) range for the last 16 months," said Louis Barbera, partner and analyst at VLM Commodities.

* It looks like China buying cotton from Brazil is translating negatively on U.S. cotton prices and cotton demand overall in the world is overstated, Barbera added.

* Market focus shifted to the U.S. Department of Agriculture's (USDA) weekly export sales report due on Thursday.

* The natural fiber also took a hit as a more than $3-a-barrel fall in oil prices made cotton-substitute polyester less expensive. O/R

* Limiting losses, however, the dollar index .DXY fell 0.3%, making cotton less expensive for other currency holders. USD/

* In the grain market, wheat fell with participants setting bargain-buying against ample global supplies while corn inched down as traders awaited a clearer picture of the U.S. harvest. GRA/

* Elsewhere, a little over half of Australia's farmers expect the country's agricultural output to grow over the next decade, according to a survey published on Wednesday. Australia is one of the world's most important agricultural exporters, shipping products including wheat, beef, wool and cotton.

Reporting by Sherin Elizabeth Varghese in Bengaluru; Editing by Shilpi Majumdar