May 9 (Reuters) -ICE cotton futures fell on Tuesday on weak trade data from key buyer China and a firmer U.S. dollar, while investors also positioned for a federal supply-demand report due on May 12.

* The first-month July cotton contract CTc2 fell 2.42 cents, or 2.9%, to 80.88 cents per lb by 1040 EDT (1440 GMT).

* The immediate negative in the market "was that China came out overnight and reported some bearish news," said Keith Brown, principal at cotton broker Keith Brown and Co in Georgia.

* China's imports contracted sharply in April, while exports rose at a slower pace, reinforcing signs of feeble domestic demand.

* Market focus remained on the monthly supply and demand report from the U.S. Department of Agriculture (USDA) due on Friday.

* The dollar index .DXY rose 0.3%, making cotton more expensive for holders of foreign currencies, while oil prices retreated amid caution over U.S. inflation readings later this week. USD/

* Lower oil prices make polyester, a cotton substitute, less expensive.

* The weather forecast in West Texas looks much more promising for rain, and that's another bearish factor, but mostly for the December contract, added Brown.

* The December contract CTZ3 on ICE Futures fell 1.91 cents at 81.09 cents per lb.

* Chicago soybean and corn futures fell on rapidly progressing U.S. planting, while wheat extended declines as ample global supplies and favourable weather forecasts offset risks to a wartime Black Sea corridor. GRA/

* Traders also took stock of the USDA's weekly crop progress report on Tuesday, which showed 23% of the cotton was planted in the week ended May 7, compared with 15% the week before. US/COT

Reporting by Rahul Paswan in Bengaluru; Editing by Andrea Ricci