* Govt sees cotton inventory falling 20 pct in 2018/19 season

* Expects cotton output to drop 6 pct to 5.55 million tonnes

* Farmers in top growing area face low incomes, high labour costs (Adds detail)

BEIJING, May 10 (Reuters) - China’s cotton inventory will plunge by 20 percent in the upcoming 2018/19 season to 6.01 million tonnes as farmers in one of the world’s top producers cut acreage due to labour costs and lower yields, the government said on Thursday.

Issuing its first forecasts for the 2018/19 season that begins in September, the Ministry of Agriculture said it expects output to fall 6 percent to 5.55 million tonnes, while imports will come in at 1.2 million tonnes, up from 1.1 million tonnes.

Plantings will decline by 4.9 percent to 3.19 million hectares and yields will drop by 0.9 percent to 1,742 kilograms per hectare, the ministry forecast.

Farmers in the top growing region of Xinjiang are struggling with low incomes and high costs of labour even as the government’s cotton subsidies have been stable.